Kansas lawmakers take aim at high prescription drug prices with new regulations

Kansas House lawmakers advanced legislation on Monday evening that supporters say will protect independent pharmacies and ultimately drive down prescription drug prices.

The bill would impose a new slate of restrictions on pharmacy benefit managers, or PBMs — the middlemen that process claims on behalf of insurance companies, decide which medications are covered by health plans, and how much they will cost patients.

The legislation, dubbed the Kansas Consumer Prescription Protection and Accountability Act, passed the House 104-17 with strong bipartisan support over the opposition of Speaker Dan Hawkins, a Wichita Republican who is running for state insurance commissioner.

Vicki Schmidt, Kansas’ current insurance commissioner, testified in favor of the bill at a hearing in Topeka earlier this month.

“Today, the (Insurance) Department has very limited authority to regulate PBMs and even fewer tools to assist Kansans who have complaints regarding PBMs. Consequently, there is little transparency and almost no accountability in areas that directly affect prescription prices,” said Schmidt, a Republican who is running for governor and spent 40 years as a pharmacist.

According to federal regulators, the three largest PBMs in the U.S. — CVS Caremark, Express Scripts, and OptumRx — manage approximately 80% of prescription drug claims made by Americans.

“The three largest PBMs have used their position as middlemen and integration with health insurers, pharmacies, providers, and recently manufacturers, to enact anticompetitive policies and protect their bottom line,” reads a 2024 congressional oversight report. It identified a pattern of PBMs using “opaque pricing and utilization schemes to overcharge plans and payers by hundreds of millions of dollars.”

The Kansas bill would establish auditing procedures, outline reporting requirements for PBMs and allow the Insurance Department to conduct financial examinations of benefit managers to ensure compliance.

It would also ban spread pricing — the practice of PBMs charging a health benefit plan more for a drug than they paid a pharmacy for it. The PBM’s reimbursement to a pharmacy would have to be at least equal to the drug’s most recent listing in the National Average Drug Acquisition Cost index, plus a professional dispensing fee of $10.50.

If a PBM violated those terms, the insurance commissioner could impose a $1,000 fine for each violation — or $5,000 for each willful violation — and the legislation would remove the limit on penalties that can be imposed on PBMs within six months.

“Kansans won today,” House Minority Leader Brandon Woodard, a Lenexa Democrat, said in a statement after the vote.

Rep. Cindy Neighbor, a Shawnee Democrat, called the reform “long overdue” and said increasing transparency and accountability for PBMs will maximize the number of Kansans who can afford necessary medications.

“I can afford my drugs. Someone else may not,” Neighbor said. “But should they be unentitled? Should I be more entitled than they are to receive (prescriptions)? I certainly hope not, because I’m no better than they are, and they deserve the right to have a healthy life.”

The slate of PBM regulations was first approved by the Kansas Senate 32-8 last month. The bill was introduced by Senate Vice President Tim Shallenburger, a Baxter Springs Republican, and 23 Republicans joined all nine Democrats in support of it.

Senate President Ty Masterson, an Andover Republican who’s running for governor, and seven other GOP senators voted against the legislation.

On Monday evening, House lawmakers approved the same language in a separate bill negotiated by a conference committee of House and Senate lawmakers. The Senate will have to approve the same conference committee report before the bill can be sent to Gov. Laura Kelly for her signature.

Rep. Doug Blex, an Independence Republican, said the legislation “brings light to darkness” and gives independent pharmacies a fair chance to compete with chain pharmacies owned by the same corporations that run the PBMs.

“(PBMs are) getting rich and they pay local pharmacies below their cost while they pay their own pharmacies higher and more, which is really stifling competition,” Blex said. “And they’ve merged into huge corporations, companies, pharmacies, (and) clinics. They own it all.”

Nearly one in three retail pharmacies in the U.S. closed between 2010 and 2021, according to a study from UC Berkeley Public Health.

“We’re losing our pharmacies. We’re losing them,” said Rep. Timothy Johnson, a Basehor Republican whose district includes part of Kansas City, Kansas. “My wife’s pharmacy has called it quits in Wyandotte County. We’re going to lose more. We need this bill.”

Rep. Angela Stiens, a Shawnee Republican, said that at its core, the legislation is “about protecting access to care, lowering out-of-pocket costs and making sure the system works for our patients — not just the middlemen.”

Opponents of the regulatory bill pointed to the $10.50 dispensing fee established in the legislation as a new cost that could be passed onto consumers rather than absorbed by PBMs

“The people who are going to pay this are all the small businesses that have to buy insurance policies,” said Rep. Pat Proctor, a Leavenworth Republican who’s running for secretary of state.

“All of the weight of this bill and that $10.50 is going to be carried by all the small businesses that are already struggling to pay to insure their employees,” said Proctor, who questioned whether the Legislature has the authority to “tell one business that they have to pay a certain amount to another class of business for every transaction.”

Rep. Sean Tarwater, a Stilwell Republican, decried the fact that some unions and large corporations that self-insure their members and employees would not have to pay the $10.50 dispensing fee after lobbyists secured exemptions during the committee process.

“The people that aren’t exempt are your counties, your cities, your school districts, churches, small businesses, individuals,” said Tarwater, who owns a company that provides finance and insurance services to car dealerships.

“They’re going to exempt Goliath but make David pay the premiums,” Tarwater said.

Hawkins, the House Speaker and insurance commissioner candidate, had shuffled the PBM regulatory bill between committees repeatedly this spring without bringing it to the floor for a vote. It was only debated on Monday after a Republican revolt on a separate piece of drug-pricing legislation caused Hawkins to abruptly send lawmakers home early last Thursday.

The Topeka Capital Journal first reported that Hawkins refused to resume work in the chamber after realizing enough Republican defectors would side with Democrats to spark a discussion on a bill that would crack down on drug manufacturers that limit the number of reduced-price medications they sell to eligible hospitals through the federal 340B Drug Pricing Program.

Hawkins, who has worked in the insurance industry for nearly three decades, described the 340B program in a March newsletter as a “boondoggle” that benefits large hospital systems instead of the hospitals in low-income and rural areas it was designed to support.

Hawkins did not respond to a request for comment through a spokesperson. After voting against the PBM bill Monday evening, he went to the well to address his colleagues.

“I didn’t want to come up and make an explanation of vote, but I want to thank the body for a great debate today,” Hawkins said. “I had promised early on that we would get to this, and today we delivered.”

Senate Minority Leader Dinah Sykes, a Lenexa Democrat who’s also running for insurance commissioner, applauded the House for its bipartisan action in a statement Tuesday morning.

“Kansans deserve legislators who put party politics aside to pass legislation that provides real relief to Kansas families and locally owned businesses,” Sykes said. “I am disappointed that the Speaker, who is running for insurance commissioner, not only voted against this commonsense policy that would increase transparency and accountability, but did everything he could to keep a vote from happening.”

Sykes said she’s confident that the legislation will receive final approval in the Senate before the Legislature adjourns at the end of the week.

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