Kansas Senate plunges ahead with bipartisan bill targeting prescription drug middlemen
- Tim Carpenter, Kansas Reflector
- 10 hours ago
- 6 min read
By Tim Carpenter
Kansas Reflector
TOPEKA — A bipartisan majority in the Kansas Senate passed a complex bill increasing state oversight of prescription drug middlemen companies accused of manipulating lax regulations to promote anti-competitive practices, monopolize the market for maximum profit, undermine local pharmacies and raise costs for consumers.
Thirty-five states have taken legislative steps to intensify regulation of pharmacy benefit managers that were created to work with drug manufacturers to lower costs for health insurance plans, pharmacies and customers. Advocates of reform asserted PBMs — CVS Caremark, Express Scripts and OptumRx control 80% of the U.S. market — stepped away from this fiduciary role and took command of the prescription drug market by negotiating mostly on their own behalf.
Under Senate Bill 360, which advocates spent two years writing, the state insurance commissioner would have more tools to regulate PBMs in Kansas.
The bill would require transparency from PBMs in terms of pharmacy reimbursement and drug pricing. It would deal with PBMs giving their own retailers better deals by requiring all Kansas pharmacies to be reimbursed at or above the National Average Drug Acquisition Cost. A pharmacy dispensing fee would be implemented to better cover costs incurred by local or independent pharmacies, especially in rural communities.
Sen. Brenda Dietrich, a Topeka Republican who carried the bill on the Senate floor, said the time had come for Kansas to answer persistent complaints about pharmacy benefit companies operating in Kansas.
“I feel like this is a bit of a David versus Goliath situation with hometown pharmacies versus billion-dollar PBMs,” Dietrich said. “We’ve just got to stop feeding the beast. The imbalance of power and wealth is inherently unfair and frightening. SB 360 is about saving local pharmacies, fairness and transparency.”
Dietrich highlighted the harm of “spread pricing” in which PBMs charged health plans or insurers more for prescription drugs than PBMs paid a dispensing pharmacy. The PBMs simply retained the difference as profit, she said. The senator referred to spread pricing as “a big black box used by the PBMs to siphon millions from plans and patients with no actual benefit to the plan or patients.”
The bill addressed another state regulatory failing — PBMs have gotten away with auditing pharmacies but refused to allow auditing of their operations, Dietrich said.
“The PBMs are watching out for their exorbitant profit margins,” she said. “They are overcharging our health plans with hidden fees and costs through price spreading, keeping rebates and not reimbursing your local hometown pharmacies as much as they reimburse their own brick-and-mortar pharmacies or their mail-order pharmacies.”
Dietrich said Kansas was so far behind the PBM reform movement that even the federal government approved changes to the industry that would take effect in 2028 and 2029.
Grassroots uprising
Senate Minority Leader Dinah Sykes, D-Lenexa, said she welcomed the state Senate legislation because Kansas pharmacies are struggling to keep their doors open and patients are unable to afford high prices for medications.
“Gigantic insurance monopolies are controlling every aspect of our health care system and they’re using their power to increase costs and eliminate competition,” she said.
The Senate bill was backed by pharmacies in Hoisington, Wichita, Downs, El Dorado, Galena, Winfield, Hesston, Hillsboro, Humboldt, Lawrence, Junction City, Coldwater, Mankato, Holton, Basehor, Phillipsburg, Mulvane, Oakley, Scott City and Baxter Springs. It was endorsed by Hy-Vee, Walgreens, the Independent Pharmacy Association of Kansas, the Kansas Hospital Association as well as individual pharmacists, pharmacy students and consumers.
The bill was derided by PBMs, including Blue Cross and Blue Shield of Kansas, as well as the Kansas Bankers Association and the Kansas Chamber because it could drive up the cost of health insurance.
“I fear this bill doesn’t consider the full potential cost shifting that will happen,” said Sen. Mike Thompson, R-Shawnee.
He echoed the message of BCBS of Kansas lobbyist Sarah Fertig, who said the bill incorrectly assumed business issues confronting Kansas pharmacies were the fault of PBMs. She said the bill would increase drug prices for Kansas consumers, but that assertion was criticized by the bill’s proponents.
“The reality is that making Kansans pay more for prescription drugs will not guarantee that all independent pharmacies can stay afloat,” she said. “Consumer choice, population shifts and other players in the drug distribution chain are more impactful to a pharmacy’s success.”
The legislation was approved Wednesday on a vote of 32-8 and sent to the Kansas House. The Senate rejected amendments beneficial to PBMs. The measure included an amendment from Sen. Kellie Warren, R-Leawood, to forbid sharing protected, personal health information with the state insurance commissioner.
‘I’m sick of it’
Sen. Beverly Gossage, the Eudora Republican, said PBM reform was the responsibility of Congress rather than state legislatures. She offered an amendment to remove a requirement that pharmacies receive a $10.50 prescription processing fee. Currently, local pharmacies were paid a fraction of the actual cost of handling prescriptions through PBMs.
Dietrich, the Topeka Republican, said about 20 states had a comparable fee to balance those business transactions.
Gossage’s amendment was blocked by the bipartisan majority, but the concept was supported by Sen. Jeff Klemp, R-Lansing, and Sen. TJ Rose, R-Olathe. It was Rose who said he supported the idea of deleting the “pill tax” fee, while Klemp said the Legislature needed to err on the side of fiscal responsibility when regulating PBMs.
“The government has no role in ensuring one private industry profits over another,” Klemp said. “The key to this is no other Kansas statute requires a business to pay another a fixed fee. We’re moving into uncharted waters.”
Klemp and others seeking to weaken the PBM bill found themselves facing a tidal wave of opposition from their Republican and Democratic brethren.
“Personally, my own pharmacy was closed because of PBMs and I’m sick of it,” said Sen. Bill Clifford, a Garden City Republican with 138 small pharmacies in his Senate district.
GOP Sen. Michael Murphy of Sylvia said he considered attempts to diminish the bill nothing more than a “PBM enrichment amendment.”
“It’s time to stop out-of-state middlemen companies and corporations from starving our pharmacists, especially our Main Street pharmacists,” said Sen. Caryn Tyson, R-Parker.
Free market collapse
Sen. Stephen Owens, R-Hesston, said the Senate bill should be placed in law despite the instinct to avoid government intrusion into the economy. He said PBMs operating in Kansas were “playing favorites” and placed local pharmacies at a heavy disadvantage.
“When the free market is no longer free, we as a government have got to step in,” Owens said.
He said Gossage was wrong to expect the federal government to promptly address the long list of shortcomings in the PBM-dominated drug market.
“If we’ve learned anything, it is we cannot have faith in our federal government to do what needs to be done when it needs to be done,” Owens said.
Sen. Scott Hill, R-Abilene, piled on. He said the rise of PBMs was destroying local pharmacies that were more to communities than places to pick up a prescription. He said anyone embracing the PBM model was naive.
“This is about price fixing,” he said. “This is about charging me, for my cancer drugs, $14,000 for a drug that costs $750. This is about gouging and increasing prices.”
He said more than 250 years ago colonists in America objected to a British company’s monopoly on tea.
“Pharmaceuticals have become the tea of our generation,” Hill said. “We have much to do on pharmacy reform as well as health care reform in general. This bill is a start, not an end.”
‘Just not fair’
The bill was expected to receive a committee hearing in the House, but passage could be complicated given House Speaker Dan Hawkins of Wichita is a GOP candidate for state insurance commissioner.
Sen. Tim Shallenburger, a Baxter Springs Republican who worked for two years on drafting the bill, said the Legislature needed to push back against PBMs, including the PBM operated by BCBS of Kansas.
“This a terrible system we have,” Shallenburger said. “It’s not just transparency. We’re looking for equity. There is no reason a PBM should direct my benefit to an out-of-state pharmacy, pay them more money than they’re paying the Walker Pharmacy at home. It’s just not fair.”
He praised Senate President Ty Masterson and Senate Majority Leader Chase Blasi, both Republicans, for allowing the bill to come to the Senate floor for debate. Masterson and Blasi were among the eight GOP senators voting against the measure.
“Many times in this building good ideas don’t have a chance of a hearing. If they do have a hearing, they don’t have a vote,” Shallenburger said. “I hope the body across the rotunda takes the opportunity to have a hearing and a vote on this bill.”
This article was republished with permission from the Kansas Reflector. The Kansas Reflector is a non-profit online news organization serving Kansas. For more information on the organization, go to its website at www.kansasreflector.com.
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