SESSION OF 2022
SUPPLEMENTAL NOTE ON HOUSE SUBSTITUTE FOR
SENATE BILL NO. 28
As Recommended by House Committee on
Insurance and Pensions

Brief*
House Sub. for SB 28 would enact law and amend
requirements requiring registration of pharmacy benefits
managers (PBMs) with the Commissioner of Insurance
(Commissioner) to instead require licensure under the
Pharmacy Benefits Manager Licensure Act (PBM Licensure
Act). The bill would establish new licensure, administrative,
and enforcement requirements on PBMs; maintain regulation
under Chapter 40, Article 38 of the Kansas Statutes
Annotated; and add a new section to the PBM Licensure Act.
The bill would also amend provisions pertaining to maximum
allowable cost (MAC) pricing and the appeals process.
On and after January 1, 2023, a person could not
perform, act, or do business in Kansas as a PBM unless the
person has a valid license issued by the Commissioner
pursuant to the PBM Licensure Act.

PBM Licensure Act (New Section 1, Sections 2-8)
Disciplinary Action (New Section 1)
The bill would allow a PBM’s license to be revoked,
suspended, or limited, or the licensee to be censured or
placed under probationary conditions, or an application for a
license or reinstatement to be denied upon a finding of the
existence of any of the following grounds:
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org
 ● The applicant or licensee committed fraud or
misrepresentation in applying for or securing an
original, renewal, or reinstated license;
● The licensee has violated any lawful rule and
regulation promulgated by the Commissioner or
violated any lawful order or directive of the
Commissioner previously entered by the
Commissioner;
● The PBM has engaged in a fraudulent activity that
constitutes a violation of state or federal law;
● The licensee has failed to furnish to the
Commissioner, or the Commissioner’s investigators
or representatives, any information legally
requested by the Commissioner;
● The PBM has been determined by the
Commissioner to be in violation of or in
noncompliance with state or federal law; or
● The PBM has failed to timely submit a renewal
application and the information required under KSA
40-3824. In lieu of a denial of a renewal
application, the Commissioner could permit the
PBM to submit to the Commissioner a corrective
action plan to correct or cure any deficiencies.
The bill would designate this section as part of and
supplemental to the PBM Licensure Act.
PBM Licensure Act – KSA 40-3821 (Section 2)
Act designation. The bill would rename KSA 40-3821
through KSA 40-3828 from the Pharmacy Benefits
Registration Act to the Pharmacy Benefits Manager Licensure
Act, add section 1 of the bill to the PBM Licensure Act, and
require, on and after January 1, 2023, any PBM performing,

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acting, or doing business in Kansas to hold a valid license
issued by the Commissioner pursuant to this act.
The bill would also amend law, previously applying to
the registration of PBMs (licensed under provisions of this
bill), to state a license issued in accordance with this act is
nontransferrable.
PBM Licensure Act – KSA 40-3822 (Section 3)
Definitions. The bill would amend definitions associated
with the regulation of PBMs to add definitions for the terms
“act,” “department,” “ERISA,” “health benefit plan,” “health
insurer,” and “maximum allowable cost or MAC.”
“Department” would be defined to mean the Insurance
Department (Department).
PBM Licensure Act – KSA 40-3823 (Section 4)
Application. The bill would update law requiring
registration with the Commissioner to reflect licensure and
would include new information to be included on the
application form:
● Name, address, and telephone number of the
PBM;
● Name, address, phone number, email address, and
official position of the employee who will serve as
the primary contact for the Department;
● A copy of the PBM’s corporate charter, articles of
incorporation, or other charter document;
● A template contract, which the bill would require to
include a dispute resolution process, that ultimately
involves an independent fact finder between:
○ The PBM and the health insurer; or

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 ○ The PBM and the pharmacy or a pharmacy’s
contracting agent; and
● A network adequacy report on a form prescribed by
the Department through rules and regulations.
The bill would also modify language in an existing form
requirement pertaining to the name, address, official position,
and professional qualifications of individuals responsible for
the conduct of the affairs of the PBM to remove any other
person who exercises control or influence over the affairs of
the pharmacy benefits manager.
Application fee. The bill would increase the
nonrefundable application fee from $140 (registration) to
$2,500 (licensure).
Material change of application information; review of
application by Commissioner; and confidential and
privileged information. The bill would require the licensee to
inform the Commissioner of any material change to the
application form and related submitted information within 90
days of such change. Failure to timely inform the
Commissioner of a material change could result in a penalty
in the amount of $500. The bill would also require, within 90
days of receipt of a completed application, the network
adequacy report, and the applicable license fee, the
Commissioner to review the application and issue a license if
the applicant is deemed qualified. If the Commissioner
determines the applicant is not qualified, the Commissioner
would be required to notify the applicant and specify the
reason for denial.
The bill would provide that all documents, materials, or
other information and copies in the possession or control of
the Department or any other governmental entity that are
obtained by or disclosed to the Commissioner or any other
person in the course of an application, examination, or
investigation made pursuant to this act shall be confidential
by law and privileged; shall not be subject to any open

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records, freedom of information, sunshine, or other public
record disclosure laws; and shall not be subject to subpoena
or discovery. The bill would further specify that the
confidentiality provisions would apply only to the disclosure of
confidential documents outlined in the bill (e.g., information
disclosed in the course of an application, examination, or
investigation) by the Department or other governmental entity
and these provisions should not be construed to create any
privilege in favor of any other party. The provision pertaining
to confidentiality and disclosure would expire on July 1, 2027,
unless the Legislature reviews and reenacts this provision
pursuant to KSA 45-229 (Kansas Open Records Act,
legislative review of exceptions to disclosure) prior to July 1,
2027.
PBM Licensure Act – KSA 40-3824 (Section 5)
License expiration, renewal. The bill would maintain
the current (registration) expiration date of March 31 each
year, providing a PBM license would expire on March 31 and
permitting annual renewal at the request of the licensee. The
bill would increase the renewal fee from $140 (registration) to
$2,500 (licensure), increase the penalty fee for failure to pay
the renewal fee by the prescribed date from $140
(registration) to $2,500 (licensure), and require any person
performing pharmacy benefits management service to obtain
a license as a PBM no later than January 1, 2023, in order to
continue to do business in Kansas.
PBM Licensure Act – KSA 40-3825 (Section 6)
Rules and regulations. The bill would require the
Commissioner to adopt, amend, and revoke all necessary
rules and regulations no later than July 1, 2023.
PBM Licensure Act – KSA 40-3826 (Section 7)
Violations of the PBM Licensure Act, statement of
violations, appeals hearing, and penalties. The bill would
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authorize the Commissioner, if the Commissioner has reason
to believe that a PBM has been engaged in this state or is
engaging in this state in activity that violates the PBM
Licensure Act, to issue and serve on a PBM a statement
detailing the charges of violation and conduct a hearing in
accordance with the provisions of the Kansas Administrative
Procedure Act.
If, after a hearing, the Commissioner determines that the
PBM subject to the charges has violated the PBM Licensure
Act, the Commissioner would be permitted to, in the exercise
of discretion, order any one or more of the following:
● Payment of a monetary penalty of not more than
$1,000 for each and every act or violation. The bill
would specify the total of the monetary penalties
for such violations cannot exceed $10,000;
○ If the PBM knew or reasonably should have
known that such manager was in violation of
this act, payment of a monetary penalty of
$5,000 for each and every act or violation.
The total of the monetary penalties for these
violations could not exceed $50,000 in any
six-month period;
● If the PBM knew or reasonably should have known
such person was in violation of this act, the
suspension or revocation of the PBM’s license; or
● The assessment of any costs incurred as a result
of conducting the administrative hearing authorized
by provisions of this bill against the PBM. The bill
would define “costs,” as used in this section, to
include witness fees, mileage allowances, any
costs associated with reproduction of documents
that become part of the hearing record, and
expenses of making a record of the hearing.
The bill would further provide that if the deadline for filing
a petition for review has expired and no petition has been
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filed, the Commissioner may reopen and modify or set aside
any portion or the entirety of any administrative order issued
under provisions of the bill. The bill would also specify that
the reopening of any such order may occur if, in the
Commissioner’s opinion, the conditions of fact or law have
changed to warrant such action or if such an action is
warranted in the public interest.
Failure to obtain a license, fines. The bill would modify
the fine associated with failure to register with the
Commissioner ($500) to a fine associated with failure to be
licensed and set this fine at $5,000 for the period of time the
PBM is found to be in violation.
PBM Licensure Act – KSA 40-3827 (Section 8)
Licensure fund. The bill would rename the PBM
Registration Fund as the Pharmacy Benefits Manager
Licensure Fund (Fund) and establish the Fund in the State
Treasury, require administration by the Commissioner for
costs associated with licensing, and provide for expenditures
from this Fund. As in current law, all moneys deposited in the
Fund would be credited to the Fund.

PBM – Maximum Allowable Cost (Sections 9-10)
MAC Pricing and Definitions – KSA 40-3829 (Section 9)
Definitions. The bill would amend law relating to MAC
pricing and reimbursements to pharmacies. The bill would
update the definition of “maximum allowable cost or MAC” to
assign the definition established in the PBM Licensure Act.
The bill would also create these definitions:
● “Pharmacy benefits plan or pharmacy benefits
program” would mean a plan or program that pays
for, reimburses, covers the cost of, or otherwise

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 provides for pharmacist services to individuals who
reside in or are employed in this state; and
● “Wholesaler” would mean a person or entity that
sells and distributes prescription pharmaceutical
products, including, but not limited to, a full line of
brand name, generic, and over-the-counter
pharmaceuticals and that offers regular and private
delivery to a pharmacy.
MAC List Requirements; Updates; Appeals Process – KSA
40-3830 (Section 10)
The bill would amend law pertaining to the MAC list and
reimbursement appeals process for network pharmacies to
require the establishment of a reasonable administrative
appeal procedure to allow a pharmacy or pharmacy’s
contracting agent to challenge MAC for a specific drug as:
● Not meeting requirements of the bill’s provisions
pertaining to MAC list; and
● Being below the cost at which the pharmacy may
obtain the drug.
The bill would require the following to be included in any
administrative appeals procedure:
● A dedicated telephone number and email address
or website for the purpose of submitting
administrative appeals; and
● The ability to submit an administrative directly to
the PBM regarding the pharmacy benefits plan or
program or through a pharmacy service
administrative organization.
The bill would clarify a continuing provision pertaining to
filing of an administrative appeal by a network pharmacy not

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later than 10 business days after the fill date to include the
network pharmacy’s contracting agent.
The bill would also require the PBM request only the
following information to determine a MAC administrative
appeal:
● Prescription number;
● Provider’s name;
● National Drug Code (NDC) used during the filing of
the claim;
● Date of the fill;
● Reimbursement amount; and
● Such other information related to the appealed
claim as required by contract.
The bill would also update provisions pertaining to the
denial of the appeal to require the PBM to provide, in addition
to the NDC number from a national or regional wholesaler
operating in Kansas meeting certain criteria, the reason for
the denial. Provisions in this section (MAC list and appeals
process) would apply to PBMs, which include the PBM for the
State Health Care Benefits Program (the State Employee
Health Plan).

Technical Amendments
The bill would make technical amendments.

Background
HB 2733 was introduced by the House Committee on
Appropriations at the request of Representative Steven
Johnson. The contents of HB 2733, as amended by House
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Committee, were incorporated in a substitute bill, House Sub.
for SB 28. [Note: The original contents of SB 28, pertaining to
reinsurance, were enacted in 2021 House Sub. for SB 78.]


House Committee on Insurance and Pensions
In the House Committee hearing on March 14, 2022,
representatives of the Kansas Pharmacists Association
(KPhA) and the Pharmaceutical Care Management
Association (PCMA) provided proponent testimony,
addressing the collaborative effort to reach a compromise
that meets the needs of pharmacists and PBMs in the
regulatory process established for PBMs in Kansas. The
KPhA representative noted the bill would establish a process
of licensure of PBMs by replacing the current registration
process with a more robust approach to identifying those
entities providing PBM services and outlining the licensure
application and approval processes. The PCMA
representative noted the significant change in Kansas law for
both the regulation and enforcement of PBM activities and
indicated it is hoped the bill would address concerns
previously expressed by pharmacists.
No other testimony was provided.
Following the hearing, the Committee, without objection,
took action on the bill. The Committee adopted technical
amendments submitted by the Revisor to update the bill title,
replace or omit references to pharmacist services, and make
clarifying changes. The Committee removed the contents of
SB 28 (codifying the National Association of Insurance
Commissioners credit for reinsurance statute and
amendments to the Kansas credit for reinsurance statute)
and inserted provisions of HB 2733, as amended.


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Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on HB 2733, as introduced, the Department
indicates the bill could increase the number of complaints
regarding administrative appeals of pricing. As a result, the
Department would need to add 1.00 FTE policy examiner
position to the Rate and Form Compliance Division. The cost
to the Department from the Pharmacy Benefits Manager
Licensure Fund would be $72,000 ($67,000 for salary and
benefits, $5,000 for computer and other office equipment).
The Department currently has 54 Pharmacy Benefit
Managers registered; if the renewal fee increases from $140
to $2,500, the revenue collected is estimated to be $135,000
to be deposited into the Pharmacy Benefits Manager
Licensure Fund. Any fiscal effect associated with the bi