Enacting the Kansas pharmacy services administrative organization act.

Session of 2026
HOUSE BILL No. 2551
By Committee on Insurance
Requested by Representative Sutton
1-27
AN ACT concerning insurance; relating to third-party administrators;
providing for pharmacy services administrative organizations and the
regulation thereof by the commissioner of insurance; enacting the
Kansas pharmacy services administrative organization act; for contracts
between pharmacy services administrative organizations and
independent pharmacies, PBMs and third-party payers; requiring
certain disclosures relating to ownership; establishing certain
requirements pertaining to appeals and audits; providing for penalties
for noncompliance.
Be it enacted by the Legislature of the State of Kansas:
Section 1. (a) Sections 1 through 10, and amendments thereto, shall
be known and may be cited as the Kansas pharmacy services
administrative organization act.
(b) As used in sections 1 through 10, and amendments thereto:
(1) "Act" means the Kansas pharmacy services administrative
organization act.
(2) "Commissioner" means the commissioner of insurance.
(3) "Department" means the Kansas department of insurance.
(4) "PBM" means any pharmacy benefits manager licensed to do
business in the state of Kansas.
(5) "Pharmacy services administrative organization" means an entity
operating within Kansas that contracts with one or more independent
pharmacies to conduct business with third-party payers on behalf of such
independent pharmacy to provide administrative services to the
independent pharmacy and to negotiate and enter into contracts with third-
party payers or PBMs on behalf of the independent pharmacy.
Administrative services provided on behalf of one or more independent
pharmacies may include one or more of the following:
(A) Assistance with claims;
(B) assistance with audits;
(C) centralized payment;
(D) certification in specialized care programs;
(E) compliance support;
(F) setting flat fees for generic drugs;
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
HB 2551 2
(G) assistance with store layout;
(H) inventory management;
(I) marketing support;
(J) management and analysis of payment and drug dispensing data; or
(K) provision of services for retail cash cards.
(6) "Pharmacy services administrative organization-pharmacy
contract" means a contractual agreement between a pharmacy services
administrative organization and an independent pharmacy under which
such pharmacy services administrative organization agrees to negotiate
with a PBM or a third-party payer on behalf of an independent pharmacy.
A pharmacy services administrative organization-pharmacy contract may
contain an agreement that the pharmacy services administrative
organization will provide other services to the independent pharmacy in
addition to negotiation with PBMs or third-party payers.
Sec. 2. (a) No pharmacy services administrative organization that
negotiates with PBMs or third-party payers on behalf of any pharmacy in
Kansas shall operate without obtaining a license from the department.
(b) The commissioner shall develop an application for licensure as a
pharmacy services administrative organization and may charge an initial
application fee of up to $200 and an annual renewal fee of up to $150. The
application shall include, but not be limited to, the following:
(1) The name, address and telephone contact number of the pharmacy
services administrative organization;
(2) the name and address of the pharmacy services administrative
organization's agent for service of process in Kansas;
(3) the name and address of each individual with management or
control over the pharmacy services administrative organization;
(4) the name and address of each individual or entity with a beneficial
ownership interest in the pharmacy services administrative organization;
and
(5) (A) a signed statement that, to the best of the applicant's
knowledge, no officer with management or control of the pharmacy
services administrative organization has been convicted of a felony or has
violated any requirement of state or federal law applicable to pharmacy
services administration, pharmacy benefits management or pharmacy
services; or
(B) a description of any felony or any violation of any requirement of
state or federal law applicable to pharmacy services administration,
pharmacy benefits management or pharmacy services committed by any
officer with management or control of the pharmacy benefits manager.
(c) An applicant or a pharmacy services administrative organization
that is licensed to conduct business in Kansas shall file a notice describing
any material modification of the information required to be contained in
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
HB 2551 3
the licensure application under this section.
(d) (1) Information contained in a report or disclosure required to be
submitted to the department by a pharmacy services administrative
organization pursuant to this act shall not contain the personally
identifiable information of any insured.
(2) Information disclosed pursuant to paragraph (1) shall be
confidential by law and privileged and shall not be subject to the open
records act, K.S.A. 45-215 et seq., and amendments thereto, or subpoena.
Such information shall not be subject to discovery or admissible as
evidence in any private civil action.
Sec. 3. (a) Prior to licensure under this act and within 10 calendar
days of any material change to such disclosure, each pharmacy services
administrative organization shall provide a written disclosure of ownership
to the department.
(b) Prior to entering into a contract with an independent pharmacy,
PBM or third-party payer, a pharmacy services administrative organization
shall provide such pharmacy, PBM or third-party payer a written
disclosure of ownership or control in order to assist the pharmacy, PBM or
third-party payer in making an informed decision regarding the
relationship with the pharmacy services administrative organization and
the pharmacy, including the pharmacy services administrative
organization's relationship with any independent pharmacy on behalf of
which the pharmacy services administrative organization is negotiating.
(c) A disclosure of ownership required under this section shall
include the extent of any ownership or control of the pharmacy services
administrative organization by any parent company, subsidiary or other
organization that:
(1) Provides pharmacy services or support;
(2) provides prescription drugs or drug services; or
(3) manufactures, sells or distributes prescription drugs, biological
products or medical devices.
(d) If a material change in ownership or control of a pharmacy
services administrative organization relating to any disclosure required
under this section occurs, then a pharmacy services administrative
organization shall notify the department and all relevant independent
pharmacies, PBMs and third-party payers of such change within 10
calendar days of such change.
Sec. 4. (a) Every pharmacy services administrative organization
pharmacy contract shall include a requirement that the pharmacy services
administrative organization provide to the independent pharmacy a copy of
any contract, amendment, payment schedule or reimbursement rate within
10 calendar days after the execution or amendment to such contract that
the pharmacy services administrative organization has signed on behalf of
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
HB 2551 4
such independent pharmacy.
(b) Each contract between a pharmacy services administrative
organization and an independent pharmacy, PBM or third-party payer shall
include the requirement that the pharmacy services administrative
organization update required disclosures in accordance with section 3(d),
and amendments thereto.
(c) No pharmacy services administrative organization shall require a
pharmacy to purchase specific amounts of prescription drugs, whether
generic or brand name, in order to access any discount.
(d) If a pharmacy services administrative organization-pharmacy
contract grants a PBM the right or obligation to conduct audits of an
independent pharmacy, then such pharmacy services administrative
organization-pharmacy contract shall contain language that permits such
PBM to obtain information from the pharmacy services administrative
organization in connection with such PBM's audit of such independent
pharmacy.
(e) A pharmacy services administrative organization-pharmacy
contract shall provide that all remittances for claims submitted to the
pharmacy services administrative organization by a PBM or third-party
payer on behalf of the independent pharmacy shall be passed through by
the pharmacy services administrative organization to the pharmacy within
a reasonable amount of time after receipt of the remittance by the
pharmacy services administrative organization from a PBM or third-party
payer. The reasonable amount of time required under this section shall be
established in the pharmacy services administrative organization-pharmacy
contract.
Sec. 5. A pharmacy services administrative organization shall not
discriminate on the price of drugs sold to an independent pharmacy based
on the price of drugs purchased from a wholesale distributor of the drug.
Sec. 6. (a) A pharmacy services administrative organization that
owns or is owned by, in whole or in part, any entity that manufactures,
sells or distributes prescription drugs, biological products or medical
devices shall not, as a condition of entering into a pharmacy services
administrative organization-pharmacy contract, require that the
independent pharmacy purchase any drugs or medical devices solely from
an entity with which the pharmacy services administrative organization
has an ownership interest or that has an ownership in the pharmacy
services administrative organization.
(b) A pharmacy services administrative organization that owns or is
owned by, in whole or in part, any entity that manufactures, sells or
distributes prescription drugs, biological products or medical devices shall
disclose to the department any agreement with an independent pharmacy
to purchase prescription drugs, biological products or medical devices by
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
HB 2551 5
an independent pharmacy from the pharmacy services administrative
organization or an entity with which the pharmacy services administrative
organization has an ownership interest or that has an ownership in the
pharmacy services administrative organization.
Sec. 7. (a) If there is a dispute between an independent pharmacy
and a PBM or third-party payer, then a pharmacy services administrative
organization that has entered into a pharmacy services administrative
organization-pharmacy contract with such independent pharmacy shall
ensure and facilitate timely communication between such independent
pharmacy and the PBM or third-party payer.
(b) If a third-party payer or a PBM provides notice or other
information to a pharmacy services administrative organization that is
related to an independent pharmacy with which the pharmacy services
administrative organization has entered into a pharmacy services
administrative organization-pharmacy contract, then such notice or other
information shall be considered provision of such notice or other
information to the pharmacy with which the pharmacy services
administrative organization is contracted. A third-party payer or PBM shall
not be required to provide notice or other information to both the
pharmacy services administrative organization and the independent
pharmacy with which the pharmacy services administrative organization
has entered into a pharmacy services administrative organization-
pharmacy contract.
(c) A pharmacy services administrative organization shall forward in
a timely manner all notices of appeals from an independent pharmacy with
which the pharmacy services administrative organization has entered into a
pharmacy services administrative organization-pharmacy contract to the
relevant PBM or third-party payer.
(d) If an appeal received by a pharmacy services administrative
organization from an independent pharmacy does not meet the minimum
requirements contained within a pharmacy services administrative
organization-pharmacy contract, then the pharmacy services administrative
organization shall deny such appeal and notify such independent pharmacy
of the denial, including the reason for such denial. If applicable, the
pharmacy services administrative organization shall allow such pharmacy
to resubmit the appeal for review by a PBM.
Sec. 8. (a) Any pharmacy services administrative organization that
fails to comply with the provisions of the Kansas pharmacy administrative
organization act, as determined by the commissioner, shall pay a penalty of
$500 per day from the day the commissioner notifies the pharmacy
services administrative organization of noncompliance until the
commissioner determines that the applicable provision is met.
(b) Failure to comply with the Kansas pharmacy administrative
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
HB 2551 6
organization act may be grounds for revocation or nonrenewal of a license
under this act, as determined by the commissioner.
(c) Any violation of the Kansas pharmacy services administrative
organization act shall be considered unfair trade practice under K.S.A. 40-
2403, and amendments thereto.
Sec. 9. The commissioner of insurance is hereby authorized to adopt
all rules and regulations necessary to implement and administer the
provisions of the Kansas pharmacy services administrative organization
act. Such rules and regulations shall be adopted not later than January 1,
2027.
Sec. 10. This act shall be a part of and supplemental to article 38 of
chapter 40 of the Kansas Statutes Annotated, and amendments thereto.
Sec. 11. This act shall take effect and be in force from and after its
publication in the statute book.
1
2
3
4
5
6
7
8
9
10
11
12
13
14