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SENATE BILL No. 20
AN ACT concerning insurance; enacting the Kansas consumer prescription protection and
accountability act; providing for the regulation of pharmacy benefits managers;
requiring the registration of auditing entities; establishing procedures and
requirements for the conduct of pharmacy audits, pharmacy benefits manager
reporting and examinations; amending K.S.A. 40-222 and 40-3831 and K.S.A. 2025
Supp. 40-202, 40-3821, 40-3822, 40-3823, 40-3824, 40-3825, 40-3826, 40-3827 and
40-3828a and repealing the existing sections; also repealing K.S.A. 40-3828, 65-
16,121, 65-16,122, 65-16,123, 65-16,124, 65-16,125 and 65-16,126 and K.S.A. 2025
Supp. 40-3829 and 40-3830.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. (a) An auditing entity conducting a pharmacy
audit under this act shall:
(1) Keep information collected during a pharmacy audit
confidential, except that such auditing entity may share the information
with the pharmacy benefits manager, the covered entity for which the
audit is being conducted and any regulatory agency and law
enforcement agency as required by law;
(2) provide the pharmacy being audited with at least 14 calendar
days' prior written notice before conducting such audit unless both
parties agree otherwise. If the pharmacy requests a delay of the audit,
such pharmacy shall provide notice to the pharmacy benefits manager
within 72 hours of receiving notice of the audit;
(3) accept paper or electronic signature logs documenting the
delivery of prescription or nonproprietary drugs and pharmacist
services to a health plan beneficiary or such beneficiary's caregiver or
guardian;
(4) provide a complete list of reviewed pharmacy records to an
authorized representative of the pharmacy prior to leaving the
pharmacy after the on-site portion of the audit has been completed;
(5) (A) provide the pharmacy with a written preliminary report of
the pharmacy audit. Such report shall:
(i) Be delivered to the pharmacy or the pharmacy's corporate
parent within 60 calendar days after completion of the on-site portion
of the pharmacy audit;
(ii) include contact information for the auditing entity that
conducted the pharmacy audit and an appropriate and accessible
contact person, including such person's telephone number, facsimile
number, email address and the auditing entity name and address so that
audit results, procedures and any discrepancies can be reviewed; and
(iii) include, but not be limited to, claim level information for any
discrepancy found and total dollar amounts of claims subject to
recovery; and
(B) a pharmacy shall have at least 30 calendar days following
receipt of the preliminary audit report to respond to the findings of the
preliminary report;
(6) deliver the final written report to the pharmacy or the
pharmacy's corporate parent within 90 calendar days after completion
of the pharmacy audit. Such report shall include any response provided
to the auditing entity by the pharmacy or corporate parent and consider
and address all such responses. The final audit report may be delivered
electronically; and
(7) upon request of the plan sponsor, provide a copy of the final
report to the plan sponsor, including the disclosure of any money
recouped in the audit. The auditing entity shall provide a copy of the
report to the commissioner upon request. No report provided to the
commissioner shall contain the protected health information of any
individual. Reports provided to the commissioner shall be confidential
by law, shall not be subject to subpoena and may not be made public by
the commissioner or any other person, except to the extent otherwise
specifically provided in the Kansas open records act, K.S.A. 45-215 et
SENATE BILL No. 20—page 2
seq., and amendments thereto.
(b) An auditing entity conducting a pharmacy audit as provided in
this act may:
(1) Have access to a pharmacy's previous audit report only if the
report was prepared by that auditing entity, except as otherwise
provided by federal or state law; and
(2) not charge back, recoup or collect penalties from a pharmacy
until the time to file an appeal of a final pharmacy audit has passed or
the appeals process has been exhausted, whichever is later.
(c) An auditing entity conducting a pharmacy audit as provided in
this act shall not:
(1) Compensate such entity's employees or contractors contracted
to conduct a pharmacy audit based solely on the amount claimed or the
actual amount recouped during such audit;
(2) during the first five days of any month, initiate or schedule a
pharmacy audit for any pharmacy averaging more than 600
prescriptions filled per week without the express consent of the
pharmacy;
(3) use extrapolation to calculate penalties or amounts to be
charged back or recouped unless otherwise required by federal law;
(4) include dispensing fees in the calculation of overpayments
unless a prescription is considered a misfill; and
(5) (A) seek any fine, charge back, recoupment or other
adjustment for a dispensed product or any portion of a dispensed
product unless one or more of the following has occurred:
(i) Fraud or other intentional and willful misrepresentation has
been committed by the pharmacy, as evidenced by a review of the
claims data, statements, physical review or other investigative method;
(ii) the pharmacy has dispensed a product in excess of the benefit
design as established by the plan sponsor;
(iii) the pharmacy has not filled prescriptions in accordance with
the prescriber's order; or
(iv) an actual underpayment or overpayment has been made to the
pharmacy; and
(B) any fee, charge back, recoupment or other adjustment shall be
limited to the actual financial harm associated with the dispensed
product or portion of the dispensed product or the actual underpayment
or overpayment, pursuant to subparagraph (A).
(d) A pharmacy audit that involves clinical judgment shall be
conducted by or in consultation with a pharmacist. Such pharmacy
audit shall not cover:
(1) A period of more than 24 months after the date that a claim
was submitted by the pharmacy to the pharmacy benefits manager or
covered entity unless a longer period is required by law; or
(2) more than 250 prescriptions. A refill does not constitute a
separate prescription for the purposes of this paragraph.
(e) When a pharmacy audit is performed, a pharmacy may use:
(1) Authentic and verifiable statements or records, including, but
not limited to, medication administration records of a nursing home,
assisted living facility, hospital or healthcare provider with prescriptive
authority to validate the pharmacy record and delivery; or
(2) any valid prescription, including, but not limited to,
medication administration records, facsimiles, electronic prescriptions,
electronically stored images of prescriptions, electronically created
annotations or documentation of telephone calls from the prescribing
healthcare provider or practitioner's agent to validate claims in
connection with prescriptions or changes in prescriptions or refills of
prescription or nonproprietary drugs. Documentation of an oral
prescription order that has been verified by the prescribing healthcare
SENATE BILL No. 20—page 3
provider shall be deemed to meet the provisions of this subsection for
the initial audit review.
(f) A pharmacy that is the subject of a pharmacy audit may not be
subject to a charge back or recoupment for a clerical or recordkeeping
error in a required document or record, including a typographical or
computer error, unless the error resulted in overpayment to the
pharmacy. Such pharmacy may appeal a final audit report in
accordance with procedures established by the entity conducting the
pharmacy audit.
(g) If an identified discrepancy in a pharmacy audit exceeds
$25,000, future payments made by the pharmacy benefits manager to
the pharmacy in excess of such amount may be withheld pending
adjudication of an appeal.
(h) No interest may accrue for any party during an audit period,
beginning with the notice of the pharmacy audit and ending with the
conclusion of the appeals process.
(i) Except for medicare claims, approval of drug, prescriber or
patient eligibility upon adjudication of a claim may not be reversed
unless the pharmacy or pharmacist obtained adjudication by fraud or
misrepresentation of claims elements.
(j) The provisions of this section shall not apply to a pharmacy
audit if:
(1) Fraud, waste, abuse or other intentional misconduct is
indicated by physical review or review of claims data or statements; or
(2) other investigative methods indicate that the pharmacy is or
has been engaged in criminal wrongdoing, fraud or other intentional or
willful misrepresentation.
(k) This section shall be a part of and supplemental to the Kansas
consumer prescription protection and accountability act.
New Sec. 2. (a) No person shall act or operate as an auditing entity
without first registering with the commissioner.
(b) Each person seeking to register as an auditing entity shall file
with the commissioner an application upon a form prescribed by the
commissioner accompanied by a nonrefundable registration fee in an
amount of not to exceed $500. At a minimum, the application form
shall include the following:
(1) Identity, address and telephone number of the applicant;
(2) name, business address and telephone number of the contact
person for the applicant; and
(3) federal employer identification number for the applicant, if
applicable.
(c) The commissioner shall issue a certificate of registration to an
applicant if the commissioner determines that the applicant has
submitted a completed application and paid the required registration
fee.
(d) The certificate of registration is nontransferable and shall
prominently list the expiration date of the registration.
(e) Each auditing entity registration shall expire on March 31 of
each year and may be renewed annually at the request of the pharmacy
auditing entity on or before March 31 of each year. The application for
renewal shall be submitted by the auditing entity on a form prescribed
by the commissioner and accompanied by a renewal fee in an amount
of not to exceed $250.
(f) If a registered auditing entity fails to provide a completed
application for renewal by March 31 or if the renewal fee is not paid by
March 31, then a penalty fee shall be assessed in an amount of not to
exceed $250. The auditing entity shall remit the renewal fee plus
penalty fee before the commissioner shall issue such auditing entity's
registration renewal.
SENATE BILL No. 20—page 4
(g) An auditing entity's registration may be suspended by the
commissioner until the renewal application has been received and the
renewal fee and any penalty assessed has been paid.
(h) Not later than December 1 of each year, the commissioner
shall set and cause to be published in the Kansas register the fees
required pursuant to this section for the next calendar year.
(i) This section shall be a part of and supplemental to the Kansas
consumer prescription protection and accountability act.
New Sec. 3. (a) Each pharmacy benefits manager shall:
(1) For each health plan or covered entity for which such
pharmacy benefits manager provides pharmacy benefits management
services, annually or more frequently upon the commissioner's request,
report to the commissioner the aggregate:
(A) Amount of rebates received by the pharmacy benefits
manager;
(B) amount of rebates distributed to each health plan or covered
entity contracted with the pharmacy benefits manager;
(C) and individual amount paid by the health plan or covered
entity to the pharmacy benefits manager for pharmacist services
itemized by pharmacy, product and goods and services; and
(D) and individual amount that a pharmacy benefits manager paid
for pharmacist services itemized by pharmacy, product and goods and
services;
(2) annually, report to the commissioner and each contracted
health plan or covered entity the aggregate difference between the
amount that the pharmacy benefits manager reimbursed pharmacies and
the amount that the pharmacy benefits manager charged such health
plan; and
(3) (A) quarterly, report to the commissioner on all drugs
appearing on the national average drug acquisition cost list that are
reimbursed at 10% and below the national average drug acquisition
cost and all drugs that are reimbursed at 10% and above the national
average drug acquisition cost and the net acquisition cost for each class
of drug appearing on the national average acquisition cost list that the
pharmacy benefits manager charged each health benefit plan.
(B) For each drug in the report, the pharmacy benefits manager
shall include:
(i) The month that the drug was dispensed;
(ii) the quantity of the drug dispensed;
(iii) the amount that the pharmacy was reimbursed;
(iv) whether the dispensing pharmacy was an affiliate of the
pharmacy benefits manager;
(v) whether the drug was dispensed pursuant to a government
health plan; and
(vi) the average national drug acquisition cost for the month that
the drug was dispensed.
(C) The pharmacy benefits manager shall publish a copy of this
report on the pharmacy benefits manager's publicly available website
for at least 24 months.
(D) This report shall be exempt from the confidentiality provisions
of subsection (d).
(b) (1) Annually, each health benefit plan or covered entity shall
report to the commissioner the aggregate amount of credits, rebates,
discounts or other such payments received by the health benefit plan or
covered entity from a pharmacy benefits manager or drug
manufacturer.
(2) Use of annual reporting provided pursuant to this subsection
by health benefit plans and covered entities shall be limited to
verification of data pursuant to this subsection for compliance
SENATE BILL No. 20—page 5
purposes.
(c) No report provided to the commissioner shall include the
protected health information of any individual.
(d) The reports required by this section shall be filed electronically
on a form and in a manner prescribed by the commissioner.
(e) With the exception of the report described in subsection (a)(3),
all data and information provided by the pharmacy benefits manager,
health plan or covered entity, pursuant to the reporting requirements
established by this section, shall:
(1) Be considered proprietary and confidential; and
(2) not be subject to disclosure under the Kansas open records act,
K.S.A. 45-215 et seq., and amendments thereto.
(f) This section shall be a part of and supplemental to the Kansas
consumer prescription protection and accountability act.
New Sec. 4. (a) The commissioner may examine the affairs of a
pharmacy benefits manager for compliance with the requirements of
this act.
(b) Every examination conducted under this section shall follow
the examination procedures and requirements provided in K.S.A. 40-
222, and amendments thereto. The commissioner may assess the costs
of the examination to the pharmacy benefits manager.
(c) (1) A pharmacy benefits manager shall not be subject to the
provisions of K.S.A. 40-222(a), and amendments thereto, pertaining to
the frequency of financial examinations of insurers.
(2) The commissioner may examine a pharmacy benefits manager,
pursuant to this section, whenever the commissioner believes it is
reasonably necessary to ensure compliance with this act.
(d) (1) No protected health information shall be provided to the
commissioner pursuant to this section.
(2) The information and data obtained by the commissioner from a
pharmacy benefits manager under this section shall be considered
confidential by law and exempt from disclosure in accordance with
K.S.A. 40-222, and amendments thereto, and shall not be subject to
disclosure under the Kansas open records act, K.S.A. 45-215 et seq.,
and amendments thereto.
(e) This section shall be a part of and supplemental to the Kansas
consumer prescription protection and accountability act.
New Sec. 5. (a) A pharmacy benefits manager shall not:
(1) Collect from a pharmacy, pharmacist or pharmacy technician
any cost share charged to a covered person that exceeds the total
submitted charges by the pharmacy or pharmacist to the pharmacy
benefits manager;
(2) (A) reimburse a pharmacy, pharmacist or pharmacy technician
for a prescription drug or pharmacy service any amount that is less than
the national average drug acquisition cost for the prescription drug or
pharmacy service at the time that the drug is administered or dispensed,
plus a professional dispensing fee that is the greater of $10.50 or the
dispensing fee calculated pursuant to K.A.R. 30-5-94; or
(B) if the national average drug acquisition cost is not available at
the time that a drug is administered or dispensed, a pharmacy benefits
manager shall not reimburse a pharmacy, pharmacist or pharmacy
technician an amount that is less than the wholesale acquisition cost of
the drug as defined in 42 U.S.C. § 1395w-3a(c)(6)(B) plus a
professional dispensing that is the greater of $10.50 or the dispensing
fee calculated pursuant to K.A.R. 30-5-94;
(3) reimburse a pharmacy or pharmacist for a prescription drug or
pharmacy service any amount less than the amount that the pharmacy
benefits manager would reimburse itself or an affiliate for the same
prescription drug or pharmacy service; and
SENATE BILL No. 20—page 6
(4) engage in any practice that:
(A) Includes imposing a point-of-sale fee or retroactive fee; or
(B) derives any revenue from a pharmacy or covered person in
connection with performing pharmacy benefits management services.
The provisions of this section shall not be construed to prohibit
pharmacy benefits managers from processing deductibles or
copayments approved by a covered person's health benefit plan.
(b) A pharmacy benefits manager shall:
(1) Charge a health benefit plan the same price for a prescription
drug as such pharmacy benefits manager pays a pharmacy for the
prescription drug; and
(2) for purposes of complying with the provisions of subsection
(a)(2), utilize the most recently published monthly national average
drug acquisition cost as a point of reference for the ingredient drug
product component of a pharmacy's reimbursement for drugs appearing
on the national average drug acquisition cost list.
(c) (1) Any methodology utilized by a pharmacy benefits manager
in connection with reimbursement shall be filed with the commissioner
at the time of initial licensure and at any time thereafter that any
methodology is changed by the pharmacy benefits manager.
(2) A methodology shall not be subject to disclosure and shall be
treated as confidential and exempt from disclosure under the Kansas
open records act, K.S.A. 45-215 et seq., and amendments thereto.
(3) Every filed methodology shall comply with the provisions of
subsection (a)(2), and no pharmacy benefits manager shall enter into a
contract with a pharmacy that provides for reimbursement methodology
that is impermissible under the provisions of subsection (a)(2).
(d) Any rebate not applied to reduce a covered individual's defined
cost sharing by the insurer shall be passed on to the health plan.
Nothing in this act shall be deemed to require or preclude an insurer
from decreasing a covered individual's defined cost sharing by the
application of rebates.
(e) The provisions of this section shall not apply to self-funded
health plans subject to the provisions of ERISA, the federal employee
retirement income security act of 1974.
(f) The commissioner may order reimbursement to a covered
person, pharmacy or dispenser who has incurred a monetary loss as a
result of a violation of this act.
(g) This section shall be a part of and supplemental to the Kansas
consumer prescription protection and accountability act.
New Sec. 6. (a) Every pharmacy benefits manager contract
between a pharmacy benefits manager and a pharmacy shall include a
requirement that the pharmacy benefits manager provide to the
pharmacy a copy of any contract, amendment, payment schedule or
reimbursement rate within 10 calendar days after the execution or
amendment to such contract.
(b) This section shall be a part of and supplemental to the Kansas
consumer prescription protection and accountability act.
New Sec. 7. (a) If any provision of this act or application thereof
to any person or circumstance is held invalid, such invalidity shall not
affect other provisions or applications of this act that can be given
effect without the invalid provision or application, and to this end the
provisions of this act are declared to be severable.
(b) This section shall be a part of and supplemental to the Kansas
consumer prescription protection and accountability act.
Sec. 8. K.S.A. 2025 Supp. 40-202 is hereby amended to read as
follows: 40-202. Except as provided in the Kansas consumer
prescription protection and accountability act, nothing contained in this
code shall apply to:
SENATE BILL No. 20—page 7
(a) Grand or subordinate lodges of any fraternal benefit society
that admits to membership only persons engaged in one or more
hazardous occupations in the same or similar line of business or to
fraternal benefit societies as defined in and organized under article 7 of
chapter 40 of the Kansas Statutes Annotated, and amendments thereto,
unless they be expressly designated;
(b) the employees of a particular person, firm, or corporation;
(c) mercantile associations that simply guarantee insurance to each
other in the same lines of trade and do not solicit insurance from the
general public;
(d) the Swedish mutual aid association of Rapp, Osage county,
Kansas;
(e) the Scandia mutual protective insurance company of Chanute,
Kansas;
(f) the Seneca and St. Benedict mutual fire insurance company of
Nemaha county, Kansas;
(g) the mutual insurance system practiced in the Mennonite
church, in accordance with an old custom, either by the congregation
themselves or by special associations, of its members in Kansas;
(h) the Kansas state high-school activities association;
(i) the mutual aid association of the church of the brethren;
(j) a voluntary noncontractual mutual aid arrangement whereby
the needs of participants are announced and accommodated through
subscriptions to a monthly publication;
(k) a self-funded health plan established or maintained for its
employees by the state or a subdivision of the state, a school district,
any public authority or by a county or city government or any political
subdivision, agency or instrumentality thereof; or
(l) a self-funded health plan established or maintained for its
employees by a church or by a convention or association of churches
that is exempt from tax under section 501 of the internal revenue code.
Sec. 9. K.S.A. 40-222 is hereby amended to read as follows: 40-
222. (a) Whenever the commissioner of insurance deems it necessary
but at least once every five years, the commissioner may make, or
direct to be made, a financial examination of any insurance company in
the process of organization, or applying for admission or doing
business in this state. In addition, at the commissioner's discretion the
commissioner may make, or direct to be made, a market regulation
examination of any insurance company doing business in this state.
(b) Whenever the commissioner deems it necessary, the
commissioner may make or direct to be made a financial examination
or market regulation examination of any pharmacy benefits manager
that conducts business in Kansas.
(c) In scheduling and determining the nature, scope and frequency
of examinations of financial condition, the commissioner shall consider
such matters as the results of financial statement analyses and ratios,
changes in management or ownership, actuarial opinions, reports of
independent certified public accountants and other criteria as set forth
in the examiner's handbook adopted by the national association of
insurance commissioners and in effect at the time of such examination
as announced by the commissioner pursuant to K.S.A. 40-2,256, and
amendments thereto, when the commissioner exercises discretion under
this subsection.
(c)(d) For the purpose of such examination examinations , the
commissioner of insurance or the persons appointed by the
commissioner, for the purpose of making such examination shall have
free access at no cost to the books and papers of any such insurance
company or pharmacy benefits manager that relate relates to its such
insurance company's or pharmacy benefits manager's business and to
SENATE BILL No. 20—page 8
the books and papers kept by any of its agents and may examine under
oath, which the commissioner or the persons appointed by the
commissioner are empowered to administer, the directors, officers,
agents or employees of any such insurance company or pharmacy
benefits manager in relation to its such insurance company's or
pharmacy benefits manager's affairs, transactions and condition.
(d)(e) The commissioner may also examine or investigate any
person, or the business of any person, in so far as such examination or
investigation is, in the sole discretion of the commissioner, necessary or
material to the examination of the insurance company or pharmacy
benefits manager, but such examination or investigation shall not
infringe upon or extend to any communications or information
accorded privileged or confidential status under any other laws of this
state.
(e)(f) In lieu of examining the financial condition of a foreign or
alien insurance company or pharmacy benefits manager , the
commissioner of insurance may accept the report of the an examination
made by or upon the authority of the company's state of domicile or
port-of-entry state until January 1, 1994. Thereafter, such reports as
they relate to financial condition may only be accepted if:
(1) At the time of the examination, the insurance department
conducting the examination was at the time of the examination
accredited under the national association of insurance commissioners'
financial regulation standards and accreditation program; or
(2) the examination is was performed under the supervision of an
accredited insurance department, or with the participation of one or
more examiners who are employed by such an accredited insurance
department and who, after a review of the examination work papers and
report, state under oath that the examination was performed in a
manner consistent with the standards and procedures required by their
such insurance company's insurance department.
(f)(g) Upon determining that an examination should be conducted,
the commissioner or the commissioner's designee shall appoint one or
more examiners to perform the examination and instruct them such
examiner as to the scope of the examination. In conducting an
examination of financial condition, the examiner shall observe those
guidelines and procedures set forth in the version of the examiners'
handbook adopted promulgated by the national association of insurance
commissioners in effect at the time of such examination as announced
by the commissioner pursuant to K.S.A. 40-2,256, and amendments
thereto. The commissioner may also employ such other guidelines or
procedures as the commissioner may deem appropriate.
(g)(h) The refusal of any insurance company or pharmacy
benefits manager, by its officers, directors, employees or agents, to
submit to examination or to comply with any reasonable written request
of the examiners shall be grounds for suspension or refusal of, or
nonrenewal of any license or authority held by the company to engage
in an insurance or other business subject to the commissioner's
jurisdiction. Any such proceedings for suspension, revocation or refusal
of any license or authority shall be conducted in accordance with the
provisions of the Kansas administrative procedure act.
(h)(i) When making an examination under this act, the
commissioner may retain attorneys, appraisers, independent actuaries,
independent certified public accountants or other professionals and
specialists as examiners, the reasonable cost of which shall be borne by
the insurance company which or pharmacy benefits manager that is the
subject of the examination.
(i)(j) Nothing contained in this act shall be construed to limit the
commissioner's authority to:
SENATE BILL No. 20—page 9
(1) Terminate or suspend any examination in order to pursue other
legal or regulatory action pursuant to the insurance laws of this state.
(j) Nothing contained in this act shall be construed to limit the
commissioner's authority to; or
(2) use and, if appropriate, to make public any final or preliminary
examination report in the furtherance of any legal or regulatory action
which the commissioner may, in the commissioner's sole discretion,
deem appropriate.
(k) (1) No later than 30 days following completion of the
examination or at such earlier time as the commissioner shall prescribe,
the examiner in charge shall file with the department a verified written
report of examination under oath. No later than 30 days following
receipt of the verified report, the department shall transmit the report to
the insurance company or pharmacy benefits manager examined,
together with a notice which shall afford such insurance company or
pharmacy benefits manager examined a reasonable opportunity of not
more than 30 days to make a written submission or rebuttal with
respect to any matters contained in the examination report.
(2) Within 30 days of the end of the period allowed for the receipt
of written submissions or rebuttals, the commissioner shall fully
consider and review the report, together with any written submissions
or rebuttals and any relevant portions of the examiners workpapers and
enter an order:
(A) Adopting the examination report as filed or with modification
or corrections. If the examination report reveals that the insurance
company or pharmacy benefits manager is operating in violation of any
law, regulation or prior order of the commissioner, the commissioner
may order the insurance company or pharmacy benefits manager to
take any action the commissioner considers necessary and appropriate
to cure such violations; or
(B) rejecting the examination report with directions to the
examiners to reopen the examination for purposes of obtaining
additional data, documentation or information, and refiling pursuant to
subsection (k); or
(C) call and conduct a fact-finding hearing in accordance with
K.S.A. 40-281, and amendments thereto, for purposes of obtaining
additional documentation, data, information and testimony.
(3) All orders entered as a result of revelations contained in the
examination report shall be accompanied by findings and conclusions
resulting from the commissioner's consideration and review of the
examination report, relevant examiner workpapers and any written
submissions or rebuttals. Within 30 days of the issuance of the adopted
report, the insurance company or pharmacy benefits manager shall file
affidavits executed by each of its directors stating under oath that they
have received a copy of the adopted report and related orders.
(4) Upon the adoption of the examination report, the
commissioner shall hold the content of the examination report as
private and confidential information for a period of 30 days except to
the extent provided in paragraph (5). Thereafter, the commissioner may
open the report for public inspection so long as no court of competent
jurisdiction has stayed its publication.
(5) (A) Except as provided in paragraph (B), nothing contained in
this act shall prevent or be construed as prohibiting the commissioner
from disclosing the content of an examination report, preliminary
examination report or results, or any matter relating thereto, at any time
to:
(i) The insurance department of this or any other state or country;
(ii) law enforcement officials of this or any other state or agency
of the federal government or any other country; or
SENATE BILL No. 20—page 10
(iii) officials of any agency of another country.
(B) The commissioner shall not share any information listed in
paragraph (A) unless the agency or office receiving the report or
matters relating thereto agrees in writing to hold it confidential and in a
manner consistent with this act.
(6) In the event the commissioner determines that regulatory
action is appropriate as a result of any examination, the commissioner
may initiate any proceedings or actions as provided by law.
(7) All working papers, recorded information, documents and
copies thereof produced by, obtained by or disclosed to the
commissioner or any other person in the course of an examination
made under this act including analysis by the commissioner pertaining
to either the financial condition or the market regulation of a an
insurance company or pharmacy benefits manager must be given
confidential treatment and are not subject to subpoena and may not be
made public by the commissioner or any other person, except to the
extent otherwise specifically provided in K.S.A. 45-215 et seq., and
amendments thereto. Access may also be granted to the national
association of insurance commissioners and its affiliates. Such parties
must agree in writing prior to receiving the information to provide to it
the same confidential treatment as required by this section, unless the
prior written consent of the insurance company or pharmacy benefits
manager to which it pertains has been obtained.
(8) Whenever it appears to the commissioner of insurance from
such examination or other satisfactory evidence that the solvency of
any such insurance company is impaired, or that it is doing business in
violation of any of the laws of this state, or that its affairs are in an
unsound condition so as to endanger its policyholders, the
commissioner of insurance shall give the company a notice and an
opportunity for a hearing in accordance with the provisions of the
Kansas administrative procedure act. If the hearing confirms the report
of the examination, the commissioner shall suspend the certificate of
authority of such company until its solvency shall have been fully
restored and the laws of the state fully complied with. The
commissioner may, if there is an unreasonable delay in restoring the
solvency of such company and in complying with the law, revoke the
certificate of authority of such company to do business in this state.
Upon revoking any such certificate the commissioner shall commence
an action to dissolve such company or to enjoin the same from doing or
transacting business in this state.
Sec. 10. K.S.A. 2025 Supp. 40-3821 is hereby amended to read as
follows: 40-3821. (a) K.S.A. 40-3821 through 40-3828, and
amendments thereto, and K.S.A. 2025 Supp. 40-3828a et seq. , and
amendments thereto, shall be known and may be cited as the pharmacy
benefits manager licensure Kansas consumer prescription protection
and accountability act.
(b) On and after January 1, 2023, a No person shall not perform,
act or do business in this state as a pharmacy benefits manager unless
such person has a valid license issued by the commissioner pursuant to
this act.
(c) This act shall apply to any pharmacy benefits manager that
provides claims processing services, other prescription drug or device
services, or both, to covered persons who are residents of this state.
(d) This act shall not apply to any pharmacy benefits manager that
holds a certificate of registration as an administrator pursuant to K.S.A.
40-3810, and amendments theretoThis act shall also apply to any audit
of the records of a pharmacy conducted by a managed care company,
third-party payer, pharmacy benefits manager or any entity that
represents a covered entity or health benefit plan and the registration
SENATE BILL No. 20—page 11
of auditing entities.
(e) A license issued in accordance with the pharmacy benefits
manager licensure Kansas consumer prescription protection and
accountability act shall be nontransferrable.
Sec. 11. K.S.A. 2025 Supp. 40-3822 is hereby amended to read as
follows: 40-3822. As used in this act:
(a) "Act" means the pharmacy benefits manager licensure Kansas
consumer prescription protection and accountability act.
(b) "Affiliate" means a pharmacy, pharmacist or pharmacy
technician which, either directly or indirectly through one or more
intermediaries:
(1) Has an investment or ownership interest in a pharmacy
benefits manager licensed under this chapter;
(2) shares common ownership with a pharmacy benefits manager
licensed under this chapter; or
(3) has an investor or ownership interest holder that is a
pharmacy benefits manager licensed under this article.
(c) "Auditing entity" means a person that performs a pharmacy
audit, including a pharmacy benefits manager, managed care
organization or third-party payer.
(b)(d) "Commissioner" means the commissioner of insurance as
defined by K.S.A. 40-102, and amendments thereto.
(c)(e) (1) "Covered entity" means:
(A) A nonprofit hospital or medical service corporation, health
insurer, health benefit plan or health maintenance organization;
(B) a health program administered by a department or the state in
the capacity of provider of health coverage; or
(C) an employer, labor union or other group of persons organized
in the state that provides health coverage to covered individuals who
are employed or reside in the state a health insurance company, health
maintenance organization, hospital, medical or dental corporation,
healthcare corporation, any entity that provides, administers or
manages a self-funded health benefit plan including a governmental
plan or any other entity that provides prescription drug coverages
unless specifically excluded in paragraph (2).
(2) "Covered entity" does not include any:
(A) Self-funded plan that is exempt from state regulation pursuant
to ERISA;
(B) plan issued for coverage for federal employees; or
(C) health plan that provides coverage only for accidental injury,
specified disease, hospital indemnity, medicare supplement, disability
income, long-term care or other limited benefit health insurance
policies and contracts insurers that provide coverage under a policy of
property or casualty insurance or workers compensation insurance.
(d)(f) "Covered person" means a member, policyholder,
subscriber, enrollee, beneficiary, dependent or other individual
participating in a health benefit plan.
(g) "Defined cost sharing" means a deductible payment,
copayment or coinsurance amount imposed on an enrollee for a
covered prescription drug under the enrollee's health plan.
(e)(h) "Department" means the insurance department Kansas
department of insurance.
(f)(i) "ERISA" means the federal employee retirement income
security act of 1974.
(g)(j) "Health benefit plan" means the same as defined in K.S.A.
40-4602, and amendments thereto or "health plan" means any hospital
or medical expense policy, health, hospital or medical service
corporation contract, a plan provided by a municipal group-funded
pool, a policy or agreement entered into by a health insurer or a health
SENATE BILL No. 20—page 12
maintenance organization contract offered by an employer or any
certificate issued under any such policies, contracts or plans. "Health
benefit plan" or "health plan" does not include policies or certificates
covering only accident, credit, dental, disability income, long-term
care, hospital indemnity, medicare supplement, specified disease,
vision care, coverage issued as a supplement to liability insurance,
insurance arising out of a workers compensation or similar law,
automobile medical-payment insurance or insurance under which
benefits are payable with or without regard to fault and that is
statutorily required to be contained in any liability insurance policy or
equivalent self-insurance.
(h)(k) "Health insurer" means the same as defined in K.S.A. 40-
4602, and amendments thereto.
(i) "Maximum allowable cost" or "MAC" means any term or
methodology that a pharmacy benefits manager or a healthcare insurer
may use to establish the maximum amount that a pharmacy benefits
manager will reimburse a pharmacy or a pharmacist for generic
drugs(l) "Misfill" means a prescription:
(1) That was not dispensed;
(2) error;
(3) that had a request by the pharmacy to authorize the filling of
such prescription that was denied by the prescriber; or
(4) that had an extra dispensing fee charged.
(m) "National average drug acquisition cost" means the monthly
survey of retail pharmacies conducted by the federal centers for
medicare and medicaid services to determine the average acquisition
cost for medicaid-covered outpatient drugs.
(n) "Nonproprietary drug" means a drug containing any quantity
of any controlled substance or any drug that is required by any
applicable federal or state law to be dispensed only by prescription.
(o) "Person" means an individual, partnership, corporation,
organization or other business entity.
(p) "Pharmacy audit" means an audit conducted by or on behalf
of an auditing entity of any records of a pharmacy for prescription or
nonproprietary drugs dispensed by a pharmacy to a covered person.
(j)(q) "Pharmacy benefits management" means:
(1) Any of the following services provided with regard to the
administration of the following pharmacy benefits:
(A) Mail service pharmacy;
(B) claims processing, retail network management and payment of
claims to pharmacies for prescription drugs dispensed to covered
individuals;
(C) clinical formulary development and management services;
(D) rebate contracting and administration;
(E) certain patient compliance, therapeutic intervention and
generic substitution programs; or
(F) disease management programs involving prescription drug
utilization; and
(2) (A) the procurement of prescription drugs by a prescription
benefits manager at a negotiated rate for dispensation to covered
individuals within this state; or
(B) the administration or management of prescription drug
benefits provided by a covered insurance entity for the benefit of
covered individuals.
(k)(r) "Pharmacy benefits manager" means a person, business or
other entity that performs pharmacy benefits management. "Pharmacy
benefits manager" includes any person or entity acting in a contractual
or employment relationship for a pharmacy benefits manager in the
performance of pharmacy benefits management for a covered entity.
SENATE BILL No. 20—page 13
"Pharmacy benefits manager" does not include a covered insurance
entity.
(l) "Person" means an individual, partnership, corporation,
organization or other business entity(s) "Pharmacy record" means
any record stored electronically or as a hard copy by a pharmacy
relating to the provision of prescription or nonproprietary drugs,
pharmacy services or other component of pharmacist care that is
included in the practice of pharmacy as defined in K.S.A. 65-1626a,
and amendments thereto.
(t) "Pharmacy services administration organization" means any
entity that contracts with a pharmacy to assist with covered entity
interactions and that may provide a variety of other administrative
services, including contracting with pharmacy benefits managers on
behalf of pharmacies and managing pharmacies' claims payments from
covered entities.
(u) "Rebate" means any and all payments that accrue to a
pharmacy benefits manager or such pharmacy benefits manager's
health plan client, directly or indirectly, from a pharmaceutical
manufacturer, including, but not limited to, discounts, administration
fees, credits, incentives or penalties associated directly or indirectly in
any way with claims administered on behalf of a health plan client.
"Rebate" does not include any discount or payment that may be
provided to or made to any 340B entity through such program.
Sec. 12. K.S.A. 2025 Supp. 40-3823 is hereby amended to read as
follows: 40-3823. (a) No person shall act or operate as a pharmacy
benefits manager without first obtaining a valid license issued by the
commissioner.
(b) Each person seeking a license to act as a pharmacy benefits
manager shall file with the commissioner an application for a license
upon a form to be furnished by the commissioner. At a minimum, the
application form shall include the following information:
(1) The name, address and telephone number of the pharmacy
benefits manager;
(2) the name, address, official position and professional
qualifications of each individual who is responsible for the conduct of
the affairs of the pharmacy benefits manager, including all members of
the board of directors, board of trustees, executive committee, other
governing board or committee, the principal officers in the case of a
corporation, the partners or members in the case of a partnership or
association;
(3) the name and address of the applicant's agent for service of
process in the state;
(4) the name, address, phone number, email address and official
position of the employee who will serve as the primary contact for the
department;
(5) a copy of the pharmacy benefits manager's corporate charter,
articles of incorporation or other charter document;
(6) a any template contract including a dispute resolution
process, that ultimately involves an independent fact finder between:
(A) The pharmacy benefits manager and the health insurer; or
(B) the pharmacy benefits manager and the pharmacy or a
pharmacy's contracting agent; and
(7) an affidavit, executed by an officer or director of the pharmacy
benefits manager affirming that any template contract submitted
pursuant to this subsection is the accurate and complete contract used;
and
(8) a network adequacy report on a form prescribed by the
department through rules and regulations.
(c) A nonrefundable application fee in an amount of not to exceed
SENATE BILL No. 20—page 14
$2,500. Not later than December 1 of each year, the commissioner shall
set and cause to be published in the Kansas register such fee for the
next calendar year.
(d) The licensee shall inform the commissioner, by any means
acceptable to the commissioner, of any material change in the
information required by this subsection within 90 days of such change.
Failure to timely inform the commissioner of a material change may
result in a penalty against the licensee in the amount of $500 an
amount of not to exceed $2,000 per occurrence.
(e) Within 90 days after receipt of a completed application, the
network adequacy report and the applicable license fee, the
commissioner shall review the application and issue a license if the
applicant is deemed qualified under this section. If the commissioner
determines that the applicant is not qualified, the commissioner shall
notify the applicant and shall specify the reason for the denial.
(f) (1) All documents, materials or other information and copies
thereof 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
records, freedom of information, sunshine or other public record
disclosure laws and shall not be subject to subpoena or discovery.
(2) The provisions of paragraph (1) shall only apply to the
disclosure of the confidential documents described in paragraph (1) by
the department or any other governmental entity and shall not be
construed to create any privilege in favor of any other party.
(3) The provisions of this subsection shall expire on July 1, 2027,
unless the legislature reviews and reenacts this provision pursuant to
K.S.A. 45-229, and amendments thereto, prior to July 1, 2027.
Sec. 13. K.S.A. 2025 Supp. 40-3824 is hereby amended to read as
follows: 40-3824. (a) Each pharmacy benefits manager license shall
expire on March 31 of each year and may be renewed annually on the
request of the licensee. The application for renewal shall be submitted
on a form furnished by the commissioner and accompanied by a
renewal fee of not to exceed $2,500. The application for renewal shall
be in such form and contain such matters as the commissioner
prescribes.
(b) (1) Within 90 days after receipt of a completed renewal
application, the commissioner shall review the application and any
relevant information received pursuant to the provisions of this act,
including quarterly and annual reports. If the commissioner determines
the application is incomplete or the pharmacy benefits manager is not
in compliance with the act, the commissioner shall notify the applicant
and shall specify the reason for the denial of the renewal application.
(2) If a registered auditing entity fails to provide a completed
application for renewal by March 31, or if the license renewal fee is
not paid by March 31, then a penalty fee shall be assessed in an
amount of not to exceed $250. The auditing entity shall remit the
renewal fee plus the penalty fee before the commissioner issues such
auditing entity's registration renewal.
(c) If a pharmacy benefits manager fails to provide a completed
application for renewal by March 31, or if a license renewal fee is not
paid by the prescribed date March 31, then the amount of the fee, plus a
penalty fee shall be assessed in an amount of not to exceed $2,500 shall
be paid. The pharmacy benefits manager's license may be revoked or
suspended by the commissioner until the renewal fee and any penalty
assessed has been paid.
(c) Any person who performs or is performing any pharmacy
SENATE BILL No. 20—page 15
benefits management service shall be required to obtain a license as a
pharmacy benefits manager from the commissioner not later than
January 1, 2023, in order to continue to do business in Kansas . The
pharmacy benefits manager shall remit the renewal fee plus the penalty
fee before the commissioner issues such pharmacy benefits manager's
license renewal.
(d) The pharmacy benefits manager's license may be revoked or
suspended by the commissioner until the renewal fee and any penalty
assessed has been paid.
(d)(e) Not later than December 1 of each year, the commissioner
shall set and cause to be published in the Kansas register the fees
required pursuant to this section for the next calendar year.
Sec. 14. K.S.A. 2025 Supp. 40-3825 is hereby amended to read as
follows: 40-3825. (a) In accordance with the provisions of the rules and
regulations filing act, K.S.A. 77-415 et seq., and amendments thereto,
the commissioner may adopt, amend and revoke rules and regulations
governing the administration and enforcement of this act, limited to:
(1)(a) The content of the application form;
(2)(b) the content of any other form or report required to
implement this act; and
(3)(c) such other rules and regulations as the commissioner may
deem necessary to carry out the provisions of this act.
(b) The commissioner shall adopt, amend and revoke all such
necessary rules and regulations not later than July 1, 2023.
Sec. 15. K.S.A. 2025 Supp. 40-3826 is hereby amended to read as
follows: 40-3826. (a) If the commissioner has reason to believe that a
pharmacy benefits manager has been engaged in this state or is
engaging in this state in activity that violates the pharmacy benefits
manager licensure Kansas consumer prescription protection and
accountability act, the commissioner shall issue and serve upon such
pharmacy benefits manager a statement of the charges of any such
violation and conduct a hearing thereon in accordance with the
provisions of the Kansas administrative procedure act.
(b) If, after such a hearing, the commissioner determines that the
pharmacy benefits manager charged has violated the act, the
commissioner may, in the exercise of discretion, order any one or more
of the following:
(1) (A) Payment of a monetary penalty in an amount of not more
than to exceed $1,000 for each and every act or violation . The total of
the monetary penalties for such violations shall not exceed $10,000;
(B) if the pharmacy benefits manager knew or reasonably should
have known that such manager was in violation of this act, payment of
a monetary penalty in an amount of not more than to exceed $5,000 for
each and every act or violation . The total of the monetary penalties for
such violations shall not exceed $50,000 in any six-month period;
(2) if such manager knew or reasonably should have known such
person was in violation of this act, the suspension or revocation of the
pharmacy benefits manager's license; or
(3) the assessment of any costs incurred as a result of conducting
the administrative hearing authorized by the provisions of this section
against the pharmacy benefits manager.
(c) As used in this section, "costs" includes witness fees, mileage
allowances, any costs associated with reproduction of documents that
become a part of the hearing record and expenses of making a record of
the hearing.
(d) (1) If the deadline for filing a petition for review has expired
and no such petition has been filed, the commissioner may reopen and
modify or set aside any portion or the entirety of any administrative
order issued under this section.
SENATE BILL No. 20—page 16
(2) 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 an action or if such an action is warranted in the public
interest.
(e) In addition to any other penalty provided by this act, any
person who acts as a pharmacy benefits manager without being
licensed as required by this act shall be subject to a fine of $5,000 not
to exceed $100,000 for the period in which the pharmacy benefits
manager is found to be in violation.
Sec. 16. K.S.A. 2025 Supp. 40-3827 is hereby amended to read as
follows: 40-3827. (a) There is hereby established in the state treasury
the pharmacy benefits manager licensure fund. Such fund shall be
administered by the commissioner for costs related to administering the
pharmacy benefits manager licensing Kansas consumer prescription
protection and accountability act. All expenditures from the pharmacy
benefits manager licensure fund shall be made in accordance with
appropriation acts upon warrants of the director of accounts and reports
issued pursuant to vouchers approved by the commissioner or by the
commissioner's designee.
(b) The commissioner shall remit all moneys received by or for
the commissioner under the provisions of this act to the state treasurer
in accordance with the provisions of K.S.A. 75-4215, and amendments
thereto. Upon receipt of each such remittance, the state treasurer shall
deposit the entire amount thereof in the state treasury and such amount
shall be credited to the pharmacy benefits manager licensure fund.
Sec. 17. K.S.A. 2025 Supp. 40-3828a is hereby amended to read
as follows: 40-3828a. (a) A pharmacy benefits manager's license may
be revoked, suspended or limited, the licensee may be censured or
placed under probationary conditions or an application for a license or
for reinstatement of a license may be denied upon a finding that the:
(1) Applicant or licensee committed fraud or misrepresentation in
applying for or securing an original, renewal or reinstated license;
(2) licensee has violated any lawful rule or regulation promulgated
by the commissioner or violated any lawful order or directive of the
commissioner previously entered by the commissioner;
(3) pharmacy benefits manager has engaged in fraudulent activity
that constitutes a violation of state or federal law;
(4) licensee has failed to furnish any information legally requested
by the commissioner to the commissioner or the commissioner's
investigators or representatives , including information requested
during an examination pursuant to section 4, and amendments thereto;
(5) pharmacy benefits manager has been determined by the
commissioner to be in violation of or noncompliance with state or
federal law; or
(6) pharmacy benefits manager has failed to timely submit a
renewal application and the information required under K.S.A. 40-
3824, and amendments thereto. In lieu of a denial of a renewal
application, the commissioner may permit the pharmacy benefits
manager to submit to the commissioner a corrective action plan to
correct or cure any deficiencies; or
(7) pharmacy benefits manager has failed to timely submit the
reporting required by section 3, and amendments thereto.
(b) This section shall be a part of and supplemental to the
pharmacy benefits manager licensure Kansas prescription protection
and accountability act.
Sec. 18. K.S.A. 40-3831 is hereby amended to read as follows: 40-
3831. (a) This section shall be known and may be cited as the Kansas
pharmacy patients fair practices act.
(b) As used in this section:
SENATE BILL No. 20—page 17
(1) "Covered person" means the same as defined in K.S.A. 40-
3822, and amendments thereto.
(2) "Health carrier" means the same as defined in K.S.A. 40-
2,195, and amendments thereto.
(3) "Pharmacy benefits manager" means the same as defined in
K.S.A. 40-3822, and amendments thereto.
(c)(1) Co-payments Copayments applied by a health carrier for a
prescription drug may shall not exceed the total submitted charges by
the network pharmacy.
(2) A pharmacy or pharmacist shall have the right to provide a
covered person with information regarding the amount of the covered
person's cost share for a prescription drug. Neither a pharmacy nor a
pharmacist shall be proscribed by a pharmacy benefits manager from
discussing any such information or for selling a more affordable
alternative to the covered person if such an alternative is available.
(d)(b) (1) This section applies to any contract between a pharmacy
benefits manager and a pharmacy, a pharmacy services administration
organization or a group purchasing organization that is entered into or
renewed on and after January 1, 2019.
(2) The provisions of this section shall not apply to any policy or
certificate that provides coverage for any specified disease, specified
accident or accident only coverage, credit, dental, disability income,
hospital indemnity, long-term care insurance as defined by K.S.A. 40-
2227, and amendments thereto, vision care or any other limited
supplemental benefit nor to any medicare supplement policy of
insurance as defined by the commissioner of insurance by rule and
regulation, any coverage issued as a supplement to liability insurance,
workers compensation or similar insurance, automobile medical-
payment insurance or any insurance under which benefits are payable
with or without regard to fault, whether written on a group, blanket or
individual basis.
Sec. 19. K.S.A. 40-222 , 40-3828, 40-3831, 65-16,121, 65-16,122,
65-16,123, 65-16,124, 65-16,125 and 65-16,126 and K.S.A. 2025 Supp.
40-202, 40-3821, 40-3822, 40-3823, 40-3824, 40-3825, 40-3826, 40-
3827, 40-3828a, 40-3829 and 40-3830 are hereby repealed.
SENATE BILL No. 20—page 18
Sec. 20. This act shall take effect and be in force from and after its
publication in the statute book.
I hereby certify that the above BILL originated in the
SENATE, and passed that body
__________________________
SENATE adopted
Conference Committee Report ________________
_________________________
President of the Senate.
_________________________
Secretary of the Senate.
Passed the HOUSE
as amended _________________________
HOUSE adopted
Conference Committee Report ________________
_________________________
Speaker of the House.
_________________________
Chief Clerk of the House.
APPROVED _____________________________
_________________________
Governor.