Senate committee advances bill to close PBM enforcement gap, raise fines

Senate Bill 94, aimed at tightening regulation of pharmacy benefit managers, passed the Senate Insurance & Commerce Committee after proponents said it closes a gap that allows PBMs serving out-of-state plans to evade Arkansas oversight. The bill would apply the state’s PBM licensure requirements to health plans issued outside Arkansas that have Arkansas resident subscribers and would increase penalties for violations.

Booth Rand, general counsel for the Arkansas Insurance Department, told the committee the bill fixes “one of the more significant loopholes” in enforcement by applying Arkansas rules to plans issued outside the state when they cover Arkansas residents. He said the measure also preserves the insurance commissioner’s examination powers and replaces a standalone reporting requirement for rebates and spread pricing with audit authority for the commissioner. “In the last 14 months… we had over 27,000 drug prescription claims declined because the law right now will not apply to out of state plans,” Rand said.

Sponsor Senator Kim Hammerstein said the changes are a cleanup to ensure a level playing field for pharmacies that comply with state law and to reduce unnecessary workload at the insurance department. Pharmacy owner Blake Torres of Westside Pharmacy testified in support, saying PBMs and their legal teams have found ways to “circumvent” the intent of earlier statutes and urging lawmakers to close loopholes to protect providers and patients. “What I'm asking the committee today is for a good vote to close those loopholes and stand with providers and patients in the state of Arkansas,” Torres said.

The bill would increase the per-violation fine from $1,000 to $5,000; the sponsor noted an original proposal for $10,000 was reduced after meetings with industry groups. Testimony also raised concern that a $50,000 cap on aggregate penalties could be gamed in ways that limit the practical impact of fines.

John Vincent, CEO of the Arkansas Pharmacy Association, said his organization — representing some 2,400 pharmacists and affiliates — supports the bill and echoed practitioners’ concerns.

Following a brief closing from the sponsor, Senator Johnson moved that the committee report the bill favorably; Senator Irvin seconded. Committee members called their votes and the chair declared Senate Bill 94 passed out of committee.

The committee record shows supporters framed the bill as targeted enforcement and administrative refinement rather than a broad change to insurance law; opponents were not recorded in the transcript. The bill will move to the next stage of the legislative calendar for further consideration.