Brief ⁽¹⁾

SB 574, as amended, concerns deceptive practices involving prescription drug discount cards. The bill:

• Defines a "discount card" as a card or other mechanism or device, which is not insurance, that purports to offer discounts or access to discounts in health-related purchases; and



• Makes it unlawful for any person to sell, market, promote, advertise, or distribute a discount card, if



• the card does not expressly state in bold and prominent type that such discount is not insurance;



• any discount offered is not specifically authorized by a separate contract with each health care provider listed in conjunction with the card; and



• the discount offered by the card is misleading, deceptive, or fraudulent, regardless of the wording on the card.

Further, the bill allows a person to maintain an action to enjoin any violation of the act and to recover damages from any violation of the act. Damages allowable could be an amount equal to $100 per discount card sold or distributed or $10,000, whichever is greater; three times actual damages; reasonable attorney fees; costs; and any other relief the court deems appropriate. In addition, other criminal, civil, or administrative penalties could apply. Generally, actions under the bill must be brought within two years of the violation. Persons who sell, market, promote, advertise, or distribute discount cards in Kansas must designate a resident agent for service of process and the agent must be registered with the Secretary of State.

The House Committee amendments:

• Add registered pharmacy to the definition of health care provider; and



• Clarify one portion of the monetary penalty based on cards sold or distributed.

Background

SB 574 was requested by the Insurance Commissioner whose representative explained that there are unscrupulous companies in the marketplace promising more than they deliver, particularly targeting the elderly and uninsured with their discount card promotions. Frequently, the consumer misunderstands and mistakes the discount card for insurance. While there are reputable discount card issuers, SB 574 simply sets out what is unlawful practice and provides penalties for those acts.

SB 574 was supported by the Kansas Pharmacists Association.

The fiscal note prepared by the Division of the Budget indicates passage of the bill would have no fiscal effect on the Insurance Department, and the effect on the courts from the filing of new cases cannot be estimated.

After the House Committee on Insurance voted to pass the bill as amended, and prior to the Committee Report being read into the House, the Committee reconsidered its action on an amendment concerning certain information privacy issues associated with the sale and distribution of discount cards. Those provisions were deleted from the bill. This Corrected Supplemental Note reflects the final Committee action.

1. *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.ink.org/public/legislative/bill_search.html