Capitol Letters: Reynolds signs pharmacy benefit manager reform, lawsuit filed

State Rep. Megan Jones

This session the House and Senate advanced reform of Iowa’s pharmacy benefit managers (PBMs) with bipartisan support.

More than 200 pharmacies have closed in Iowa in the last decade, including more than 30 last year. Rural Iowa has been hit the hardest, making it harder for these Iowans to get the medications they need.

For too long, the abusive anti-competitive practices of PBMs have increased prescription drug prices nationwide and increased PBM profits while reimbursing pharmacies far below their costs. This session the Iowa legislature passed Senate File 383 to prohibit many of these unfair practices. The bill does the following:

• Prohibits a PBM or insurer from discriminating against a pharmacy if the pharmacy is acting within its license and all laws
• Prohibits the removal of pharmacy choice or imposing any monetary advantages or penalties that result in removing pharmacy choice (including unnecessary specialty drug designations and requiring use of mail order pharmacies)
• Prohibits additional cost-sharing on the insured based on where they choose to have their prescription filled
• Requires all rebates to be returned to the employee plan sponsor
• Requires any amount paid by the insured for the prescription drug to be applied to their deductible
• Requires PBMs to reimburse retail pharmacies (not large national chains and those with only mail order) based on acquisition cost plus a dispensing fee of $10.68.
• Prohibits spread pricing
• Requires pharmacies have an appeals process if not reimbursed at acquisition cost
• Requires regular reporting from the PBMs to the Insurance Division
• Requires a study of Pharmacy Services Administrative Organizations and wholesales by IID with a report due by Jan. 1, 2026.

This bill provides transparency in a broken system, empowers patients to choose their healthcare provider, requires that the dollars in the system benefit patients and employers and ensures that pharmacies can keep their doors open by reimbursing what it costs to dispense prescriptions to Iowans. The governor signed the bill on June 11.

On June 23, the Iowa Association of Business and Industry filed a lawsuit in federal district court seeking a temporary and permanent injunction of the law. The lawsuit claims that Iowa’s law violates ERISA preemption and the 1st amendment.

ERISA is a federal law that generally preempts state’s ability to regulate employed sponsored health plans. Interestingly, the lawsuit fails to mention the U.S. Supreme Court ruling in 2020 regarding PBM regulations and ERISA in Rutledge v. PCMA. In the ruling, the Court clearly upholds the Arkansas law’s regulations of PBMs and opened the door to additional state regulations of PBMs. Additional regulations were then upheld by the 8th Circuit Court of Appeals in the PCMA v. Wehbi case in 2021, which was also oddly not mentioned in the ABI lawsuit. Additionally, the First Amendment claims in the lawsuit are not backed by court precedent and are an unusual addition to the lawsuit.

Federal district court will likely decide on the temporary injunction in the next week. Even if a temporary injunction is granted, the legislature is confident the law will win on the merits. Every provision in the bill has been implemented in another state and U.S. Supreme Court precedent was utilized in the drafting of the bill. PBMs stand to lose millions and have no problem spending some on court costs to delay implementation. It is my hope that legal delays do not cause pharmacy closures in the meantime.

Email: megan.jones@legis.iowa.gov