Capitol Letters: Web of PBM enforcement to occur with district court injunction

State Rep. Megan Jones

This session, the House and Senate advanced, and the governor signed, reform of Iowa’s pharmacy benefit managers with bipartisan support.

More than 150 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 far 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 First Amendment. ERISA is a federal law that generally preempts state’s ability to regulate employed sponsored health plans.

On July 21, the Southern District of Iowa made its decision regarding preliminary injunction and it left quite a web of enforcement for the state and pharmacies to determine. The above bolded sections were not enjoined and therefore can be enforced on all PBMs. The non-bolded sections can be enforced only on those PBMs that are not contracted with the plaintiffs in the case. That list of PBMs was required to be submitted to the Court by July 22.

The case will now go to trial at the district court level. Eventually, the case will be appealed to the 8th Circuit Court of Appeals. Many of the provisions have been implemented in other states and U.S. Supreme Court precedent was utilized in the drafting of the bill. Hopefully the law is upheld and Iowa pharmacies will not close.

Contact Jones by email: megan.jones@legis.iowa.gov