Business groups sue over Iowa’s new law regulating pharmacy benefit managers
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Business groups sue over Iowa’s new law regulating pharmacy benefit managers
A coalition of businesses and employer-provided health care plans are suing Iowa’s insurance commissioner over a new state law governing pharmacy benefit managers. The new law will take effect July 1. The lawsuit contends that the law, Senate File 383, would upend prescription drug coverage in the state and violate the First Amendment. Supporters of the law say its provisions will help financially struggling pharmacies stay afloat by increasing reimbursement rates. But opponents say that will raise costs for patients and employers, and will upend the coverage that Iowans rely on for their health care. The law includes a range of regulations governing pharmacybenefit managers, known as PBMs, which operate as middlemen between drug manufacturers and insurance providers. The plaintiffs include the Iowa Association of Business and Industry, the Iowa Bankers Benefit Plan, Iowa Laborers District Council Health and Welfare Fund and Iowa Spring Manufacturing & Sales Co.
The Iowa Association of Business and Industry and several employer-provided health care plans filed the lawsuit June 23. The new law will take effect July 1.
Supporters of the law say its provisions will help financially struggling pharmacies stay afloat by increasing reimbursement rates. But opponents say that will raise costs.
A coalition of businesses and employer-provided health care plans are suing Iowa’s insurance commissioner over a new state law governing pharmacy benefit managers that they say will raise costs.
The lawsuit, filed Monday, June 23, in federal court in Des Moines, contends that the law, Senate File 383, would upend prescription drug coverage in the state and violate the First Amendment by preventing employers from directing workers to some pharmacies over others.
The lawsuit also says the Iowa law is in conflict with the federal Employee Retirement Income Security Act (ERISA), which the plaintiffs argue should take precedence.
The plaintiffs include the Iowa Association of Business and Industry (ABI), the Iowa Bankers Benefit Plan, Iowa Laborers District Council Health and Welfare Fund, Des Moines Orthopaedic Surgeons PC and Iowa Spring Manufacturing & Sales Co.
“We’re challenging this new Iowa law because it’s going to raise health care costs for businesses of all sizes across the state by hundreds of millions of dollars,” ABI President Nicole Crain said in a statement. “It will also disrupt the prescription drug coverage that Iowans count on, and it even stops health plans from giving people simple, money-saving information, like which pharmacy has the better deal. That’s bad policy that goes against federal law and violates the First Amendment.”
Together, the plaintiffs provide health care for thousands of Iowans that they say would be negatively affected by the new law.
Gov. Kim Reynolds signed the law on June 11 and it is set to take effect July 1.
Iowa lawmakers passed the law to prevent further pharmacy closures in Iowa, especially in rural areas. The law includes a range of regulations governing pharmacy benefit managers, known as PBMs, which operate as middlemen between drug manufacturers and insurance providers.
Supporters of the measure, including pharmacists, have complained that pharmacy benefit managers regularly reimburse pharmacies at a rate below what it costs the pharmacy to dispense drugs to patients, forcing them to operate at a loss.
The law contains several provisions intended to help struggling pharmacies stay afloat financially, including requiring PBMs to reimburse pharmacies at the national average drug acquisition cost and establishing a baseline dispensing fee of $10.68 for every drug a pharmacy provides.
The law also says pharmacy benefit managers cannot prohibit or limit someone from selecting a certain pharmacy or pharmacist if that pharmacy is covered by their health insurance. And it prevents PBMs from charging different copayment amounts or providing smaller reimbursement rates at one pharmacy or another.
Those provisions will increase costs for patients and employers, opponents say. But supporters of the law say other states that have passed similar legislation have not seen an increase in prescription drug costs.
A spokesperson for Iowa Insurance Commissioner Doug Ommen did not immediately respond to a request for comment.
Stephen Gruber-Miller covers the Iowa Statehouse and politics for the Register. He can be reached by email at sgrubermil@registermedia.com or by phone at 515-284-8169. Follow him on X at @sgrubermiller.