Iowa business groups challenge state law regulating pharmacy benefit managers
CHICAGO, June 24 (Reuters) - An Iowa business group has joined up with some health insurance plans and employers in the state to challenge a new local law that regulates pharmacy benefit managers, saying it will drive up healthcare costs for businesses by millions yearly.
The Iowa Association of Business and Industry, which represents Iowa employers, filed the lawsuit, opens new tab in federal court in Des Moines on Monday, saying the law was meant to regulate pharmacy benefit managers, or PBMs, but will harm the community of health insurance plan providers in the state. The suit claims that the law is preempted by a federal law governing health insurance plans and places unconstitutional restrictions on speech for health benefit plans, private employers and PBMs.
The law, known as Senate File 383, goes into effect on July 1. In part, it bars PBMs from directing patients to specific favored pharmacies, reimbursing pharmacies for less than a drug's cost or unreasonably designating a drug as a 'specialty drug' to limit patient access, according to the legislation. It also directs certain terms for contracts between pharmacies and PBMs, health insurance plans and employers.
Pharmacy benefit managers serve as intermediaries in the health insurance world, negotiating prescription drug prices with drugmakers on behalf of employers and health plans. They also often manage pharmacy networks and operate mail-order pharmacies.
Nicole Crain, president of the Iowa Association of Business and Industry, said in a statement that the law will dramatically increase healthcare costs for Iowans, disrupt how prescription drug insurance plans operate in the state and prevent health plans from telling people where they can find the best deals on prescriptions.
The lawsuit seeks an injunction barring enforcement of the law and a declaration that it is illegal.
A representative for Iowa Insurance Commissioner Doug Ommen, who will enforce the law, did not immediately respond to a request for comment on the lawsuit.
A spokesperson for Iowa Governor Kim Reynolds also did not immediately respond to a request for comment. Reynolds, a Republican, signed the law on June 11, saying in a statement that the control PBMs have over prescription drug costs has led to the closure of dozens of rural pharmacies in the state.
PBMs' business practices have drawn increasing scrutiny in recent years from U.S. lawmakers looking to lower drug prices, state attorneys general and from the Federal Trade Commission, which released a report in 2024 accusing PBMs of inflating drug costs and hurting pharmacy businesses.
In response to the report, PBM Express Scripts filed a lawsuit against the FTC, calling the report defamatory and biased.
States across the country have passed laws seeking to limit PBMs' influence on drug pricing, including in Arkansas, where a new law bars PBMs from owning retail pharmacies.
Express Scripts and CVS had sued to block Arkansas' law last month, calling it an unconstitutional restriction on interstate commerce.
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