Iowa Expands PBM Legislation to Address Concerns of Independent Pharmacies

Sitting on the desk of Kim Reynolds, the governor of Iowa, is a bill aimed at providing for reform of pharmacy benefit managers (PBMs). The legislation echoes many of the themes present in other states’ PBM laws — enhancing independent pharmacy access to PBM networks, mandating pharmacy reimbursement levels, 100% pass-through of rebates, and increased financial transparency.

Passed by both state houses earlier this month, Senate File 383 would require PBMs to use 100% pass-through pricing. The bill sets restrictions on how pharmacies can be paid, requiring that PBMs reimburse retail pharmacies according to the National Average Drug Acquisition Cost (NADAC) and provide a dispensing fee of $10.68. In addition, it would restrict PBMs from favoring a specific pharmacy and require pharmacies to be reimbursed at the average state or national acquisition cost of a drug.

The law would be effective for any contracts beginning July 1, 2025, and apply to prescription drug benefits beginning Jan. 1, 2026.

“This bill is a critical step toward protecting Iowa’s local pharmacies and ensuring accountability for PBMs, whose practices have forced Iowa pharmacies to shutter their doors and countless Iowans to lose healthcare access,” Kate Gainer, CEO of the Iowa Pharmacy Association, said in a news release.

Related: Is Arkansas’ New PBM Law the Right Path Forward for Reform? No One Knows Yet

But critics said that, if signed, this will be costly for the state. The Iowa Association of Business and Industry (ABI) — along with the Iowa Bankers Association (IBA), Iowa Business Council, and National Federation of Independent Business (NFIB) — said the new law will cost an estimated $340 million annually.

“At a time when businesses are tightening their belts and working to avoid layoffs, legislation like SF 383 places additional strain on small businesses across the state,” the business groups said in a statement. “SF 383 is believed to be the most expensive health care mandate ever passed in Iowa history. This is a step in the wrong direction for Iowans, employers, and the state economy.”

Theresa C. Carnegie

There are likely benefits for independent pharmacies, but the legislation will impose significant administrative and operational burdens on PBMs and plans, and those burdens may have downstream effects on overall costs, Theresa C. Carnegie, an attorney with Mintz who works with health plans and PBMs, told Formulary Watch.

“The legislation goes into effect quite quickly and so I foresee that plans and PBMs will have to scramble to bring existing arrangements into compliance with the law. It’s also interesting that Iowa already had some PBM legislation on the books and now is looking to further expand its PBM regulation,” she said. “We are seeing that trend in other states as well. It is challenging for PBMs and plans to keep up with this second wave of state legislation, and it creates a patchwork of different requirements in different states that is burdensome.”

But Wes Hartig, CEO of the PBM MedOne Pharmacy Benefit Solution, said in a LinkedIn post about the Iowa bill that it doesn’t necessarily mean higher costs. “If two pharmacies are paid the same price, they should be on an equal playing field in terms of access. Member cost share should align with plan cost. If a pharmacy demands a higher price, our clients and members should know that and there should be an opportunity to assess higher cost share to members should they choose that pharmacy.”