Following a significant survey conducted by the Iowa Pharmacy Association in fall 2023, , Iowa’s House of Representatives passed House File 2401 (“Bill”). If enacted, House File 2401, which passed through Iowa’s House in March 2024, would regulate Pharmacy Benefit Managers (“PBMs”) operating in Iowa and would improve transparency for Iowa’s independent pharmacies. The overwhelming vote of 93-3 to pass the Bill reflects strong bipartisan support for Iowa’s independent pharmacies and reasonable PBM regulation. It also shows concern about the results of the 2023 survey which indicated that over 40% of Iowa’s independent pharmacies could potentially close by 2025. Iowa is not a stranger to PBM regulation and has been on the forefront of challenging questionable PBM business practices. In fact, it was previously attempted PBM regulation in Iowa that led to the significant Eighth Circuit case PCMA v. Gerhart in 2017. In the Gerhart case, Iowa’s laws were challenged by all of the PBMs via the Pharmaceutical Care Management Association (“PCMA”) and the Eighth Circuit ultimately held that Iowa’s laws at that time were preempted by ERISA. However, since Gerhart, the pharmacy landscape has changed significantly including because of the subsequent landmark ruling in the Supreme Court case Rutledge v. PCMA which upheld laws in Arkansas aimed at reasonable PBM regulation.
House File 2401 represents further efforts by Iowa (and numerous other states throughout the country) to bring transparency to the opaque world of PBM business practices in the aftermath of Rutledge. According to Iowa Rep. Shannon Lundgren, who is the Bill’s Floor Manager, Iowa’s legislature is taking “bold action to stop the unfair treatment of our local pharmacies.” The Bill has two main components, which if enacted into law would:
(1) prohibit spread pricing, which occurs when a PBM charges an insurance company more for prescription drugs than it reimburses a pharmacy, and
(2) require PBMs to provide an appeal process related to maximum allowable cost or other reimbursement related issues.
The Bill being passed in Iowa’s House is a positive development for Iowa’s independent pharmacies. It also addresses the growing concern of pronounced vertical integration among PBMs and their corporate affiliated parent companies. House File 2401would represent a significant legislative accomplishment which will help to limit PBMs’ ability to engage in certain improper business practices and improve reimbursement rates for Iowa’s independent pharmacies. Pharmacies and pharmacists should monitor this Bill as it could lead to significant improvements for pharmacies’ ability to conduct business in Iowa and provide additional legal rights when facing challenges with PBMs.
How Frier Levitt Can Help
Frier Levitt represents numerous pharmacies across the United States in challenging PBM audits, network access, reimbursement practices and other complex issues such as DIR fees. Our attorneys have extensive knowledge in all aspects of the pharmacy-PBM relationship. Contact us to speak with an attorney about how your pharmacy can leverage the various applicable laws and protections afforded to pharmacies that regulate PBM conduct.
