Relating to pharmacy benefits managers, pharmacies, and prescription drugs and including applicability provisions

Topics:Business & economy Health care Insurance Prescription drug prices

Same legislation: SSB 1074, SF 383, HF 852

Write your legislators about itWhat changed before it passed

Official bill page Lobbyist declarations One-pager to print

Where it is now

Done: IntroducedJanuary 29, 2025
Done: SubcommitteeJanuary 29, 2025
Done: House committeeFebruary 11, 2025
Skipped: Passes the HouseContinued as HF 852
Next: Senate committee
Next: Passes the Senate
Next: To the Governor
Next: Signed into law

Became HF 852 → Its progress continues under the new number. Go to HF 852 What’s a funnel?

What’s in it

AI summary Pharmacy benefits managers would be prohibited from discriminating against pharmacies or limiting a person's ability to choose their own pharmacist. These companies cannot force people to use mail-order services or charge higher fees based on which pharmacy is used. Additionally, the law requires pharmacies to be paid fairly for drugs and gives them a way to appeal if they are not reimbursed correctly.¹

Read the official explanation

This bill relates to pharmacy benefits managers (PBMs), pharmacies, and prescription drugs. The bill prohibits a PBM from discriminating against a pharmacy or a pharmacist with regards to participation, referral, reimbursement of a covered service, or indemnification if a pharmacist acts within the scope of the pharmacist’s license and the pharmacy is operating in accordance with all applicable laws and rules. Under the bill, where a pharmacy or pharmacist has agreed to participate in a covered person’s (person’s) health benefit plan (plan), a PBM shall not prohibit or limit the person from selecting a pharmacy or pharmacist of their choice, or impose a monetary advantage or penalty as described in the bill. A PBM shall not deny a pharmacy or pharmacist the right to participate as a contract provider under a plan if the pharmacy or pharmacist agrees to the terms and requirements of the plan and the terms of reimbursement. A PBM shall not impose upon a pharmacy or pharmacist, as a condition of participation in a network, any course of study, accreditation, certification, or credentialing different than state requirements and rules of the board of pharmacy. A PBM shall not unreasonably designate a prescription drug (prescription) as a specialty drug to prevent a person from accessing the prescription or to limit a person’s access to the prescription from a pharmacy or pharmacist that is within the person’s plan’s network. A person or pharmacy harmed by such a violation may file a complaint. _____ of payment or reimbursement, to purchase pharmacy services exclusively through a mail order pharmacy. A PBM shall not impose upon a person any payment or condition to purchasing pharmacy services that is more costly or restrictive than if such services were purchased from a mail order pharmacy, or any other pharmacy. If a third-party payor providing reimbursement to persons for prescriptions restricts pharmacy participation, the third-party payor shall notify, in writing, all pharmacies within the geographical coverage area of the plan, and offer the opportunity to participate in the plan at least days prior to the effective date of the restriction. All pharmacies in the geographical coverage area are eligible to participate under identical reimbursement terms. The third-party payor shall inform persons of the names and locations of all pharmacies participating in the plan. A participating pharmacy shall be entitled to announce the pharmacy’s participation to the pharmacy’s customers. The commissioner shall not certify any PBM or license an insurance producer not in compliance with the bill. A PBM shall not impose different cost-sharing or additional fees on a person based on the pharmacy at which the person fills a prescription order. A person’s cost-sharing for a prescription shall be calculated at the point of sale based on a price that is reduced by an amount equal to at least 100 percent of all rebates that have been received, or will be received, by the health carrier or a PBM in connection with the dispensing or administration of the prescription. A PBM shall include any amount paid by a person, or on behalf of a person, when calculating the person’s total contribution toward the person’s cost-sharing. Any amount paid by a person for a prescription shall be applied to any deductible imposed on the person by the person’s plan in accordance with the coverage documents. _____ amount less than the national average drug acquisition cost or the Iowa average acquisition cost or, if neither is available, the wholesale acquisition cost, for a prescription on the date that the prescription is administered or dispensed. A PBM also must reimburse the pharmacy or pharmacist a professional dispensing fee in an amount not less than the pharmacy dispensing fee published in the Iowa Medicaid enterprise provider fee schedule on the date that the prescription is administered or dispensed. The bill permits a pharmacy to decline to dispense a prescription to a person if the pharmacy will be reimbursed less for the prescription than the pharmacy’s acquisition cost. The bill requires all contracts executed, amended, adjusted, or renewed on or after July 1, 2025, that are applicable to prescription drug benefits on or after January 1, 2026, between a PBM and a third-party payor, or between a person and a third-party payor, to use a pass-through pricing model; to exclude terms that allow for spread pricing unless the entire amount of the difference caused by spread pricing is passed through by the PBM; and to ensure that payments received in relation to providing services to a third-party payor or a pharmacy are used or distributed pursuant to the PBM’s contract with the third-party payor or with the pharmacy, or as otherwise required. “Pass-through pricing” and “spread pricing” are defined in the bill. The bill requires a PBM to provide a process for pharmacies to appeal a reimbursement rate for a specific prescription. The appeal process is detailed in the bill. The bill applies to pharmacy benefits managers that manage a prescription drug benefit in the state on or after July 1, 2025.

Changed since by amendments H-1291, S-3138; see Amendments.

Full bill text · What changed before it passed²

House subcommittee

Named January 29, 2025. On February 5, 2025 it recommended passage.

Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part

6 written public comments to its subcommittee: February 5, 2025 (3), February 5, 2025 (3) · on the Legislature’s site

Fiscal note

AI summary This bill regulates pharmacy benefit managers by prohibiting certain discriminatory practices, requiring rebate pass-throughs, and setting specific reimbursement and dispensing fee standards. It is estimated to increase annual costs to the State of Iowa plan by between $3.9 million and $8.2 million beginning in fiscal year 2026, while plan members may pay an additional $742,000 to $970,000 in higher copays. The Iowa Insurance Division faces an estimated annual cost increase of $600,000 to hire 4.0 additional full-time equivalent positions starting in fiscal year 2026. The fiscal impact on the Board of Regents is indeterminable at this time.³

Read the fiscal note

Senate File 383 relates to pharmacy benefits managers (PBMs), pharmacies, prescription drugs, and pharmacy services administrative organizations (PSAOs) and includes applicability provisions.

Division I — Pharmacy Benefits Managers

Description

Division I relates to PBMs, pharmacies, and prescription drugs and does the following:

Prohibits PBMs, health carriers, health benefit plans, and third-party payors from discriminating against a pharmacy or a pharmacist with respect to listed actions in the Bill.
Prohibits certain conduct by a PBM.
Requires third-party payors to perform certain actions as described in the Bill.
Prohibits the Iowa Insurance Commissioner (Commissioner) from certifying a PBM or licensing an insurance producer that is not in compliance with new Iowa Code section 510B.4B and permits a covered person or pharmacy injured by a violation of this section to maintain a cause of action to enjoin the continuation of the violation.
Requires 100.0% of all rebates received by a PBM to be passed through to the health carrier or to the employee plan sponsor as permitted by the federal Employee Retirement Income Security Act of 1974 (ERISA).
Sets additional cost-sharing requirements regarding a covered person’s contribution and deductible calculations.
Sets applicability for qualifying high-deductible health plans as defined in 26 U.S.C. §223 of the Internal Revenue Code (IRC) to apply only after the covered person satisfies the minimum deductible, except for preventive care as defined in the IRC.
Establishes the following requirements; however, the requirements do not apply to a pharmacy that operates in a State-owned facility:
PBMs must reimburse retail pharmacies according to the National Average Drug Acquisition Cost (NADAC) or, if unavailable, the wholesale acquisition cost on the date the prescription drug is administered or dispensed.
PBMs must reimburse retail pharmacies a professional dispensing fee of $10.68.
PBMs must submit to the Commissioner a quarterly report of all drugs reimbursed at 10.0% or more below the NADAC and at 10.0% or more above the NADAC. The report must include the information laid out in the Bill and must be available on the PBM’s website for 24 months.
Requires all contracts as of FY 2026 that apply to prescription drug benefits for CY 2026 or after between a third-party payor and either a person or a PBM to include the following requirements:
The PBM must use pass-through pricing.
Payments received by a PBM for services provided to a third-party payor or a pharmacy shall be distributed pursuant to the relevant contract or as otherwise specified by law.
Unless otherwise prohibited by law, these requirements will supersede any contractual terms to the contrary in the above contracts.
Requires a PBM to provide a reasonable process to appeal any matter.
Includes requirements for the appeal process. If the PBM grants a pharmacy’s appeal related to a reimbursement rate, the PBM must adjust the reimbursement rate for the appealing pharmacy and select additional pharmacies. If the PBM denies a pharmacy’s appeal, the PBM must direct the pharmacy where to purchase the prescription drug at or below the NADAC or adjust the reimbursement rate above the pharmacy’s pharmacy acquisition cost.

The provisions of Division I of the Bill are severable pursuant to Iowa Code section 4.12. Division I of the Bill is applicable to PBMs, health carriers, third-party payors, and health benefit plans that manage a prescription drug benefit in the State on or after July 1, 2025.

Background

Iowa Code chapter 510B regulates PBMs; sets standards of conduct; provides requirements for contacting covered persons, substituting prescription drugs, and establishing various cost-control mechanisms; and establishes the Commissioner as the enforcement body for the chapter.

Currently, Iowa Code section 510B.8B requires PBMs to calculate the pharmacy reimbursement on a per unit basis based on the same generic product identifier or generic code number. Figure 1 shows pharmacy spend in 2024 by plan. The State of Iowa costs were provided by Wellmark and exclude claims incurred but unpaid as of February 11, 2025. The Regents universities’ costs were provided by the Board of Regents (BOR) and are current as of February 17, 2025.

Figure 1 — CY 2024 Pharmacy Spend by Plan

Assumptions

Provisions of the Bill related to the NADAC requirements are estimated to decrease annual costs to the State of Iowa plan by between $780,000 and $1.6 million.
The increased cost associated with higher dispensing fees will be split 65/35 between the State of Iowa plan and the member.
Requiring a $10.68 professional dispensing fee is estimated to cost the State of Iowa plan between $2.6 million and $3.0 million annually. An additional $742,000 to $970,000 is estimated to be paid in the form of higher copays by plan members for a portion of the $10.68 professional dispensing fee cost due to low-cost generic medications that are currently reimbursed below the member copay level rising above that threshold.
The prohibition of exclusive pharmacy relationships is estimated to increase the cost of specialty drugs by 6.0%. It is estimated that this may cost the State of Iowa plan between $2.5 million and $3.0 million annually.State University of Iowa 113,900,000$ Iowa State University 23,500,000

University of Northern Iowa 8,200,000 University Total 145,600,000$ State of Iowa 97,600,000 Total 243,200,000$

According to Wellmark, it is unclear whether the provisions of the Bill related to copay coupons apply to the State’s self-funded plan. If the provisions do apply, it is estimated that the copay coupon provisions may increase annual costs to the State of Iowa plan by between $1.7 million and $2.5 million.
According to the Iowa Insurance Division (IID), the provisions of this Bill will require the IID to hire 4.0 additional full-time equivalent (FTE) positions with an estimated annual cost of $600,000.
It is unknown whether the IID will need additional office space and supplies for these positions.
According to the IID, it is unknown what the job classifications of these positions will be.
Each of these positions will begin at the start of FY 2026. The positions will be focused on PBM-related duties within the Company Regulation Bureau and the Market Regulation Bureau of the IID.
The provisions related to rebate pass-through by PBMs will not have a fiscal impact for the State of Iowa plan.
According to Wellmark, a high-end estimate of $900,000 may be paid by the State of Iowa plan for prescription drugs currently reimbursed under the NADAC that may be appealed for an increased reimbursement rate to reach NADAC levels.
According to Wellmark, the utilization of the NADAC and dispensing fee requirements are paired, higher utilization of the NADAC increases both NADAC savings and dispensing fee costs, as shown on the low-end estimate of Figure 2. Conversely, lower utilization of the NADAC decreases both NADAC savings and dispensing fee costs.

Fiscal Impact — State of Iowa Plan Senate File 383 is estimated to increase annual costs to the State of Iowa plan between $3.9 million and $8.2 million beginning in FY 2026. An additional $742,000 to $970,000 is estimated to be paid annually in the form of higher copays by plan members for a portion of the $10.68 professional dispensing fee cost.

Figure 2 below shows the low-end and high-end estimated annual fiscal impact of Senate File 383 on the State of Iowa plan. It does not include the $742,000 to $970,000 anticipated to be paid by plan members in the form of higher copays. The high-end estimate assumes the copay coupons provisions apply to the State of Iowa plan, while the low-end estimate assumes these provisions do not apply.

Figure 2 — Low-End and High-End Estimated Annual Fiscal Impact of Senate File 383 on the State of Iowa PlanLow-End High-End NADAC Requirements -1,580,000$ -780,000$ Dispensing Fees 2,958,000 2,581,000 Preferred/Tiered Pharmacies 2,538,000 3,000,000 Copay Coupons 0 2,518,000 Appeal 0 900,000 Total 3,916,000$ 8,219,000$

State of Iowa Plan

Fiscal Impact — Iowa Insurance Division (IID) The Bill is estimated to increase annual costs to the IID by $600,000 and 4.0 FTE positions. According to the IID, the positions will be focused on PBM-related duties within the Company Regulation Bureau and the Market Regulation Bureau, but the job classification of these positions is unknown.

Fiscal Impact — Board of Regents (BOR) According to the BOR, the fiscal impact is indeterminable at this time.

Sources

Iowa Insurance Division, Department of Insurance and Financial Services
Legislative Services Agency
Board of Regents
Wellmark
Division II — Pharmacy Services Administrative Organizations and Wholesale
Distribution — Report
Description
Division II requires the Commissioner or the Commissioner’s designee to review PSAOs and
the wholesale distribution of prescription drugs and submit a report to the General Assembly
before January 1, 2026, containing findings and recommendations based on the review. The
report must include each of the following:
• A description and analysis of the prescription drug wholesale distribution supply chain,
including focuses on the market concentration for, margins in, and competition in the
wholesale distribution of prescription drugs.
• A description of the role that PSAOs serve in the prescription drug supply chain.
• A description and analysis of the relationships between PSAOs, prescription drug
wholesalers, and retail pharmacies, including standard contracting terms, fees charged to
pharmacies, and contractual restrictions and limitations applicable to retail pharmacies.
Division II includes confidentiality requirements for the report.
Background
PSAOs are collective bargaining groups that leverage their membership to negotiate contracts
with other parties in the pharmaceutical supply and payment chain. PSAOs provide a range of
business services to pharmacies. PSAOs typically serve independent and small chain
pharmacies.
Assumptions
The IID will need to hire a contractor to conduct the report required by this Division of the Bill.
Fiscal Impact
The IID estimates the cost of hiring a contractor in FY 2026 to complete the report required by
Division II of the Bill to be approximately $225,000.
Source
Iowa Insurance Division, Department of Insurance and Financial Services