Bill addressing pharmacy benefit managers tailored to help smaller pharmacies

DES MOINES — Legislation designed to constrain prescription drug costs and protect rural pharmacies by regulating third-party health care companies known as pharmacy benefit managers is once again moving in the Iowa Capitol.

The Iowa Senate on Monday approved a bill that would place limits on pharmacy benefit managers, or PBMs, which are health care companies that function as intermediaries between insurance providers and drug manufacturers.

Under the proposal, all prescription drug contracts would be required to use a pass-through pricing model. In a pass-through pricing model, the amount paid by the PBM to the pharmacy is passed through to the plan sponsors — employers, insurers, government agencies, or managed care organizations — and the PBM is compensated through administrative fees, according to the Pharmaceutical Care Management Association, which represents PBMs.

Also under the proposed legislation, PBMs would be required to pay small pharmacies a dispensing fee, and would be prohibited from:

The bill also requires PBMs to provide an appeals process for pharmacies to challenge reimbursement rates for specific prescriptions and would allow pharmacies to decline to dispense a prescription to a person if the pharmacy would be reimbursed less for the prescription than the cost to the pharmacy.

What lawmakers said during debate

Iowa Sen. Mike Klimesh, a Republican from Spillville, said the legislation is designed to address disparities in the PBM market.

  Buy Photo

“It implements sound regulation of pharmacy benefit managers while providing opportunities to support network adequacy, consumer choice and provide further transparency in what is traditionally an opaque system on reimbursements and costs,” Klimesh said during Senate debate.

Klimesh said the legislation borrows from similar provisions enacted in other states. According to Klimesh, 36 states have laws that prohibit PBMs from limiting which in-network pharmacist an individual chooses, 32 states prohibit requiring mail-order fulfillment, 11 states have addressed minimum reimbursement standards, and seven states have created an appeals process.

“Iowa is not the first state to tackle these issues in this bill,” Klimesh said. “Nothing in this bill is uncharted territory. In fact, I would say Iowa is lagging behind a little bit. Now we’ll get caught up.”

The Senate amended the proposal to make the dispensing fee and reimbursement requirement applicable only to smaller pharmacies — those with fewer than 20 pharmacies under common ownership and located in fewer than 20 states.

Broadly speaking, pharmacists and other health care organizations are supportive of the legislation, while PBMs, insurance companies, business organizations, worker unions and local governments are opposed, according to state lobbying records.

Pharmacists have said many pharmacies — especially in Iowa’s rural areas — are going out of business because of the increasing costs of prescription drugs, and that some of them have had to discontinue certain prescription drugs because they get reimbursed at a fraction of the drug’s cost.

  Buy Photo

Last year, 29 pharmacies closed in Iowa, according to the Iowa Pharmacy Association.

Before 2024, nearly 100 pharmacies across the state had closed since 2008, according to research from a recent study conducted by Drake University and The Health Professions Tracking Center at the University of Iowa Carver College of Medicine.

Sen. Sarah Trone Garriott, a Democrat from West Des Moines, called the debate “a really tough issue.”

“It’s incredibly important that we protect the pharmacies that serve our small towns and rural communities,” Trone Garriott said during debate. “But in this bill, there is also the potential to increase costs for Iowans. I’m really concerned about that. I take that very seriously.”

What’s next for the bill

The Senate passed the bill, Senate File 383, on a 36-14 vote with three Democrats joining most Republicans in voting for the bill and three Republicans joining most Democrats in voting against it.

The bill still must pass the Iowa House before it could be sent to Gov. Kim Reynolds for her consideration. The House passed a similar bill out of its Commerce Committee in February, but has not taken action on it since.

Comments: (515) 355-1300, erin.murphy@thegazette.com

Get the latest Iowa politics and government coverage each morning in the On Iowa Politics newsletter.