Iowa’s new health care law paused, but only for some companies

DES MOINES — A new state law regulating third-party health care companies can go into effect Tuesday as planned for much of Iowa, but not for the plaintiffs in a lawsuit challenging the new law.

The new law, designed to help rural pharmacies and address prescription drug costs, adds regulations on pharmacy benefit managers, or PBMs — health care companies that function as intermediaries between insurance providers and drug manufacturers.

A federal judge on Monday granted plaintiffs’ request for a two-week restraining order, temporarily halting the Iowa Insurance Division from enforcing the new law.

But the restraining order halts enforcement of the law only for those plaintiffs: the Iowa Bankers Benefit Plan, Iowa Laborers District Council Health and Welfare Fund, Des Moines Orthopaedic Surgeons, Iowa Spring Manufacturing and Sales Co., and the members of the Iowa Association of Business and Industry.

The ruling makes clear that the state insurance division may enforce the law for any other companies in Iowa.

A hearing to consider a preliminary injunction of the new law has been scheduled for July 14.

The Iowa Insurance Division did not immediately respond to a request for comment Monday.

The Iowa Association of Business and Industry on its website claims to represent “more than 330,000 working Iowans.” The organization did not immediately respond to a request for comment Monday.

The judge’s ruling requires Iowa ABI to submit to the court a full list of its members within 24 hours of the order — by Tuesday afternoon.

What does the law do?

The new Iowa law requires all prescription drug contracts in Iowa to use a “pass-through” pricing model, in which 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.

The new law also requires PBMs pay a $10.68 dispensing fee to small pharmacies, and prohibits them from:

In her ruling, U.S. District Court Judge Rebecca Goodgame Ebinger wrote Monday that plaintiffs showed sufficient evidence that provisions of the new law could conflict with federal law that regulates employee benefit plans and could violate First Amendment protections for businesses.

Ebinger wrote that she concluded plaintiffs sufficiently argued the new law “reaches beyond cost controls” and “interferes more meaningfully in (employers’ health care) plan design.”

Ebinger also wrote that plaintiffs sufficiently argued that the new law could cause irreparable harm because of its financial impact on employers and employees.

In written testimony, Pella Corporation Senior Benefits Manager Kirk Veenstra said the law’s collective provisions would increase the company’s health care plan costs by nearly $1.2 million; and Wellmark Blue Cross and Blue Shield of Iowa Vice President/Chief Pharmacy Officer Paul Karow said Iowans enrolled in one of the company’s programs could go from paying nothing for certain specialty prescription drugs to $4,380 for a three-month supply of one drug or $2,310 for a one-month supply of another.

The law, Senate File 383, was passed by the Iowa Legislature on May 12 and signed into law by Gov. Kim Reynolds on June 11. The lawsuit was filed June 23.

Pharmacies and other health care organizations supported the legislation, saying it would help protect pharmacies from closure. Last year, more than 30 pharmacies closed in Iowa, affecting both rural and urban communities, according to the Iowa Pharmacy Association. Since 2014, more than 200 Iowa pharmacies have closed, creating pharmacy deserts and limiting access to care.

Download: pbm injunction granted 6-30 (clean).pdf

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

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