A federal judge has temporarily blocked the enforcement of a new Iowa law regulating pharmacy benefit managers after a coalition of business groups sued.
The plaintiffs, which include the Iowa Association of Business and Industry, argued that the law would raise costs on Iowans and would conflict with federal law and violate the First Amendment by preventing employers from directing workers to some pharmacies over others.
U.S. District Judge Rebecca Goodgame Ebinger issued a temporary restraining order June 30, hours before Iowa’s law, Senate File 383, was set to take effect July 1. The order will stay in place until a July 14 court hearing to consider the issue further.
Goodgame Ebinger wrote that the arguments in the plaintiffs’ lawsuit and accompanying declarations persuaded her they had a likelihood of prevailing in their claim that Iowa’s law is preempted by the federal Employee Retirement Income Security Act (ERISA) and violates the First Amendment.
“The court holds plaintiffs have made the necessary showing that provisions of SF 383 are unenforceable,” she wrote.
The temporary restraining order applies only to the plaintiffs who sued — including the roughly 600 businesses that are members of the Iowa Association of Business and Industry, as well as the Iowa Bankers Benefit Plan, Iowa Laborers District Council Health and Welfare Fund, Des Moines Orthopaedic Surgeons PC and Iowa Spring Manufacturing & Sales Co.
Together, the plaintiffs provide health care for thousands of Iowans that they say would be negatively affected by the new law.
Iowa lawmakers passed the law to prevent further pharmacy closures in Iowa, especially in rural areas.
The law includes a range of regulations governing pharmacy benefit managers, known as PBMs, which operate as middlemen between drug manufacturers and insurance providers. Gov. Kim Reynolds signed the legislation on June 11.
Supporters of the measure, including pharmacists, have complained that pharmacy benefit managers regularly reimburse pharmacies at a rate below what it costs the pharmacy to dispense drugs to patients, forcing them to operate at a loss.
The law contains several provisions intended to help struggling pharmacies stay afloat financially, including requiring PBMs to reimburse pharmacies at the national average drug acquisition cost and establishing a baseline dispensing fee of $10.68 for every drug a pharmacy provides.
The law also says pharmacy benefit managers cannot prohibit or limit someone from selecting a certain pharmacy or pharmacist if that pharmacy is covered by their health insurance. And it prevents PBMs from charging different copayment amounts or providing smaller reimbursement rates at one pharmacy or another.
Those provisions will increase costs for patients and employers, opponents say, as well as require employers to alter their health care plans in ways that conflict with ERISA. But supporters of the law say other states that have passed similar legislation have not seen an increase in prescription drug costs.
Stephen Gruber-Miller covers the Iowa Statehouse and politics for the Register. He can be reached by email at sgrubermil@registermedia.com or by phone at 515-284-8169. Follow him on X at @sgrubermiller.
This article originally appeared on Des Moines Register: Federal judge blocks Iowa’s pharmacy benefit manager law for 2 weeks after businesses sue
Reporting by Stephen Gruber-Miller, Des Moines Register / Des Moines Register
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