Bills aim to address prescription drug costs, pharmacy closures by regulating PBMs

DES MOINES — High prescription drug costs and pharmacies going out of business, especially in rural Iowa, have once again put pharmacy benefit managers — the companies that function as intermediaries between insurance providers and drug manufacturers — under the legislative microscope.

After passing some regulations in 2024, Iowa state lawmakers are this year once again considering legislation that would further regulate pharmacy benefit managers — or PBMs.

The proposals were considered by lawmakers in both chambers of the Iowa Legislature on Wednesday in a pair of legislative hearings that drew high interest from lobbyists and the public. A pair of subcommittee hearings on the bills both filled hearing rooms at the Iowa Capitol.

Under the twin bills — Senate Study Bill 1074 and House Study Bill 99 — 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.

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.

Also under the proposed legislation, PBMs would be prohibited from:

Limiting or disincentivizing an individual from selecting a pharmacy or pharmacist of their choice;Designating a prescription drug as a specialty drug to prevent a person from accessing the prescription;Requiring a customer to purchase prescription drugs or other services through a mail order pharmacy, or from charging more for prescription drugs or other services than if they were purchased from any other pharmacy;Reimbursing a pharmacy less than the national or Iowa average drug acquisition cost.

Twenty-nine Iowa pharmacies closed in 2024

During public comment in two legislative hearings on the proposals Wednesday, pharmacists and other health care officials spoke in favor of the bills, while lobbyists representing PBMs, insurance companies, and the Iowa Association of Business and Industry spoke in opposition.

Pharmacists said many pharmacies 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.

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

Prior to 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.

Charlie Hartig, CEO of Hartig Drug, which was founded in Iowa in 1904, said two Hartig Drug pharmacies closed last year.

"Pharmacy closures and threats to pharmacies because of big PBM abuse is real," Hartig said. "This legislation ultimately is we're looking for an even playing field. We're looking for (the) ability to compete with large pharmacy conglomerates, and we're also looking to be able to service better and get paid for those services."

Matt McKinney, a lobbyist for the Federation of Iowa Insurers, America's Health Insurance Plans, and Principal Financial Group, noted the Iowa Legislature has passed laws in recent years regulating PBMs and warned that the new proposal could lead to increased costs for Iowans.

"This bill will absolutely result in more money going to pharmacies, probably hundreds of millions of dollars. But we don't think it's appropriate that those dollars flow from the employers, the businesses and the patients," McKinney said. "This doesn't include any appropriation from the state. It doesn't include an appropriation from the federal government. Big Pharma isn't paying for this. Patients and Iowa businesses are going to be paying these hundreds of millions of dollars."

Supporters of the proposal say that in other states where similar measures have passed, there has not been a measurable increase in costs to consumers that can be directly tied to the new laws.

Bills advance in House and Senate

The proposals were advanced in both the Iowa House and Senate, with the respective three-members subcommittee panels both giving their unanimous approval.

Iowa Sen. Annette Sweeney, a Republican from Iowa Falls, became emotional multiple times while talking about the pharmacist that has served her and her family. She praised the legislative proposal and warned of the "dismembering of our local pharmacies."

"I am so appreciative of the heart that our pharmacists have," Sweeney said. "They want to continue the care, they want to continue caring about the people in our communities and the people that they love."

By advancing out of the subcommittees, the bills are now eligible for consideration by their respective full committees: the Senate Health and Human Services Committee and the House Commerce Committee.

Tom Barton of The Gazette contributed to this report.