Federal judge grants Wellmark injunction blocking enforcement of parts of Iowa drug pricing law

A federal judge has granted Wellmark Blue Cross and Blue Shield a preliminary injunction temporarily blocking enforcement of parts of Iowa's new pharmacy benefit manager reform law, shielding the state's largest health insurer and its customers from provisions Wellmark argues would sharply increase prescription costs.

Chief U.S. District Judge Stephanie Rose on Wednesday issued the order, which suspends enforcement of several sections of Senate File 383 that she found likely in conflict with federal law — including the Employee Retirement Income Security Act and the First Amendment.

The injunction applies to Wellmark health plans and insurance policies that include pharmacy benefits and were not already covered by an earlier court order issued in a separate case: Iowa Association of Business and Industry v. Ommen. That July ruling blocked 11 provisions of the same law for ABI's member companies.

The Iowa Insurance Division agreed to the entry of the preliminary injunction enjoining it from enforcing certain provisions of the pharmacy benefit manager law. A spokesperson for the division said it will continue to enforce all provisions of the law that remain in effect and have not been blocked by court order.

Dispensing fee, cost provisions paused

Under Wednesday's order, the state may not enforce the law's $10.68 dispensing fee for each prescription filled at retail pharmacies in Iowa for affected Wellmark plans. The injunction also extends to CVS Caremark, Wellmark's pharmacy benefit manager, for covered health plans and policies.

In a statement, Wellmark said the injunction provides "clear compliance guidance" for employer customers and "shields more than one million Iowans from significant increases in prescription medication costs."

"To protect health care affordability for its members, Wellmark filed suit … to clarify that it may legally pause implementation of certain SF 383 provisions," the company said in a release. The order will remain in effect until further court action or a final appellate decision in ABI v. Ommen, expected next year.

Legal challenge mirrors ABI case

Wellmark filed its lawsuit Oct. 14 against Iowa Insurance Commissioner Doug Ommen and the Iowa Insurance Division, seeking to extend to its customers the same legal protections that ABI obtained earlier this year.

In the ABI case, the court found that several sections of the Iowa law violated the federal Employee Retirement Income Security Act, which establishes standards for most private health and retirement plans. The court said the law also violated the First Amendment by dictating how health plans are structured and restricting truthful commercial speech.

Wellmark argued that the division's guidance requiring full compliance with the law — despite the partial injunction in the ABI case — would force Wellmark to choose between violating federal law or facing state penalties.

In court filings, Wellmark warned that compliance could raise prescription costs by nearly $100 million annually for plans it administers and add about $40 million in out-of-pocket expenses for members through higher co-pays, coinsurance and deductibles.

The company's complaint cited the state's September implementation bulletin, which directed pharmacy benefit managers and insurers to comply with all of SF 383's provisions beginning Jan. 1, 2026, for any plans not specifically exempted by court order. That guidance, Wellmark argued, "creates difficult, unworkable, and ultimately untenable conditions" for insurers and employers.

State law aimed to curb PBM power

Approved by lawmakers in May and signed by Gov. Kim Reynolds in June, Senate File 383 was designed to rein in pharmacy benefit managers, or PBMs — companies that negotiate drug prices and manage pharmacy benefits for insurers and employers — by setting reimbursement standards and limiting their ability to steer patients to preferred pharmacies.

Supporters, including independent pharmacists, said the law would improve transparency and protect rural pharmacies from unfair reimbursement practices. Opponents, including insurers and large employers, warned it would drive up costs and conflict with federal benefits law.

Among its key provisions, SF 383 requires PBMs to reimburse independent pharmacies based on the federal National Average Drug Acquisition Cost plus a $10.68 dispensing fee, prohibits health plans from favoring certain pharmacies, and allows pharmacies to appeal reimbursement disputes.

In a September bulletin, the Insurance Division said: "Three PBMs control approximately 80 percent of the national market. The largest PBMs have almost total control over the pricing, dispensing, and reimbursement of covered drugs." The division said it remained "committed to ensuring transparency, fair dealing, and accountability in the marketplace," and stressed that the law remained enforceable "in its entirety" against entities not covered by the ABI injunction.

Ommen said at the time that the division would continue to investigate potential violations under the Iowa Insurance Trade Practices Act to "protect Iowa consumers" from unfair practices in the prescription drug marketplace.

Next steps

The preliminary injunction will stay in place until the courts resolve either Wellmark's lawsuit or the pending appeal in the ABI case. The outcome could determine how far states may go in regulating PBMs and health plans governed by federal law — and whether Iowa's PBM reform law survives intact.

"Wellmark will continue to seek clarity, ensure compliance, and stand up for the needs of its members and employer customers," the company said in its statement.