The Iowa Senate passed a bill setting new standards for pharmacy benefit managers (PBM) that lawmakers said will help keep rural pharmacies in business and lower the cost of prescription drugs.
Senate File 383, passed 36-14, is the legislation passed through the committee process earlier this year limiting certain PBM business practices. Pharmacy benefit managers are companies that serve as the negotiator between drug manufacturers, pharmacies and health insurance companies for setting prescription drug costs.
The legislation would set new regulations for PBMs, including requiring pharmacies to be reimbursed for the national or state average acquisition cost of a drug — a higher reimbursement rate than many pharmacies are currently receiving, according to several workers and owners of current rural pharmacies.
Many components of the bill deal with PBM practices to pressure or force consumers to use certain pharmacies to fill a prescription. The bill specifically prohibits PBM strategies like setting different cost-sharing rates or implementing financial advantages or penalties for the use of certain pharmacies to fill a prescription. It also restricts other methods of PBMs limiting the use of certain pharmacies if that provider has agreed to participate in a person’s health benefit plan.
Earlier in the legislative session, pharmacists and supporters told lawmakers the bill would help Iowa pharmacies stay in business, linking the closure of many locally owned, rural pharmacies in recent years to PBM practices that favor mail-order prescription refills and certain pharmacy chains.
Pharmacy benefit managers are companies that serve as the negotiator between drug manufacturers, pharmacies and health insurance companies for setting prescription drug costs.
The bill was amended by the Senate Monday to define “retail pharmacies” and “pharmacy chains.” The Senate amendment also makes some changes to the language about how rebates received by a PBM on drugs are returned to a health benefit plan to reduce insurance premiums.
The bill’s floor manager Sen. Mike Klimesh, R-Spillville, said the legislation was important to him because of his own experience having medicine for his father, which could only be filled by a mail-order pharmacy, get lost in the mail. He said ensuring rural pharmacies in Iowa stay in business is necessary to help keep Iowans healthy, saying local pharmacies can help address problems and adjust to the medical needs of people in their community in real time.
“We need to have a conversation about what rural health care looks like in Iowa,” Klimesh said. “And one of those main talking points about rural health care in Iowa is not only just a clinic you go to to get your check up, or the hospital you see, but the next step in that in that phase — which is the pharmacy, the pharmacy to fill your prescription.”
Many local pharmacies have closed in recent years, which Klimesh said was largely due to unfair business practices by PBMs. More than 150 Iowa pharmacies have closed in the past 10 years, and 31 closed in 2024, according to the Iowa Pharmacy Association. Klimesh said if the Legislature does not pass a bill regulating and PBM practices and improving transparency, “we are setting [Iowans] up for having no access to a pharmacy.”
"We need to have a conversation about what rural health care looks like in Iowa.”Republican Sen. Mike Klimesh
“I lost four alone in my district, and once they close, they’re not going to reopen,” Klimesh said. “So this bill is a great step in the right direction to provide transparency.”
Sen. Sarah Trone Garriott, D-West Des Moines, said she supported a measure to restrict PBM business practices, but said Senate Republicans’ amended legislation would lead to consumer cost increases. She introduced an amendment that would require negotiated drug manufacture rebates exclusively go to reducing health care plan premiums. Her proposal also would require pharmacies with five or less organizations and pharmacies that are the only entity able to fill a prescription in their community receive a $10.68 dispensing fee for every prescription they fill.
Trone Garriott said she believed Klimesh’s amended bill would lead to significantly increased health insurance costs for Iowans, while her amendment would ensure Iowans do not lose access to health coverage because of efforts to regulate PBMs.
“[The amendment] does increase prices on consumers, it does increase prices on Iowa,” Trone Garriott said. “The amendment that I am presenting today has a much smaller increase. When we compare $160 increase to $6 increase, that’s a pretty big difference when it comes to folks who are working so hard to make ends meet. We have to take seriously that the PBMs have promised they’re going to pass the cost along to the consumers, and we want to shield the people of Iowa from increased costs, while protecting our small town and rural pharmacies.”
Klimesh called Trone Garriott’s amendment “PBM reform light.” He said the issues she brought up with rebates were already addressed in his amendment, stating a transparency provision in the bill “forces all rebates to flow back to the plan payer,” and said the Democratic senator’s amendment did not address issues with spread price manipulation, where PBMs charge payers like Medicaid more than a pharmacy is paid for a medication.
Trone Garriott’s amendment failed, while Klimesh’s amendment was adopted. The amended legislation heads to the House for further consideration. The House passed a companion version of the legislation through the committee process in March, but has not yet had floor debate on the measure.
