A group of several businesses and organizations filed a lawsuit Monday challenging the new Iowa law putting regulations in place for pharmacy benefit managers, the companies negotiating prescription drug prices between drug manufacturers, pharmacies and health insurance companies.
The lawsuit against Iowa Insurance Commissioner Doug Ommen was brought by the Iowa Association of Business and Industry, as well as Des Moines Orthopaedic Surgeons PC, Iowa Spring Manufacturing & Sales Co. and health plans the Iowa Bankers Benefit Plan, Iowa Laborers District Council Health and Welfare Fund. The suit against the state argues Senate File 383, signed into law by Gov. Kim Reynolds earlier in June, is unlawful and contradicts federal PBM regulations.
The law, supported by pharmacists and other rural health care advocates during the 2025 legislative session, restricts certain PBM business practices that supporters of the measure said coerce or force consumers to use certain pharmacies to fill prescriptions. These entities are banned from adding financial advantages or penalties for certain pharmacies when filling an order and setting different cost-sharing rates under the law. It also requires pharmacies to be reimbursed for the national or state average acquisition cost of a drug and establishes a $10.68 dispensing reimbursement fee for each prescription filled by independent and rural pharmacies.
ABI released a statement on the bill June 11, shortly after the bill was signed.
“ABI is disappointed in today’s action,” the statement said. “ABI testified at every turn in favor of legislation that would support small independent pharmacies in Iowa. The bill that the Governor signed … is not that. Senate File 383 includes expensive, unneeded provisions that are going to drive up the costs of pharmacy services in Iowa without any discernable improvement in patient care. Iowans – including businesses and employees – will bear these costs at the pharmacy counter and in the structure of their health care plans. This is an additional headwind in an already challenging business environment. Now law, ABI will take every opportunity to mitigate the increased costs on our members and their team members throughout Iowa.”
While supporters said the new provisions will help struggling pharmacies in many Iowa communities, several business and health insurance industry organizations have repeatedly criticized the measures as they will potentially raise the prescription drug and health coverage costs for Iowans. The lawsuit filed in the U.S. District Court in Des Moines argued the new law will “raise healthcare costs for businesses across the state – large and small – by tens of millions of dollars.”
The plaintiffs are seeking an injunction to block enforcement of the law and for the court to rule the measure is unlawful.
In a news release on the lawsuit, ABI officials argued the measure was not only preempted by federal law on PBMs, but was unconstitutional by restricting free speech.
The measure could make it illegal for employers to tell their employees “about ways to save money, such as avoiding a $10.68 fee by using certain pharmacies,” according to the release.
“We’re challenging this new Iowa law because it’s going to raise health care costs for businesses of all sizes across the state by hundreds of millions of dollars,” ABI President Nicole Crain said in a statement. “It will also disrupt the prescription drug coverage that Iowans count on, and it even stops health plans from giving people simple, money-saving information, like which pharmacy has the better deal. That’s bad policy that goes against federal law and violates the First Amendment.”
Organizations like the Iowa Pharmacy Association and lawmakers backing the law repeatedly said claims the measure will significantly raise health care costs in Iowa are untrue, pointing to other states that have enacted similar measures without seeing dramatic increases in health insurance premiums.
Reynolds said in a statement when she signed the measure that it would address several PBM business practices that harm patients and small pharmacies, but said her administration will conduct ongoing review to assess the impacts of the law as it takes effect.
“The complexity and lack of verifiable data made signing this bill a difficult decision, and my administration will closely monitor implementation to mitigate and ensure that any unintended consequences for private employers are addressed,” Reynolds wrote. “We will also be launching a reverse auction to ensure Iowa’s state health plan continues to keep costs as low as possible for the state and its employees.”
