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Iowa Employers Sue to Halt PBM Law, Citing Rising Healthcare Costs

By  |  June 25, 2025

A coalition of Iowa businesses, health plans, and employers is pushing back against a new state law regulating pharmacy benefit managers (PBMs), filing a federal lawsuit that claims the measure would significantly drive up healthcare costs and infringe on constitutional rights.

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    According to Reuters, the Iowa Association of Business and Industry (ABI), which advocates for the interests of Iowa employers, led the legal action filed Monday in a U.S. District Court in Des Moines. The group argues that Senate File 383 — set to take effect July 1 — unfairly targets PBMs and, in doing so, harms the broader ecosystem of health insurance providers and businesses operating in the state.

    PBMs act as intermediaries between drug manufacturers and insurance providers, negotiating prescription drug prices and managing pharmacy networks. Per Reuters, the new Iowa law prohibits several PBM practices, including steering patients toward certain pharmacies, reimbursing pharmacies below drug acquisition costs, and over-categorizing medications as “specialty drugs” to restrict access.

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    The ABI’s complaint alleges that the law violates the U.S. Constitution by placing undue restrictions on free speech and is preempted by the federal Employee Retirement Income Security Act (ERISA), which governs most employer-sponsored health insurance plans. The lawsuit seeks to block enforcement of the law and obtain a legal declaration that it is invalid.

    In a statement cited by Reuters, ABI President Nicole Crain warned that the law would significantly increase healthcare expenses for Iowa residents and disrupt the functioning of prescription drug plans. She also noted that it would limit the ability of health plans to direct patients to cost-effective medication options.

    Governor Kim Reynolds signed the legislation into law on June 11, defending it as a necessary measure to reduce PBM influence, which she says has contributed to the closure of many rural pharmacies. The law also mandates specific terms for contracts between pharmacies and PBMs, as well as with health insurance providers and employers.

    Source: Reuters