PBM Restriction Law Struck Down in Iowa

The Eighth Circuit Court of Appeals recently struck down a law that forced pharmacy benefit managers (PBMs) to disclose the process they use to price generic drugs.

The Iowa law requires PBMs to reveal pricing methodology to the insurance commissioner. It also allows pharmacies to comment on, and even appeal prices, according to an article by Bloomberg BNA. Iowa took this action to increase healthcare transparency and prevent unnecessary costs.

However, the federal court decided that this law could not be put into place because it would impede the administration of the Employee Retirement Income Security Act (ERISA) plans in the United States.

The court decided that the Iowa law could not be enforced due to a Supreme Court decision that used ERISA to invalidate a Vermont law that collected claims data, according to the article.

However, not all groups supported this measure. The Pharmaceutical Care Management Association (PCMA) issued a press release opposing the law, saying that PBMs reduce costs, and requirements should not be imposed upon them. If similar laws are implemented, PBMs will not be able to lower costs effectively, according to the release.

PCMA said that if the law was enforced, individuals would overpay for generic drugs, because PBMs would not be able to utilize the Maximum Allowable Costs lists that are used to keep drugs affordable, according to the press release.

“PBMs are part of the solution to high drug prices and use many tools to reduce prescription drug costs,” PCMA President and CEO, Mark Merritt said in a press release. “This federal appeals court decision sends an important signal that states can’t impose a patchwork of costly mandates on employers and unions that offer pharmacy benefits.”

Other organizations, such as the National Community Pharmacists Association (NCPA), expressed their disappointment with the outcome. The organization explained that the Iowa law was meant to provide assurance that patients would receive the necessary treatments, and would increase transparency among PBMs.

"We continue to support policies such as the Iowa law to provide important protections for patients and the pharmacies that serve them,” NCPA CEO, B. Douglas Hoey, RPh, MBA said in a press release. “Moreover, related efforts to bring more transparency to prescription drug pricing by PBMs is critical to the ongoing national discussion about drug costs and community pharmacists are prepared to work with government policymakers and industry stakeholders to that end."

Although Iowa was defeated regarding this law, they remain willing to tackle what they consider unfair drug pricing. In December 2016, Iowa joined an anti-trust lawsuit that involved 20 other states.

This lawsuit alleged that the generic pharmaceutical companies Heritage Pharmaceuticals, Auribindo Pharma, Citron Pharma, Mayne Pharma, Mylan Pharmaceuticals, and Teva Pharmaceuticals all illegally conspired to inflate prices, according to a press release from the Office of Iowa’s Attorney General.

While Iowa was not successful in enforcing a PBM restriction law, it is clear that they are going to continue taking action against companies that may be unjustly raising prescription drug costs.