Iowa State Capitol building
Iowa lawmakers are debating legislation to bar pharmacy benefit managers and insurers from using alleged discriminatory practices against 340B covered entities and their contract pharmacies.

Iowa Tries Again to End Alleged PBM Bias Against 340B Providers and Pharmacies

Identical bills have been introduced in the Iowa House and Senate to bar pharmacy benefit managers and insurers from using alleged discriminatory practices against 340B covered entities and their contract pharmacies, including reimbursing them at a lower rate or imposing unfair contract terms. Similar legislation died last year.

According to the state legislature’s website, a House Health and Human Services subcommittee voted 3-0 on Feb. 8 to recommend passing House Study Bill 137 as introduced. A Senate Commerce subcommittee voted Feb. 7 to recommend passing Senate Study Bill 1098 with unspecified amendments.

The bills would prohibit PBMs, health plans and other commercial payors from “discriminating against a covered entity or a contract pharmacy” by reimbursing them at an amount less than the payor reimburses another similarly situated entity or pharmacy that is not in the 340B program.   

As introduced, the legislation would also prohibit PBM and payer discrimination based on 340B status including:

  • Fees, chargebacks, clawbacks, dispensing fees, or other adjustments not required by state law or administrative code.
  • Requirements related to frequency or scope of audits.
  • Requirements related to inventory management systems using generally accepted accounting principles.   
  • Requirements related to mandatory disclosure directly or via third party of prescriptions filled with 340B-priced drugs, except disclosures required by federal law.

The bill makes exceptions for adjustments for overpayments or other errors associated with an adjudicated claim, as well as for requirements related to statutorily required modifiers or other identifiers on claims submitted for 340B-priced drugs.

The legislation further bars PBMs and other payers from refusing to contract with a 340B covered entity or contract pharmacy based on criteria not applied to non-340B entities, or imposing restrictions or conditions that interfere with a covered entity’s ability to maximize the value of 340B drug discounts. The bill also include language prohibiting restrictions, or requirements on patients who obtain 340B drugs through a covered entity or contract pharmacy.

The bill contains penalty provisions stating, “A violation of this chapter shall be an unfair or deceptive act or practice in the business of insurance pursuant to [Iowa law].” It says that, after notice and hearing, the state’s insurance commissioner may “issue any order or impose any penalty” under state law.

Bills similar to Iowa’s have been introduced in eight other states this year: Kansas, Massachusetts, Mississippi, Missouri, Montana, Oregon, Rhode Island, and Texas. Ryan White Clinics for 340B Access reported in April 2022 that 23 states had passed laws since 2019 prohibiting discriminatory 340B reimbursement.

“Generally, PBMs are immensely underregulated, allowing these companies to operate in the dark and skim money out of the health care system at the expense of patients, employees, taxpayers, and pharmacies,” said Seth Brown, director of public affairs with the Iowa Pharmacy Association. “This is apparent in the 340B space.”

“One administrative restriction that effectively transfers 340B savings from patients and pharmacies to private, for-profit PBMs is when PBMs refuse to cover medications purchased under 340B or by refusing to allow 340B pharmacies to participate in their networks,” Brown said. “These types of practices are particularly harmful to communities in rural Iowa, where most covered entities are located and pharmacy networks are already scarce.”

Iowa passed bipartisan legislation last year that bars PBMs from clawing back payments from pharmacies, lets pharmacists tell patients about lower cost medicines, requires PBMs to pay independent pharmacies at least as much as PBMs pay their affiliate pharmacies, and strengthens PBM reporting requirements. 340B-specific PBM legislation failed to advance last year.

“It takes time to build momentum that effectuates change,” Brown said. “Great efforts have been made on bills such as this in past sessions, but the culmination of factors coming together in favor of this year’s bill has been unmatched.”

Aimee Kuhlman, American Hospital Association vice president of government relations, said, “The AHA supports state-level efforts to ensure that the 340B program is protected against threats by drug companies and PBMs that would scale back the many benefits that the program helps hospitals provide to their patients and communities.”

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