Status Check on HF 2297

Following unanimous passage of pharmacy benefits manager (PBM) legislation in Iowa during the 2014 and 2015 legislative sessions,^1,2 the Iowa Pharmacy Association (IPA) continues to work closely with the Iowa Insurance Division (IID) on rule-making. Additionally, IID and the State of Iowa Attorney General’s office have been involved in the lawsuit filed by the Pharmaceutical Care Management Association (PCMA), the national trade association representing PBMs. Directions in Pharmacy spoke with Dr. Kate Gainer, PharmD, Executive Vice President and Chief Executive Officer of the IPA about the legislation.

Why was the law needed? What problem was it trying to address?

In 2013, 23 pharmacies (the number is now 71) in Iowa closed, in large part due to unregulated PBM business practices. The law provided clear statutory authority for the IID to audit PBMs by addressing 2 issues harming Iowa pharmacies—lack of transparency, and undisclosed reimbursement methodology for generic prescriptions.

How did the law "fix" the problem?

The law gives the IID complete authority to investigate PBMs operating in Iowa, and requires them to disclose their maximum allowable cost (MAC) pricing lists. The law also limits the drugs that can be included in an MAC list to only A-rated generics and forbids single-source generics, in the generic exclusivity period, from being included. Finally, only products available for purchase by multiple Iowa pharmacies can be used to calculate a MAC.

Why would it be a win for the IID to audit PBMs?

The IID has the authority to ensure that Iowa pharmacies are reimbursed with MAC rates that meet the requirements of the law. PBMs would be required to provide the methodology to IID, including the source of pricing, for MAC rates used. If PBMs are not complying with the law (and subsequent rules, which are yet to be adopted), the IID can take action against PBMs with the new law.

What are the implications for the IID divisions/community pharmacies in the 49 other states?

The dismissal of the PCMA lawsuit in Iowa has positive implications across the country, and the judge’s decision can be used in states where the legislature is debating PBM legislation. The ruling by Iowa’s District Court judge to uphold the legislation as passed³ is a strong precedent.

Does this go beyond generic reimbursement?

We hope it does. Clearly, PBM practices are unregulated and lack transparency. For these reasons, they make changes to contracts and policies that negatively impact pharmacies and patient care. IPA hopes that increasing transparency and drawing the attention of policy makers and regulators to the PBM business model will force a change to how PBMs operate.

What is the question most frequently asked of IPA regarding this bill?

Have PBM practices changed or improved since the passage of PBM legislation and dismissal of the PCMA lawsuit? The IID has authority to adopt rules that will implement the policies of legislation passed in 2014, and clearly articulate the enforcement authority of the state insurance division over PBMs that practice in the state of Iowa. Draft rules are scheduled to be released before the end of the year, now that the PCMA case dismissal has occurred.

It is the understanding of IPA that, once updated rules take effect, IID will have enforcement authority to audit PBMs and ensure they are complying with the PBM statute and rules in Iowa. IPA continues to serve as a resource for the Iowa Attorney General’s office and IID with regards to the legislation and policy implications of this case.

HF 2297 Timeline

Date

Action

Description

March 14, 2014

HF 2297 signed into law in Iowa

HF 2297 requires PBMs to be transparent about their methods for determining reimbursement for generic drugs and affords the state’s insurance commissioner authority to request information from PBMs in Iowa.

September 2, 2014

PCMA seeks to block HF 2297

PCMA files a federal lawsuit in the Southern District of Iowa seeking a preliminary injunction against the Iowa Insurance Commissioner and the Iowa Attorney General to block implementation of HF 2297. The 5-count complaint alleges that:

• The Employee Retirement Income Security Act of 1974 (ERISA) expressly preempts HF 2297

• ERISA preempts HF 2297 due to conflict preemption

• HF 2297 violates the Takings Clause of the US Constitution

• 2297 violates the Takings Clause of the Iowa Constitution

• HF 2297 violates the Dormant Commerce Clause of the US Constitution

October 23, 2014

Iowa Attorney General’s Office files Motion to Dismiss

Motion to dismiss 4 of the 5 claims alleged in PCMA’s lawsuit (leaving only the Dormant Commerce Clause claim)

February 18, 2015

Motion to Dismiss Granted

May 7, 2015

PCMA files Motion to Certify

Motion to Certify requests that the Iowa Supreme Court issue an opinion clarifying certain obligations set forth in HF 2297. Iowa Attorney General’s office objected to this motion, alleging that it is untimely and that the IID is the proper entity to interpret HF 2297, not the Iowa Supreme Court. *At the time of publication, several items are pending and discovery has been delayed. The District Court has not ruled on the Motion to Certify, Motion to Strike, nor Motion to Dismiss.

May 28, 2015

PCMA files Amendment Complaint

Amended Complaint filed revising the original Dormant Commerce Clause claim and adding a new claim alleging the legislation is vague in violation of due process, to which Iowa filed another Motion to Dismiss.

September 8, 2015

Southern District Court of Iowa dismisses all 6 claims in the PCMA lawsuit against the state of Iowa’s PBM legislation

October 7, 2015

PCMA files Notice to Appeal

The PCMA’s notice of appeal will focus on 3 issues: 1) ERISA preemption, 2) the dormant commerce clause of the US Constitution, and 3) the due process clause of the US Constitution.

References

• HF 2297, ch 1016, 85th Gen Assemb (Iowa 2014). https://www.legis.iowa.gov/DOCS/IowaActs/85/2/pdf/Chapter_1016.pdf. Accessed December 12, 2015.
• HF 395, 86th Gen Assemb (Iowa 2015). http://coolice.legis.iowa.gov/linc/86/external/govbills/HF395.pdf. Accessed December 12, 2015.
• Pharmaceutical Care Management Association v Gerhart, No. 4:14-cv-00345 (SD Iowa September 9, 2015).