Dive Brief:

• Iowa passed a law last week that places limits on pharmacy benefit managers, joining a growing number of states cracking down on the drug middlemen in an effort to constrain rising prescription drug costs and protect rural pharmacies. 
• The legislation includes numerous provisions aimed at tamping down on PBMs’ “outsized control” over the pharmaceutical supply chain, Gov. Kim Reynolds said in a statement. That includes preventing PBMs from steering patients to particular pharmacies, equalizing reimbursement between pharmacies and reforming how PBMs are paid.
• However, some experts have raised concerns that the law could lead to higher costs for health plans and patients.

Dive Insight:

Iowa’s push to regulate PBMs comes amid an ongoing national conversation about how the drug middlemen influence the affordability of and access to prescription drugs in America.

The companies argue they help lower drug prices by negotiating drug discounts with pharmaceutical manufacturers. However, PBMs have faced growing criticism over certain controversial business practices, including paying independent pharmacies lower rates than in-house pharmacies, directing business to their owned subsidiaries and profiting from spread pricing — in which PBMs charge insurers a higher price for a drug than what they reimburse the pharmacy for dispensing it, and then keep the difference.

Part of the problem, critics allege, is the PBM industry is too consolidated: The “Big Three” operated by CVS, UnitedHealth and Cigna jointly control about 80% of the U.S. prescription drug market.

Iowa’s law, called Senate File 383, seeks to address such concerns by limiting PBMs’ ability to steer patients and increase reimbursement to their own pharmacies. It’s similar to laws passed this year in Texas, Georgia, Indiana and Montana, according to Reynolds, and comes on the heels of landmark legislation in Arkansas, which prevents pharmacy benefit managers from owning or operating pharmacies.