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Wellmark sues Iowa Insurance Division over enforcement of pharmacy benefit law
Federal judge’s earlier ruling left parts of the law unenforceable for some — but not all — Iowa employers
Oct. 14, 2025 6:13 pm
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Wellmark Blue Cross and Blue Shield filed a lawsuit Tuesday in the U.S. District Court for the Southern District of Iowa seeking to block the state’s enforcement of parts of Iowa’s new pharmacy benefit manager (PBM) reform law, Senate File 383, that a federal judge has already partially halted.
The judge’s order, however, applies only to plaintiff businesses, their workers and health care agents.
Wellmark seeks to extend to its customers the same protections that a federal court granted earlier this year to members of the Iowa Association of Business and Industry (ABI) in a related case.
The state’s largest health insurer argues the Iowa Insurance Division’s directive requiring insurers to comply with the law would “unfairly raise costs for members and employers across the state,” potentially increasing prescription drug costs for more than one million Iowans.
Background on the law and earlier injunction
Senate File 383 was passed by the Iowa Legislature in May and signed into law by Gov. Kim Reynolds in June. The law imposed new restrictions on PBMs — companies that negotiate drug prices and manage pharmacy benefits for insurers and employers. Supporters said the measure was designed to improve transparency and protect rural pharmacies, while opponents warned it would drive up prescription costs.
Among its key provisions, SF 383 requires PBMs to reimburse independent pharmacies based on the federal National Average Drug Acquisition Cost (NADAC) plus a $10.68 dispensing fee, prohibits health plans from favoring certain pharmacies, and allows pharmacies to appeal reimbursement disputes. It also applies only to commercial insurance, excluding Medicaid, Medicare and federal employee plans.
In July, Chief U.S. District Judge Stephanie Rose granted a preliminary injunction blocking 11 provisions of the law for ABI and its members while the case continues to work its way through the courts.
The court found that several sections violated the federal Employee Retirement Income Security Act (ERISA), the federal law that establishes standards for most private health and retirement plans, and the First Amendment by dictating how health plans are structured and restricting truthful commercial speech.
The law in its entirety remains in effect and enforceable on all other Iowa businesses’ health care plans, leaving the state with a patchwork law that is in effect for some Iowa companies but not others.
Insurance Division: PBMs wield enormous market power
In a Sept. 24 advisory bulletin, the Iowa Insurance Division said it issued new guidance to clarify implementation of SF 383 and to “reinforce existing prohibitions of unfair and deceptive trade practices” by PBMs in the insurance marketplace. The bulletin emphasized that PBMs are “significant actors in the prescription drug market,” handling negotiations with drug manufacturers over discounts and rebates, managing pharmacy networks and drug formularies, and administering prescription benefits for health plans.
“Three PBMs control approximately 80 percent of the national market,” the Division said. “The largest PBMs have almost total control over the pricing, dispensing, and reimbursement of covered drugs.”
Insurance Commissioner Doug Ommen, in the bulletin, said the Division remains “committed to ensuring transparency, fair dealing, and accountability in the marketplace,” and that SF 383 is enforceable “in its entirety” against any entities that are not plaintiffs in the ABI lawsuit.
“PBMs, contractors, and agents are expected to implement SF 383 for all of their third-party payer clients who are not subject to the court’s order,” the bulletin stated.
The Division’s guidance details how the law’s various provisions are to be implemented, including:
- Consumer steering: PBMs may not limit a consumer’s choice of pharmacy or impose cost-sharing differences that would influence that choice.
- Pharmacy participation: PBMs must allow any qualified pharmacy that meets plan terms and licensing requirements to join their networks and cannot impose stricter conditions than those required by the state Board of Pharmacy.
- Rebates: PBMs must pass through 100 percent of manufacturer rebates to health plans or employers to help reduce premiums.
- Cost-sharing: PBMs must include all amounts paid by or on behalf of a consumer when calculating cost-sharing totals, though only direct payments by the consumer count toward deductibles unless otherwise allowed by plan documents.
- NADAC reimbursement and dispensing fees: PBMs must reimburse retail pharmacies at or above the federal NADAC rate and pay a dispensing fee of $10.68 per claim.
- Pass-through pricing: PBMs must use a “pass-through” model in which the amount paid by a health plan equals the amount paid to the dispensing pharmacy, including dispensing fees.
- Appeals: PBMs must provide clear processes for pharmacies to appeal reimbursement disputes and adjust rates statewide if an appeal shows the reimbursement rate was too low.
The Division also said all contracts between PBMs and third-party payers applying to prescription drug benefits on or after Jan. 1, 2026, must comply with SF 383’s requirements. It added that good-faith implementation efforts would be considered in any future enforcement actions.
“Violations of SF 383 would also constitute violations of the Iowa Insurance Trade Practices Act,” the bulletin states. “The Division takes these possible violations seriously and will continue to investigate and take enforcement actions where necessary to protect Iowa consumers.”
Wellmark’s lawsuit
In its 51-page complaint, Wellmark contends the Insurance Division overstepped by ordering enforcement of SF 383 “in its entirety” against insurers and PBMs not covered by the ABI injunction. The division’s bulletin and subsequent correspondence warned that companies failing to comply could face penalties under the state’s insurance trade practices law.
Wellmark argues those enforcement efforts conflict with the federal court’s findings that key provisions of SF 383 are illegal and preempted by federal law. The company says compliance would force it to choose between violating federal protections under ERISA or facing state enforcement actions.
“Defendant’s increasing efforts to enforce SF 383 in its entirety with respect to non-parties to ABI creates difficult, unworkable, and ultimately untenable conditions for Wellmark and non-parties to ABI.” the complaint states, warning that the law could increase costs by nearly $100 million annually for Wellmark-administered plans and add roughly $40 million in out-of-pocket expenses for members through increased coinsurance, co-payments, and deductibles not covered by their plans and policies.
Wellmark’s suit seeks a declaratory judgment and injunction preventing the Iowa Insurance Division from enforcing the disputed portions of SF 383 until the Eighth Circuit Court of Appeals rules on the ABI case.
Statement from Wellmark
“To protect health care affordability for our members, Wellmark has filed suit against the Iowa Insurance Division to clarify that Wellmark may legally pause implementation of certain SF 383 provisions until an appeals court issues a final ruling,” the company said in a statement. “This lawsuit is intended to bring clarity to our fully insured and self-funded group customers as well as more than one million Iowans who stand to pay substantially more for their prescription medications solely because of the passage of SF 383 by the Iowa Legislature. … Wellmark remains committed to supporting its members and employer customers in managing health care costs, including at the pharmacy. Wellmark continues to advocate for PBM reform that balances access, fairness and financial responsibility.”
Next steps
The case — Wellmark, Inc. et al. v. Ommen — was filed Tuesday in Des Moines. The company said it plans to seek relief similar to the injunction already granted in the ABI case, which remains on appeal. The Iowa Attorney General’s Office has previously defended SF 383 as constitutional and vowed to continue defending the law in court.
The Attorney General’s Office did not immediately respond to a request for comment Tuesday evening.
“We are aware of Wellmark’s filing and are reviewing it. We have no additional comment at this time," Iowa Insurance Division spokesman Craig Robinson told The Gazette.
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Gazette Des Moines Bureau Chief Erin Murphy contributed to this report.
Comments: (319) 398-8499; tom.barton@thegazette.com
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