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HF 2401 – Regulation of Pharmacy Benefits Managers (LSB5093HV)
Staff Contact: Xavier Leonard (515.725.0509) xavier.leonard@legis.iowa.gov
Fiscal Note Version – New
Description
House File 2401 relates to pharmacy benefits managers (PBMs), pharmacies, and prescription
drug pricing; provides applicability provisions; and provides protections for pharmacies and
pharmacists, contract requirements for prescription drug pricing, and requirements for the
appeal and dispute process between PBMs and pharmacies.
The Bill applies to PBMs who manage a prescription drug benefit in the State on or after July 1,
2024.
Background
Iowa Code chapter 510B defines “pharmacy benefits manager” as a person who, pursuant to a
contract or other relationship with a third-party payor, either directly or through an intermediary,
manages a prescription drug benefit provided by the third-party payor.
As defined in Iowa Code chapter 510B, “third-party payor” means any entity other than a
covered person or a health care provider that is responsible for any amount of reimbursement
for a prescription drug benefit. “Third-party payor” includes health carriers and other entities
that provide a plan of health insurance or health care benefits. Exceptions to the definition can
be found in Iowa Code section 510B.1(22).
A maximum allowable cost (MAC) list is a list of prescription drugs that includes the MAC for
each prescription drug and that is used by a PBM. The MAC is the maximum amount for which
a pharmacy will be reimbursed by a PBM or health carrier for a drug and may be measured via
multiple methods, including but not limited to average acquisition cost, national average
acquisition cost, average manufacturer price, average wholesale price, and wholesale
acquisition cost.
House File 2401 is estimated to impact approximately 25.2% of the State’s population (807,000
persons). This includes individual coverage, fully insured small and large employer groups,
self-insured public employees, and the State of Iowa Plan.
Of the individuals not covered by the mandate, approximately 47.9% are covered by
government-sponsored health insurance, 23.0% are covered by employer coverage that is
governed by the federal Employee Retirement Income Security Act of 1974 (ERISA), and the
remaining 3.9% are uninsured. Additional details are presented in Figure 1.
Fiscal Note
Fiscal Services Division 2
Figure 1 — Population Covered by Insurance Plans Regulated by Iowa Law
Assumptions
• Neither the spread pricing nor the pass-through pricing, as required by the Bill, will represent
a meaningful change from current practices for the State’s health plans.
• The MAC requirements in the Bill may, in some cases, increase the amount reimbursed per
unit for filling prescriptions.
• State of Iowa Plan and the Board of Regents Insurance Plans prescription drug spending
may increase between 0.2% and 2.0% as a result of the MAC requirements.
• Potential offsetting pricing changes by PBMs may decrease the overall effect of increased
prescription drug spending, making the lower end of the above range more likely.
Fiscal Impact
House File 2401 is estimated to increase annual cost to the State of Iowa Insurance Plan by
between approximately $223,000 and $2.2 million and the Board of Regents Insurance Plans
between $283,000 and $2.8 million, as shown in Figure 2, beginning in FY 2025.
It is estimated that the lower end of this range is more likely to occur, since offsetting price
changes by PBMs, as a result of pharmacy reimbursement rates changing, will decrease the
overall effect of MAC requirements in the Bill.
Type of Coverage
Iowa
Population
Percent of
Population
Total Population 2022 3,200,517 100.0%
Included in Mandate
Individual Coverage 102,399 3.2%
Fully Insured Small Employer Group 140,349 4.4%
Fully Insured Large Employer Group 294,013 9.2%
Self-Insured Public Employees 215,000 6.7%
State of Iowa Plan 55,000 1.7%
Total 806,761 25.2%
Not Included in Mandate
Employer (self-insured + other types not listed)736,868 23.0%
Uninsured 126,000 3.9%
Other Public (Military, Tricare, Veterans Affairs)21,600 0.7%
Medicare 658,382 20.6%
Medicaid + Children’s Health Insurance Plan850,906 26.6%
Total 2,393,756 74.8%
Source: Iow a Insurance Division, Department of Insurance and Financial Services, and Wellmark 3
Figure 2 — Annual Fiscal Impact Summary
Sources
Iowa Insurance Division, Department of Insurance and Financial Services
Board of Regents
Wellmark
Legislative Services Agency
/s/ Jennifer Acton
March 8, 2024
Doc ID 1446654
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov Pharmacy Spend
Low Estimate of
Increased
Pharmacy Costs
High Estimate of
Increased
Pharmacy Costs
State University of Iowa 106,100,000$ 212,000$ 2,123,000$
Iowa State University 29,200,000 58,000 585,000
University of Northern Iowa 6,400,000 13,000 128,000
University Total 141,700,000$ 283,000$ 2,836,000$
State of Iowa 111,700,000 223,000 2,233,000
Total 253,400,000$ 506,000$ 5,069,000$
Amounts may not total due to rounding.