799 F.Supp.3d 795
S.D. Iowa2025Background
- Iowa enacted SF 383 to regulate PBMs and related pharmacy practices, imposing network-access rules, reimbursement floors (NADAC/WAC), a $10.68 dispensing fee, pass-through rebate requirements, reporting/notice duties, limits on PBM accreditation, and restrictions on communications about preferred pharmacies.
- Plaintiffs are ERISA plan sponsors and plans (IABI, Iowa Bankers Benefit Plan, Laborers Fund, and two employers) who use PBMs and allege SF 383 forces plan design and administration changes, imposes large immediate costs, and will eliminate certain cost-saving patient programs.
- The State defends SF 383 as consumer-protection and anti-self-dealing legislation aimed at preserving rural pharmacy access and preventing PBM favoritism toward affiliated pharmacies.
- Plaintiffs sued pre-effectiveness (filed June 23, 2025); a TRO enjoined enforcement against named plaintiffs pending a preliminary-injunction hearing; plaintiffs seek an as-applied injunction for ERISA plans and their administrators (including their PBMs).
- The court evaluated Article III standing, ERISA preemption (express preemption and related doctrines such as the savings/deemer clauses), and First Amendment commercial-speech claims, applying Eighth Circuit and Supreme Court precedent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge PBM-directed provisions | Plans suffer concrete injury because PBM regulation raises costs and contractual indemnities make plans liable | Plaintiffs lack standing because they are not PBMs and are not direct targets | Court: Plaintiffs have Article III standing to bring ERISA preemption claims (plans are functionally dependent on PBMs); limited First Amendment standing only where provisions directly regulate plans |
| ERISA preemption — anti-discrimination / any-willing-provider / specialty-drug open-access | These provisions dictate network composition and eliminate fiduciary discretion in benefit design, thus conflict with ERISA | State: provisions regulate PBMs and protect consumers, not plan design | Court: Preempted — anti-discrimination, any-willing-provider, and specialty-open-access intrude on central plan-administration matters |
| Cost-sharing & mail-order parity (including $10.68 dispensing fee) | These provisions eliminate core plan cost-design tools and coercively dictate plan choices | State: these are permissible cost/regulatory measures like those upheld in Rutledge | Court: Parity and cost-sharing mandates preempted; dispensing fee found inseverable with some preempted provisions and enjoined as inseverable; some pure cost regulations (e.g., NADAC reimbursement) survive |
| Pass-through rebates and mandatory contract terms (and supersession clause) | Contract-term mandates and mandatory pass-through specifications unlawfully restrict fiduciary contracting and plan-admin choices | State: pass-through is transparency/cost regulation; contractual prescriptions are within state authority to regulate commercial arrangements | Court: Pass-through rebate requirement (general transparency) survives as permissible cost regulation; mandatory contractual-term provision and its supersession clause are preempted because they directly govern plan–PBM contracts |
| First Amendment — anti-referral and notice/compelled-disclosure provisions | Provisions suppress or compel truthful commercial speech (fiduciaries’ ability to inform participants), failing Central Hudson/Zauderer | State: speech regulation is justified to prevent steering and protect rural pharmacies; notice is purely factual disclosure | Court: Anti-referral and broad compelled-notice provisions violate commercial-speech protections (fail intermediate scrutiny / Zauderer inapplicable) and are enjoined as applied to ERISA plans |
| Scope of relief / nonparty contractors after Trump v. CASA | Plaintiffs need injunction extended to PBMs/contractors to obtain effective relief; universal injunction disallowed | State warns against overbroad nonparty relief | Court: Under CASA principles, court limited relief to plaintiffs but extended the preliminary injunction to plaintiffs’ contractors/agents (e.g., their PBMs) as necessary to give complete, practical relief to each plaintiff |
Key Cases Cited
- Winter v. Nat’l Res. Def. Council, Inc., 555 U.S. 7 (standards for preliminary injunction)
- Pharm. Care Mgmt. Ass’n v. Wehbi, 18 F.4th 956 (8th Cir.) (regulation of PBMs can function as regulation of ERISA plans)
- Pharm. Care Mgmt. Ass’n v. Rutledge, 592 U.S. 80 (Supreme Court) (upholding certain PBM reimbursement cost regulations against preemption)
- Pharm. Care Mgmt. Ass’n v. Mulready, 78 F.4th 1183 (10th Cir.) (any-willing-provider rules and network mandates preempt ERISA)
- Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (state reporting requirements that target ERISA plans are preempted)
- Aetna Health Inc. v. Davila, 542 U.S. 200 (ERISA’s civil-enforcement scheme is exclusive)
- Central Hudson Gas & Elec. v. Pub. Serv. Comm’n, 447 U.S. 557 (commercial-speech intermediate-scrutiny test)
- Zauderer v. Off. of Disciplinary Counsel, 471 U.S. 626 (compelled commercial disclosures doctrine)
- Ex parte Young, 209 U.S. 123 (equitable relief against state officers for federal-law violations)
- Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (ERISA preemption ‘connection with’ test)
- N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (state regulation that increases costs does not automatically trigger preemption)
- Pharm. Care Mgmt. Ass’n v. Rowe, 429 F.3d 294 (1st Cir.) (distinguishing permissible PBM disclosure duties from preempted plan-directed duties)