Iowa Association of Business and Industry v. Iowa Insurance CommissionerIowa Association of Business and Industry v. Iowa Insurance Commissioner
This case presents fundamental questions about the boundaries of federal preemption amid growing state efforts to address rising healthcare costs and preserve healthcare access through legislation. Plaintiffs—a coalition of Iowa employers and employee benefit plans governed by ERISA—challenge Iowa Senate File 383 (“SF 383“), a comprehensive statute that regulates pharmacy benefit managers (“PBMs“) while simultaneously constraining health plan operations. The dispute highlights the practical reality that modern prescription drug benefits require PBM intermediary services. This creates functional interdependence between state-regulated entities and federally-governed employee benefit plans.
Iowa1 defends SF 383 as necessary consumer protection legislation designed to preserve rural pharmacy access and prevent anticompetitive practices, while Plaintiffs contend the statute
exceeds state authority by dictating central aspects of plan design and administration that Congress reserved to exclusive federal oversight under ERISA. The legal issues encompass both ERISA‘s express preemption doctrine and First Amendment protections for commercial speech. The Court must determine whether state regulation of PBM conduct impermissibly interferes with the structure and administration of employee benefit plans, and whether statutory restrictions on truthful communications between PBMs, plans, and participants violate constitutional protections for commercial speech.
I. BACKGROUND
A. The Iowa Regulatory Framework
1. The Prescription Drug Benefit Industry
PBMs serve as intermediaries in the prescription drug market, operating between pharmaceutical manufacturers, retail pharmacies, health insurers, and employer-sponsored health plans. These entities perform critical functions including negotiating manufacturer discounts and rebates, creating preferred pharmacy networks, managing drug formularies, and administering prescription benefits for health plans. The industry has consolidated significantly over recent decades: three major PBMs now control approximately 80% of the national market and serve roughly 270 million Americans.
Modern ERISA plans have become functionally dependent on PBM services to administer prescription drug benefits. As the United States Court of Appeals for the Eighth Circuit has explained, PBMs “manage benefits on behalf of plans” and serve as agents “who undertake and perform
PBMs generate revenue through various mechanisms, including “spread pricing“—retaining the difference between what health plans pay them and what they reimburse pharmacies—and keeping portions of manufacturer rebates. The parties offer sharply different characterizations of these practices and their effects on healthcare markets.
2. SF 383‘s Regulatory Structure
SF 383 substantially restructures Iowa‘s regulation of PBMs while extending new restrictions to health benefit plans, health carriers, and third-party payors. The statute operates through four principal mechanisms that collectively govern both PBM conduct and health plan operations.
First, the law establishes comprehensive network and provider access requirements. It prohibits discrimination against pharmacies by PBMs, health carriers, health benefit plans, and third-party payors, requiring identical treatment regarding “participation, referral, reimbursement of a covered service, or indemnification.”
Second, SF 383 establishes mandatory reimbursement standards. PBMs must reimburse retail pharmacies at no less than the published national average drug acquisition cost and must pay a minimum dispensing fee of $10.68 per prescription.
Third, the statute imposes extensive transparency and contractual requirements. It mandates “pass-through pricing” under which PBMs must transfer 100% of manufacturer rebates
to health plans.
Fourth, SF 383 restricts communications between plans and their participants. It prohibits PBMs from “promotion of one participating pharmacy over another” and bars disclosure “comparing the reimbursement rates” between pharmacies and mail-order options that might “affect a covered person‘s choice” of pharmacy provider.
3. Plaintiffs and Their ERISA Plans
Plaintiffs in this action represent a diverse coalition of Iowa business interests united by their common reliance on employer-sponsored health benefit plans governed by ERISA. Plaintiff Iowa Association of Business and Industry (“IABI“) serves as an advocacy organization for more than 600 member businesses that collectively employ over 300,000 individuals. [ECF No. 1 ¶ 8]. These members, nearly universally, sponsor ERISA-covered health benefit plans for their employees—both self-funded and fully insured arrangements—and many contract with PBMs to assist in plan administration. Id. IABI actively opposed SF 383 during the legislative process and brings this challenge
Plaintiff Iowa Bankers Benefit Plan operates as a tax-exempt Voluntary Employee Beneficiary Association under
covering approximately 150 and 175 employees respectively, along with their dependents. Id. ¶¶ 11, 12. Together, these Plaintiffs cover tens of thousands of Iowans and possess both the requisite standing and the practical expertise necessary to challenge SF 383‘s intеrference with established methods of healthcare plan administration.
4. Plaintiffs’ Challenge and Projected Impact
Plaintiffs contest both the law‘s characterization and its projected effects as articulated by Defendant. Acknowledging that SF 383 is nominally directed at regulating PBMs, they contend the statute actually governs employer-sponsored health plans—a domain they argue falls exclusively within federal jurisdiction under ERISA. Plaintiffs project substantial compliance costs, supported by detailed actuarial analysis and concrete declarations from affected entities.
Bradley W. Bartle, Chief Actuary and Vice President for Wellmark Inc., provides comprehensive actuarial analysis based on 2024 pharmacy claims data from approximately 800,000 covered lives in Iowa. [ECF No. 6-1 ¶¶ 10, 12] (Bartle Decl.). Bartle‘s analysis estimates that SF 383 will impose substantial financial burdens through multiple mechanisms. The mandatory dispensing fee alone will increase benefit plan costs between $17.9 million and $20.1 million annually, resulting in an average per-enrollee cost increase of $22.08 to $25.02. Id. ¶ 16. The prohibition on copay accumulator and maximizer programs represents an even more significant cost driver, with estimated increases of $39.5 million to $50.7 million annually for benefit plans, translating to $49.18 to $63.12 per enrollee annually. Id. ¶ 18.
Bartle‘s analysis concludes that SF 383 will increase total costs for Wellmark-administered benefit plans by as much as $96.8 million annually, with an average per-enrollee increase of up to $120.51, while separately imposing up to $38.7 million in additional annual costs directly on covered persons, averaging up to an additional $48.18 per enrollee. Id. ¶ 22.
Kirk Veenstra, Senior Benefits Manager at Pella Corporation, provides a concrete illustration of SF 383‘s impact on individual employers. [ECF No. 6-2] (Veenstra Decl.). Pella Corporation, which spent $63.4 million on its health plan in 2024 covering approximately 14,837 lives, estimates that SF 383 will add at least $1.2 million annually to plan costs. Id. ¶¶ 17, 19, 30. This reflects the statute‘s interference with fundamental plan design elements, including the inability to favor in-network pharmacies and mandatory $10.68 dispensing fees. Id. ¶ 31.
Particularly significant is SF 383‘s elimination of beneficial programs that provide direct cost savings to plan participants. Paul Karow, Vice President and Chief Pharmacy Officer at Wellmark, details how the statute will terminate the PrudentRx
Plaintiffs further argue that SF 383‘s primary beneficiary will be Hy-Vee, a large retail pharmacy chain, rather than the rural independent pharmacies Iowa seeks to protect. They contend the statute will eliminate beneficial programs that provide cost savings to plan participants, including specialty drug programs that waive copayments for patients with serious medical conditions.
5. The State‘s Justification and Supporting Evidence
SF 383 represents a necessary response to anticompetitive practices in the PBM industry under Defendant‘s chаracterization. According to the state, PBMs have exploited their market
dominance to impose below-cost reimbursement rates on independent pharmacies while favoring their own affiliated entities through preferential pricing and network placement. Iowa contends these practices constitute harmful self-dealing that has contributed to widespread pharmacy closures, with 34 rural pharmacies closing in Iowa in 2024 alone and over 150 closures in the past decade. The state argues that such closures create “pharmacy deserts” that compromise patient access to healthcare, particularly in rural communities where the local pharmacy may be the only readily accessible healthcare provider. Iowa frames SF 383 as a consumer protection measure designed to ensure fair reimbursement to pharmacies, increase transparency in PBM operations, and preserve healthcare access for Iowa residents.
In support of its position, Iowa presents the declaration of Aaron Wiese, President of Hy-Vee, Inc., who provides a comprehensive perspective from an entity that operates simultaneously as a retail pharmacy, an ERISA plan sponsor, and owner of a transparent PBM. See [ECF No. 24-2] (Wiese Decl.). Wiese details how Hy-Vee operates 270 pharmacies, including 132 in Iowa, and has experienced firsthand the effects of what he characterizes as “increasingly aggressive and opaque PBM practices: unsustainable reimbursement rates, hidden fees, and patient steering to PBM-owned mail-order pharmacies.” Id. ¶ 9. He reports that these practices have forced Hy-Vee to close 25 pharmacies since 2019, demonstrating that even large retail chains with diversified revenue streams are not immune to PBM-related pressures. Id. ¶ 20.
Wiese provides concrete evidence of below-cost reimbursement, stating that since January 1, 2025, of 500 prescriptions filled, Hy-Vee‘s pharmacies have dispensed 115 different drugs for which the reimbursement rate was less than national average drug acquisition cost. Id. ¶ 18. He characterizes PBM practices as exploiting market concentration, noting that the three largest PBMs control over 80% of the market and process prescription claims for approximately 180 million Americans. Id. ¶¶ 11, 25.
From his perspective as an ERISA plan sponsor covering more than 15,759 members, Wiese argues that PBM practices actually increase rather than decrease costs for employers and plan participants.
Particularly significant is Wiese‘s description of Hy-Vee‘s operation of Vivid Clear Rx, a transparent PBM founded on principles of accountability and pass-through pricing. Id. ¶ 35. He provides specific examples of cost savings achieved through transparent praсtices: one employer covering 250 individuals saved approximately $35,000 per month on a specialty cancer medication compared to pricing from a large traditional PBM, while another plan sponsor covering 150 individuals would have received $110,000 in annual rebates compared to only $35,000 under traditional PBM arrangements. Id. ¶¶ 41–42. Wiese argues that these examples demonstrate that substantial cost reductions are achievable when PBMs operate transparently, but that traditional PBMs use their market power to undercut competitive threats through various exclusionary practices. Id. ¶ 43.
In further support of its defense, Iowa presents the declaration of Charles S. Hartig, Owner and Chief Executive Officer of Hartig Drug Company, who provides additional testimony regarding the effects of PBM practices on Iowa‘s pharmacy landscape. [ECF No. 24-5] (Hartig Decl.). Hartig brings unique expertise to these proceedings, having served as both a licensed pharmacist for 16 years and a licensed attorney in Iowa for 13 years, with previous employment at Express Scripts as a pharmacist and at CVS Health as Senior Legal Counsel specializing in pharmacy compliance and regulatory matters. Id. ¶¶ 4–5.
Hartig provides concrete financial data demonstrating the unsustainable nature of current PBM reimbursement practices. Over the five calendar quarters from January 1, 2024 to March 31, 2025, Hartig Drug Company averaged less than $5.75 in gross margin per commercially insured prescription, with brand drug medications generating an average gross margin loss of $26.37 per prescription. Id. ¶ 9(a). He contrasts these figures with state and national estimates that the average cost to dispense medication ranges from $10 to $15 per prescription, demonstrating that current PBM reimbursement rates fall far below the actual costs of pharmacy operations. Id. ¶ 9(b).
The scope of below-cost reimbursement practices receives detailed documentation in Hartig‘s declaration, which reports that PBMs underpaid his company, making payments below the cost to acquire drug products on just under 10,000 prescription drug claims in the first quarter of 2025 alone. Id. ¶ 9(c). He describes additional PBM tactics including unilateral “discount card” arrangements that reduce contractual reimbursement while adding administrative fees averaging $5.00 or more. Id. ¶ 10.
Specific examples of PBM practices that prioritize profit over patient care emerge from Hartig‘s declaration, including the forced transfer of a patient receiving PrEP (HIV prevention) medication from his pharmacy to CVS Health‘s mail-order pharmacy within three months of initiating treatment at Hartig Drug, noting that ‘as a specialty medication, PrEP is profitable’ and the patient was subsequently unable to continue receiving the medication from his local pharmacy. Id. ¶ 12. He also documents how PBMs regularly “claw back” patient payments, citing one day in June 2025 when over 230 prescription drug
Hartig provides practical evidence of SF 383‘s projected benefits, stating that financial modeling of the new reimbursement methodology shows an increase of less than one-half of a
percent to net profit as a percentage of sales, characterizing this not as a “financial windfall” but as ensuring “a fair operating margin to ensure its personnel and fixed costs can be paid.” Id. ¶¶ 21–22. He warns that absent SF 383‘s protections, Hartig Drug Company, which already closed two of its fifteen Iowa pharmacies in 2024, expects to close additional locations, further contributing to the pharmacy access crisis in Iowa. Id. ¶ 23.
B. Procedural Background
Iowa Governor Kim Reynolds signed SF 383 into law on June 11, 2025, with an effective date of July 1, 2025. Plaintiffs filed suit on June 23, 2025, eight days before the statute‘s effective date, seeking declaratory and injunctive relief. On June 26, 2025, Plaintiffs moved for a temporary restraining order. After determining that the Commissioner opposed voluntary delay of enforcement, United States District Judge Rebecca Goodgame Ebinger granted ex parte emergency relief on June 30, 2025, enjoining enforcement of SF 383 against the named Plaintiffs pending a preliminary injunction hearing. [ECF No. 17].
The temporary restraining order reflected Judge Ebinger‘s preliminary determination that certain provisions of SF 383 likely violate ERISA‘s preemption doctrine by impermissibly interfering with central matters of plan administration, and that restrictions on truthful commercial speech likely violate the First Amendment under intermediate scrutiny analysis. She further concluded that Plaintiffs faced irreparable harm both from unrecoverable compliance costs and from interference with their ability to structure benefit plans and fulfill fiduciary obligations to plan participants.
Plaintiffs now seek a preliminary injunction against enforcement of the entire statute, arguing that individual provisions are either independently invalid or inseverable from the statutory scheme as a whole. The fundamental disagreement between the parties centers on SF 383‘s true regulatory target: Iowa maintains the law primarily regulates PBMs as intermediaries
in pharmaceutical markets, while Plaintiffs contend it actually governs the structure and administration of employer-sponsored health plans in ways that intrude upon exclusively federal regulatory authority.
II. DISCUSSION
A. Framework for Preliminary Injunctive Relief
Preliminary injunctive relief is an extraordinary remedy, not issued routinely or “as a matter of right.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008) (quoting Munaf v. Green, 553 U.S. 674, 689–90 (2008)). The primary purpose of a preliminary injunction is to preserve the status quo and prevent irreparable harm until the Court can render a final decision on the merits. Cigna Corp. v. Bricker, 103 F.4th 1336, 1342 (8th Cir. 2024). A plaintiff seeking this extraordinary relief bears the burden of demonstrating that such intervention is warranted. H&R Block, Inc. v. Block, Inc., 58 F.4th 939, 946 (8th Cir. 2023).
Courts consider four factors when determining whether to issue a preliminary injunction: (1) the plaintiff‘s likelihood of success on the merits; (2) the threat of irreparable harm to the plaintiff absent
Although all factors must be considered, the Eighth Circuit has determined that the likelihood of success on the merits is the “most significant” factor. Sleep Number Corp. v. Young, 33 F.4th 1012, 1016 (8th Cir. 2022). When a party seeks to enjoin the enforcement of a duly enacted statute or regulation, a heightened standard applies, requiring the moving party to show they are “likely to prevail on the merits” of their claims. Firearms Regulatory Accountability Coalition, Inc. v. Garland, 112 F.4th 507, 517 (8th Cir. 2024) (quoting Planned Parenthood Minn., N.D., S.D. v. Rounds, 530 F.3d 724, 732 (8th Cir. 2008) (en banc)). This heightened standard applies because government action undertaken through “presumptively reasoned democratic
processes” is entitled to substantial deference and “should not be enjoined lightly.” D.M. by Bao Xiong v. Minn. State High Sch. League, 917 F.3d 994, 1000 (8th Cir. 2019) (cleaned up). The Eighth Circuit hаs clarified that this “more-likely-than-not standard” applies when “a preliminary injunction is sought to enjoin the implementation of a duly enacted state statute.” Rounds, 530 F.3d at 732.
With respect to irreparable harm, a plaintiff need not establish with absolute certainty that such harm will occur but must demonstrate that “irreparable injury is likely in absence of an injunction.” Winter, 555 U.S. at 22. Failure to show irreparable harm constitutes an “independently sufficient basis upon which to deny a preliminary injunction.” Sessler v. City of Davenport, 990 F.3d 1150, 1156 (8th Cir. 2021).
In balancing the equities, the Court weighs “the threat of irreparable harm shown by the movant against the injury that granting the injunction will inflict on [the] other part[y] litigant[s].” MPAY Inc. v. Erie Custom Comp. Applications, Inc., 970 F.3d 1010, 1020 (8th Cir. 2020) (cleaned up).
B. Preliminary Injunction Analysis
The preliminary injunction analysis requires examining several interconnected factors to determine whether Plaintiffs may obtain relief against SF 383‘s enforcement. Standing doctrine requires an initial determination of whether each Plaintiff faces concrete injury sufficient to invoke federal jurisdiction. This inquiry proves particularly important here because many challenged provisions regulate PBMs rather than Plaintiffs directly. The Court must also examine whether established causes of action support Plaintiffs’ claims for prospective relief under federal preemption and constitutional principles.
On the likelihood of success on the merits factor, the fundamental question is whether Iowa‘s regulation of PBMs crosses constitutional boundaries by intruding upon areas of exclusive
federal authority under ERISA or by restricting protected commercial speech. The heightened standard applicable to challenges against duly enacted legislation demands that Plaintiffs demonstrate not merely possible success, but likelihood of prevailing on claims that would invalidate the democratic will expressed through Iowa‘s legislative process. Each element of the preliminary injunction framework must be satisfied before the Court may grant the extraordinary remedy of enjoining state law enforcement. Should Plaintiffs prevail on the merits, the Court must further determine whether unconstitutional or preempted provisions may be severed from SF 383‘s broader
1. Threshold Issues
a. Article III Standing Requirements
Federal courts possess only limited jurisdiction, and they must therefore determine as a threshold matter whether a plaintiff has Article III standing to bring suit. Murthy v. Missouri, 603 U.S. 43, 56 (2024); see also Ariz. Christian Sch. Tuition Org. v. Winn, 563 U.S. 125, 133 (2011) (stating “a case or controversy under Article III” requires that “a plaintiff must establish standing“). Standing doctrine serves the essential constitutional function of ensuring that federal courts adjudicate only genuine cases and controversies, rather than abstract policy disputes or generalized grievances. See FDA v. All. for Hippocratic Medicine, 602 U.S. 367, 379 (2024) (explaining that federal courts do not “operate as an open forum for citizens ‘to press general complaints about the way in which the government goes about its business‘“) (quoting Allen v. Wright, 468 U.S. 737, 760 (1984)). To establish standing, a plaintiff must demonstrate injury in fact, causation, and redressability. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). The injury-in-fact requirement demands that plaintiffs have “suffered ‘an invasion of a legally
protected interest’ that is both ‘concrete and particularized’ and ‘actual or imminent.‘” Spokeo, Inc. v. Robins, 578 U.S. 330, 339 (2016) (quoting Lujan, 504 U.S. at 560).
Where plaintiffs challenge a statute‘s validity, they may satisfy the injury requirement by demonstrating either present harm from the law‘s operation or by pleading “facts that affirmаtively and plausibly suggest that they are indeed subject to a credible threat of prosecution under the statute for engaging in the conduct for which they invoke constitutional protection.” Zanders v. Swanson, 573 F.3d 591, 594 (8th Cir. 2009) (citation omitted); see also Susan B. Anthony List v. Driehaus, 573 U.S. 149, 159 (2014). Organizations “can assert the standing of their members.” Summers v. Earth Island Inst., 555 U.S. 488, 494 (2009). To invoke representational standing, an organization must establish that its members possess individual standing to sue, that the interests at stake relate to the organization‘s purposes, and that neither the claims nor the requested relief requires individual member participation in the litigation. Students for Fair Admissions, Inc. v. President & Fellows of Harvard Coll., 600 U.S. 181, 199 (2023) (citing Hunt v. Wash. State Apple Advertising Comm‘n, 432 U.S. 333, 343 (1977)).
Plaintiffs have Article III standing to challenge SF 383‘s provisions, including many of those primarily directed at PBMs. This conclusion rests on well-established precedent recognizing the functional interdependence between ERISA plans and the intermediaries essential to their operation.
Plaintiffs indisputably have standing to challenge SF 383‘s provisions that directly regulate health benefit plans and third-party payors. Multiple sections of SF 383 explicitly impose obligations on “health benefit plans,” “third-party payors,” and “health carriers,” creating immediate regulatory burdens for entities like Plaintiffs.
More challenging is the question whether Plaintiffs may challenge SF 383‘s provisions directed primarily at PBMs. For Plaintiffs’ preemption arguments, Wehbi provides dispositive guidance. In that case, the United States Court of Appeals for the Eighth Circuit held that “a regulation of PBMs ‘function[s] as a regulation of an ERISA plan itself.‘” Id. at 966. This principle reflects the practical reality that modern ERISA plans have become “functionally dependent on PBM services to administer prescription drug benefits,” making it “practical[ly] impossib[le]” for plans to “manage [their] own pharmacy benefits and avoid using a PBM.” Pharm. Care Mgmt. Ass‘n v. Mulready, 78 F.4th 1183, 1195 (10th Cir. 2023). The ERISA preemption analysis further clarifies this issue because the pertinent question is whether the state law has an impermissible “connection with” or “reference to” ERISA plans, not whether it is directed at them. Wehbi, 18 F.4th at 967.
The Supreme Court‘s standing doctrine does not require that plaintiffs be the direct target of regulation when they suffer concrete injury from regulatory compliance. Here, Plaintiffs have demonstrated substantial financial harm flowing from SF 383‘s PBM provisions. The actuarial analysis projects compliance costs exceeding $120 per enrollee annually, with mandatory dispensing fees alone adding $17.9 to $20.1 million in annual costs. [ECF No. 6-1 ¶¶ 16–19] (Bartle Decl.). These are not speculative future harms but immediate consequences of regulatory implementation.
Plaintiffs’ standing is further reinforced by standard indemnification provisions in their PBM contracts. Such clauses create direct financial exposure for ERISA plans when their service providers face regulatory penalties, as the Second Circuit has recognized. The ERISA plan sponsor in that case had standing because it would “indemnif[y] [the third-party administrator] for the ensuing civil penalties.” Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497, 502 (2d Cir. 2014), aff‘d sub nom. Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016). Similarly here, Plaintiffs’
agreements require them to hold their PBMs harmless for regulatory compliance costs, converting indirect regulatory burdens into direct financial obligations.
ERISA plan sponsors possess standing to challenge state laws regulating their service providers, as established precedent demonstrates. In a previous case, the United States Court of Appeals for the Eighth Cirсuit allowed Tyson Foods to challenge an any-willing-provider law applicable only to insurance companies because Tyson maintained agreements with those companies for network access and administrative services. See Prudential Ins. Co. of Am. v. Nat‘l Park Med. Ctr., 413 F.3d 897, 901 (8th Cir. 2005). The functional relationship between plan sponsors and their intermediaries created sufficient injury for standing purposes.
The Commissioner‘s argument that Plaintiffs lack standing because they “are not PBMs” misapprehends both standing doctrine and ERISA‘s structure. Standing requires injury-in-fact, not identity with the regulated entity. When regulatory burdens imposed on essential service providers create concrete financial harm for plan sponsors—whether through increased costs, compliance obligations, or contractual indemnification—Article III‘s requirements are satisfied. Under ERISA
Different considerations govern Plaintiffs’ First Amendment challenges. Regulations restricting only PBMs’ First Amendment rights do not create cognizable injury flowing to plan structure or plan sponsors in the manner that supports ERISA preemption claims. Plaintiffs must assert their own legal rights and interests rather than resting their claim to relief on the legal rights or interests of third parties. Warth v. Seldin, 422 U.S. 490, 499 (1975). Plaintiffs cannot demonstrate concrete injury from alleged violations of PBMs’ First Amendment rights. They
therefore lack Article III standing for their First Amendment challenge to
For Plaintiff IABI, organizational standing is established through its members’ individual standing. The Association represents over 600 businesses that collectively sponsor ERISA plans covering more than 300,000 individuals. The interests at stake—freedom from preempted state regulation and protection of fiduciary discretion—directly relate to the Association‘s purposes. Additionally, neither the claims nor requested relief requires individual member participation, satisfying the requirements for organizational standing. See Hunt, 432 U.S. at 343.
The Court therefore concludes that all Plaintiffs possess Article III standing to challenge SF 383‘s provisions as preempted under ERISA, both those directly applicable to health benefit plans and those primarily directed at PBMs. The modern structure of employee benefit administration creates a sufficient nexus between PBM regulation and plan sponsor injury to support federal jurisdiction over those claims. Plaintiffs likewise possess standing to challenge provisions that directly restrict their own First Amendment rights, though they cannot assert the constitutional rights of third-party PBMs.
b. Availability of Cause of Action
The parties present a fundamental dispute regarding Plaintiffs’ authority to invoke federal jurisdiction. Plaintiffs’ claims rest on SF 383‘s alleged violation of the Supremacy Clause through conflict with ERISA‘s preemptive scope, seeking equitable relief under Ex parte Young alongside constitutional remedies under
cognizable cause of action because the challenged provisions do not directly regulate them and they face no credible enforcement threat.
The constitutional architecture governing such disputes establishes clear but limited avenues for relief. The Supremacy Clause operates as a “rule of decision” directing courts to give no effect to state laws that conflict with federal laws, but it does not itself create federal rights or causes of action. Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320, 324 (2015). Rather than providing an enforcement mechanism, the Clause instructs
The Supreme Court acknowledged in Armstrong that “federal courts may in some circumstances grant injunctive relief against state officers who are violating, or planning to violate, federal law.” Id. at 326–27. When “an individual claims federal law immunizes him from state regulation, the court may issue an injunction upon finding the state regulatory actions preempted” through the federal judiciary‘s traditional equitable powers. Id. at 326 (citing Ex parte Young, 209 U.S. 123, 155–56 (1908)). This authority remains “subject to express and implied statutory limitations,” reflecting the principle that equity cannot “disregard statutory and constitutional requirements” any more than courts of law. Id. at 329.
Established precedent confirms that parties may seek prospective relief to prevent enforcement of preempted state law. When a plaintiff challenges state regulation as preempted by federal statute, such claims present federal questions within the jurisdiction of federal courts under
For constitutional violations, Section 1983 supplies an additional mechanism for relief against state officials acting under color of law. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983).
Applying these principles, Plaintiffs have demonstrated credible enforcement threats sufficient to invoke federal jurisdiction under these established legal frameworks.
c. Scope of Constitutional Challenge
Defendant characterizes Plaintiffs’ lawsuit as a facial challenge to SF 383, arguing this creates an “insurmountable burden” requiring Plaintiffs to demonstrate that “no set of circumstances” exists under which the law would be valid. [ECF No. 24-1 at 17]. Defendant contends that because SF 383 applies to both ERISA and non-ERISA plans, and ERISA governs only employee benefit plans subject to federal jurisdiction, ERISA cannot preempt SF 383‘s application to non-ERISA plans. Therefore, Defendant argues, the statute has valid applications that preclude facial relief as a matter of law.
Plaintiffs sharply contest this characterization, maintaining they have brought an as-applied challenge. They argue that certain SF 383 provisions are unlawful as applied to their ERISA plan circumstances, with the remainder invalid as to them due to inseverability. Plaintiffs emphasize that their complaint explicitly limits the challenge as “to Plaintiffs and particularly self-funded and insured ERISA plans only.” [ECF No. 39-1 at 3]. They note the linguistic disparity between the parties’ characterizations: while “facial” appears repeatedly in Defendant‘s brief, “Plaintiffs have never used it.” Id.
Plaintiffs’ position proves more persuasive for several reasons. First, the Complaint‘s language supports an as-applied interpretation. It alleges that SF 383‘s provisions are preempted and “null and vоid as applied to ERISA plans, their sponsors, their fiduciaries, their administrators, their PBMs, and their participants and beneficiaries.” [ECF No. 1 ¶ 63]. The Complaint further contends that “as applied to
through their PBMs,” SF 383 violates federal preemption principles.
Second, Plaintiffs’ briefing consistently frames their arguments in as-applied terms. Their preliminary injunction brief argues that “ERISA preempts some or all of [SF 383‘s provisions] as applied to self-funded ERISA plans” and similarly pursues preemption “as applied to insured ERISA plans.” [ECF No. 39-1 at 3–4]. This language demonstrates Plaintiffs’ focus on how SF 383 affects their particular circumstances rather than challenging the statute‘s validity in all possible applications.
Third, Plaintiffs’ opposition to Defendant‘s motion for a briefing schedule explicitly clarified their position: “Plaintiffs do not seek to enjoin the statute as to non-ERISA entities, but only as applied to ERISA plans and those administering them.” [ECF No. 9 at 2]. This statement directly refutes Defendant‘s facial challenge characterization and confirms Plaintiffs seek relief limited to their circumstances.
Fourth, the Supreme Court has cautioned that “the distinction between facial and as-applied challenges is not so well defined that it has some automatic effect or that it must always control the pleadings and disposition in every case.” Citizens United v. Fed. Election Comm‘n, 558 U.S. 310, 331 (2010). Although the distinction can be “instructive and necessary” in certain cases, it goes “to the breadth of the remedy employed by the Court, not what must be pleaded in a complaint.” Id.
Moreover, ERISA‘s own language supports as-applied relief. The statute preempts state laws only “insofar as they may now or hereafter relate to any employee benefit plan.”
intact. Indeed, virtually every state law held preempted under ERISA also covers non-ERISA plans. See, e.g., Nat‘l Park Med. Ctr., 413 F.3d at 913 n.10 (holding Arkansas law preempted as applied to ERISA, but not non-ERISA plans); Mulready, 78 F.4th at 1200-01 (limiting preemption of Oklahoma‘s law to ERISA plan applications).
Defendant‘s argument proves too much. If accepted, it would render as-applied ERISA preemption challenges virtually impossible whenever state laws apply broadly to both ERISA and non-ERISA entities—the common situation. This would undermine ERISA‘s preemptive scope and conflict with established precedent allowing targeted relief protecting ERISA plans while preserving state regulatory authority over non-ERISA entities.
The Court therefore concludes that Plaintiffs have brought an as-applied challenge to SF 383, seeking relief limited to its enforcement against their own ERISA plans and those who administer them. This characterization governs the analysis of their claims and the scope of any relief granted.
2. Federal Preemption Under ERISA
Congress enacted ERISA to protect the interests of participants in employee benefit plans and their beneficiaries by establishing substantive regulatory requirements for such plans and ensuring “appropriate remedies, sanctions, and ready access to the Federal courts.” Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting
ERISA broadly preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.”
A state law crosses the threshold for an impermissible “reference to” ERISA plans under one of two circumstances: the law must either “act immediately and exclusively upon ERISA plans,” or “the existence of ERISA plans is essential to the law‘s operation.” Rutledge, 592 U.S. at 88 (quoting Gobeille, 577 U.S. at 319-20). ERISA plans become essential to a statute‘s operation only where the law cannot reach non-ERISA plans. Id. at 88-89.
Not every state law that touches upon employee benefit plans triggers preemption. The fact that a state regulation “affects an ERISA plan or causes some disuniformity in plan administration” falls short of the requisite showing, particularly where the challenged law does no more than influence plan costs. Id. at 87.
Additionally, ERISA‘s express preemption provision contains important exceptions. The savings clause provides that preemption does not “exempt or relieve any person from any law of any State which regulates insurance.”
The Court now turns to the central question in this litigation: whether SF 383‘s comprehensive regulation of PBMs and related entities crosses the constitutional boundary into federal preemption under ERISA. This analysis requires careful application of the Supreme Court‘s guidance in Rutledge and the Eighth Circuit‘s decision in Wehbi to determine which state regulatory measures constitute permissible cost regulations and which impermissibly dictate the structure and administration of employee benefit plans. The parties’ fundamental disagreement extends beyond SF 383‘s characterization to encompass the proper scope of ERISA preemption in an industry where state-regulated intermediaries have become essential to federally-governed employee benefit plans.
Although Iowa correctly observes that not every state law affecting ERISA plans triggers preemption, the Court finds that several of SF 383‘s provisions cross the line from permissible cost regulation into impermissible structural mandates that govern central matters of plan administration. The analysis nevertheless reveals that certain provisions operate as traditional rate regulations that fall within the state‘s regulatory authority and do not bear the requisite connection with ERISA plans to warrant preemption. Plaintiffs challenge more than twenty distinct provisions within SF 383 on preemption grounds. The Court addresses each category of challenged provisions in turn, applying the established framework to distinguish between permissible state regulation and federal preemption. The analysis below is grouped according to the topic and substance of the particular provisions.
a. Anti-Discrimination and Network Access
The Court begins its ERISA preemption analysis with SF 383‘s most direct intrusions into plan design authority. SF 383‘s anti-discrimination and network access provisions directly regulate fundamental plan design decisions. The anti-discrimination provision prohibits discrimination against pharmacies in participation and reimbursement, while the any-willing-provider standards establish open-access requirements for specialty drugs. Plaintiffs argue these provisions impermissibly dictate plan structure by eliminating sponsors’ discretion to configure networks based on cost and quality considerations. Iowa characterizes the provisions as consumer protection measures that regulate PBM conduct without mandating specific plan benefits.
i. Anti-Discrimination Provision (Iowa Code § 510B.1(4) )
SF 383 establishes broad anti-discrimination requirements prohibiting PBMs, health carriers, health benefit plans, and third-party payors from discriminating against pharmacies or pharmacists “with respect to participation, referral, reimbursement of a covered service, or indemnification if a pharmacist is acting within the scope of the pharmacist‘s license, as permitted under state law, and the pharmacy is operating in compliance with all applicable laws and rules.”
This provision is preempted by ERISA because it impermissibly restricts ERISA plans and their sponsors from structuring benefit arrangements that favor particular providers based on legitimate considerations such as price, safety, or convenience. The Supreme Court‘s decision in Shaw establishes that ERISA preempts state anti-discrimination requirements that prohibit employers from structuring their employee benefit plans in certain ways. Shaw, 463 U.S. at 96-97. The Court recognized that
The anti-discrimination provision interferes with central matters of plan administration by restricting fiduciary decision-making regarding provider networks and participant guidance. Under ERISA, plan fiduciaries have the obligation to act “for the exclusive purpose” of “providing benefits to participants and their beneficiaries” and “defraying reasonable expenses of administering the plan.”
The prohibition on discrimination in “participation, referral, reimbursement of a covered service, or indemnification” directly regulates fundamental aspects of plan design and administration that ERISA reserves to plan sponsors and fiduciaries. See Mulready, 78 F.4th at 1201 (recognizing that pharmacy networks constitute “cornerstones in plans’ prescription-drug benefit structures” and that “state efforts to undermine those pharmacy networks diminish plans’ benefit options“).
By preventing differential treatment of pharmacies regardless of the underlying business rationale, the provision “require[s] providers to structure benefit plans in particular ways” in violation of established preemption doctrine. Rutledge, 592 U.S. at 86-87. This broad prohibition prevents plan fiduciaries from making the very distinctions between providers that sound business judgment and fiduciary duty would dictate.
Iowa‘s attempt to distinguish this provision by arguing that it merely regulates PBM network curation fails to address the provision‘s direct application to health benefit plans and third-party payors. The provision applies explicitly to “health benefit plans” and “third-party payors,” not merely to PBMs, placing it squarely within the category of state laws that courts have recognized as specifically designed to affect employee benefit plans. Mackey v. Lanier Collection Agency & Serv., 486 U.S. 825, 829 (1988). By requiring that the plans extend the same requirements to all pharmacies, the provision restricts the incentives and deterrents that can be incorporated in plan design to achieve the most beneficial coverage and relationships within the network. This fundamentally alters plan structure in ways that exceed permissible state authority. See Shaw, 463 U.S. at 97.
The provision is materially different from the restriction upheld in Wehbi, which did not restrict plan structure but rather prohibited PBMs from having certain ownership interests in pharmacies within their networks. Here, by contrast, the statute constrains all participants in the benefit delivery system and affects the structure of the plans themselves by prohibiting discrimination in participation, referrals, reimbursement, and indemnification. The anti-discrimination provision
ERISA preempts the anti-discrimination provision of
ii. Any-Willing-Provider Provisions (Iowa Code §§ 510B.4B(1)(b) and 510B.4B(2)(a) )
Network composition represents a core element of plan sponsors’ fundamental authority under ERISA to design benefit structures that best serve their participants’ interests. When plan sponsors select which pharmacies to include in their networks, they make strategic decisions about cost, quality, geographic accessibility, and specialized services that directly affect both the benefits available to participants and the expenses incurred by the plan. The Supreme Court has distinguished between laws that “merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage” and those that “require providers to structure benefit plans in particular ways.” Rutledge, 592 U.S. at 86, 88 (citations omitted). Iowa‘s any-willing-provider provisions fall squarely within the latter category of impermissible structural mandates.
The analysis of these two provisions is guided by the Tenth Circuit‘s decision in Mulready, which confronted Oklahoma‘s Patient‘s Right to Pharmacy Choice Act containing any-willing-provider provisions substantially similar to Iowa‘s requirements. The Mulready court concluded that any-willing-provider provisions are “quintessential state laws that mandate benefit structures” because they prevent plans from implementing “some of the most fundamental network designs, such as preferred pharmacies, mail-order pharmacies, and specialty pharmacies.” 78 F.4th at 1199-1200. Mulready recognized that pharmacy network composition represents a core component of plan design because it directly affects both the benefits available to participants and the costs incurred by the plan. Id. at 1199.
This reasoning reflects a deeper understanding of how modern employee benefit plans operate. Plan sponsors do not select network pharmacies arbitrarily; they make strategic choices based on factors including cost-effectiveness, quality of service, geographic convenience, and specialized capabilities. By requiring plans to accept any pharmacy willing to meet basic terms, Iowa‘s provisions eliminate the customizability and discretion that ERISA reserves to plan sponsors and fiduciaries.
Wehbi addressed materially different regulatory provisions and cannot be extended to validate Iowa‘s any-willing-provider requirements as Defendant argues. In that case, the court considered North Dakota statutes that merely limited the accreditation requirements that a PBM may impose on pharmacies as a condition for participation in its network. The court concluded that these provisions constituted “at most, regulation of a noncentral ‘matter of plan administration’ with de minimis economic effects.” 18 F.4th at 968.
Critically, the North Dakota provisions did not mandate network inclusion or create any-willing-provider standards. Rather, they established boundaries on the types of qualifications PBMs could demand beyond
This distinction places Iowa‘s law within a fundamentally different category of regulations. The North Dakota provisions allowed plans to maintain discretion over which pharmacies to include in their networks, subject only to limited constraints on the qualification criteria. Iowa‘s provisions, by contrast, eliminate such discretion entirely by requiring inclusion of any-willing-provider. This mandatory approach represents precisely the type of state interference with plan design that ERISA preempts.
The consensus among courts that have addressed this issue supports preemption. Every court that has considered true any-willing-provider laws in the ERISA context has concluded that such provisions are preempted. These decisions span multiple circuits and have uniformly recognized that such laws impermissibly “strik[e] at the heart of network and benefit design” by constraining fundamental plan structuring decisions. Mulready, 78 F.4th at 1209; see also Ky. Ass‘n of Health Plans v. Nichols, 227 F.3d 352, 363 (6th Cir. 2000); CIGNA Healthplan of La., Inc. v. Louisiana ex rel. Ieyoub, 82 F.3d 642, 648 (5th Cir. 1996).
This judicial consensus reflects a recognition that any-willing-provider laws fundamentally alter the relationship between plan sponsors and service providers. Rather than allowing market forces and plan-specific objectives to guide network construction, these laws impose a regulatory framework that prioritizes provider access over plan flexibility. Such reordering of priorities conflicts with ERISA‘s fundamental premise that plan sponsors should retain authority to structure benefits in ways that best serve their participants’ interests.
Iowa‘s attempt to distinguish its provisions by characterizing them as regulations of “pharmacy network curation” rather than benefit design fails to appreciate their actual operation. The statutes explicitly require that qualifying pharmacies be permitted to participate in networks, leaving no discretion to exclude willing providers regardless of strategic considerations. This represents a direct legal mandate affecting plan structure, not merely an indirect consequence of regulating third-party relationships.
The provisions effectively force ERISA plans to adopt a “take all comers” approach to network participation. This mandatory requirement eliminates the ability of plan sponsors to make strategic decisions about network composition based on factors such as cost-effectiveness, quality metrics, geographic optimization, or specialized service capabilities. When a plan sponsor determines that limiting network participation to certain high-performing or cost-effective pharmacies would benefit plan participants, Iowa‘s law prevents such strategic choices.
Similarly, a plan sponsor seeking to control costs by negotiating favorable terms with a limited number of high-volume pharmacies would be required to extend network participation to any-willing-provider, potentially undermining the volume-based pricing advantages that benefit plan participants. These are not theoretical concerns but practical realities that demonstrate how Iowa‘s provisions dictate fundamental aspects of plan design.
Iowa‘s reliance on Wehbi to defend its any-willing-provider provisions is misplaced. Defendant reads Wehbi too broadly
The any-willing-provider provisions in
The Tenth Circuit‘s analysis in Mulready provides the controlling framework for understanding why such mandates constitute impermissible benefit design requirements. The Eighth Circuit‘s different result in Wehbi addressed materially different regulatory provisions and cannot be credited to be extended to validate Iowa‘s structural constraints on plan design. The consensus among courts that have addressed this issue supports preemption, recognizing that any-willing-provider laws fundamentally alter the relationship between plan sponsors and service providers in ways that conflict with ERISA‘s preservation of plan sponsor authority over benefit design decisions.
iii. Open-Access Standard for Specialty Drugs (Iowa Code § 510B.4B(1)(d) )
Under
ERISA preempts this provision for substantially the same reasons as the anti-discrimination provision analyzed above. The arguments advanced by both parties regarding this provision largely mirror their positions on the broader anti-discrimination requirements, as both provisions operate to restrict differential treatment of pharmacies in ways that interfere with plan design and administration.
The open-access standard impermissibly constrains ERISA plans’ ability to structure their pharmacy networks and benefit arrangements based on the specialized nature of certain medications. Specialty drugs, as defined by SF 383, are medications used to treat “chronic and complex, or rare medical conditions” that “require[] special handling or administration, provider care coordination, or patient education that cannot be provided by a nonspecialty pharmacy or pharmacist.”
By preventing PBMs from using specialty drug designations to direct participants to pharmacies with specialized capabilities,
SF 383 eliminates a tool that plans use to ensure quality care delivery and cost management for their most complex and expensive medications. The Tenth Circuit explained in Mulready that network restrictions crossing into impermissible structural mandates are those that “impede PBMs from offering plans some of the most fundamental network designs, such as preferred pharmacies, mail-order pharmacies, and specialty pharmacies.” Mulready, 78 F.4th at 1200.
Like the anti-discrimination requirement, this requirement prevents plan sponsors from making strategic decisions about provider networks based on legitimate considerations including clinical expertise, patient safety, care coordination capabilities, and cost-effectiveness. The provision essentially mandates that plans treat all network pharmacies equivalently for specialty drug dispensing purposes, regardless of their varying capabilities to provide appropriate specialized services.
Defendant‘s response to this provision follows the same reasoning advanced for the anti-discrimination provision—arguing that the provision merely regulates PBM conduct without dictating plan benefits and permits plan sponsors to establish participation terms of their choosing. This argument fails for the same reasons discussed above. The provision directly constrains fundamental plan design decisions about how to ensure appropriate care delivery for complex medications, thereby interfering with central matters of plan administration.
The provision also implicates the same fiduciary concerns as the anti-discrimination provision. When plan fiduciaries determine that certain medications require specialized handling or enhanced patient monitoring that may not be available at all network pharmacies, their duty to act with “an eye single” towards the interest of the beneficiaries may require directing participants to pharmacies with appropriate capabilities. See Pegram v. Herdrich, 530 U.S. 211, 235 (2000) (citation omitted). The open-access standard prevents such fiduciary decision-making by prohibiting specialty drug designations that would accomplish this objective.
The open-access standard for specialty drugs in
b. Patient Choice and Access
The Court next examines provisions that restrict communications between PBMs and participants regarding pharmacy choices. The limitation on guidance to preferred pharmacies restricts promotional activities and cost comparisons. Plaintiffs
i. Limitation on Guidance to Preferred Pharmacies (Iowa Code § 510B.4B(1)(a) )
Federal preemption does not reach this provision given its exclusive application to PBMs without direct regulation of ERISA plans or their sponsors. The statutory language specifically targets PBM conduct rather than imposing requirements on health benefit plans or third-party payors. Since PBMs are not ERISA fiduciaries and ERISA does not directly regulate their activities, state laws governing PBM conduct fall outside ERISA‘s core concerns.
The provision regulates the manner in which PBMs may communicate with plan participants about network pharmacy options, but it does not dictate the terms of plan benefits or require plans to provide specific coverage. Plan sponsors maintain complete authority over their network composition, participation requirements, and reimbursement structures. The restriction operates only after these fundamental plan design decisions have been made and affects solely how PBMs may present information about available network options to participants.
Moreover, the provision does not prevent PBMs from implementing legitimate cost-containment strategies or network preferences established by the plan sponsor. It simply requires that promotional activities and rate comparisons be conducted in a manner that does not unduly influence participant choice through PBM-directed steering mechanisms. Plans remain free to structure their networks and cost-sharing arrangements to incentivize use of preferred pharmacies; the provision merely limits the promotional methods PBMs may use to effectuate those preferences.
The regulation falls within the category of PBM conduct that courts have recognized as permissible under ERISA preemption analysis. Wehbi, 18 F.4th at 968 upheld similar restrictions on PBM activities, finding that regulations affecting PBM-pharmacy relationships without directly mandating plan structure or benefits do not trigger ERISA preemption. 18 F.4th at 968 (finding that such provisions constitute “regulation of a noncentral matter of plan administration with de minimis economic effects“).
This provision allegedly interferes with central matters of plan administration by restricting fiduciary guidance to participants and beneficiaries about cost-effective pharmacy options. Plaintiffs argue that the provision prevents plan fiduciaries from fulfilling their obligations to act in participants’ best interests by limiting communications about preferred network options that might reduce costs or improve service quality.
This argument mischaracterizes both the provision‘s scope and its relationship to ERISA fiduciary duties. The provision applies specifically to PBMs, not to plan fiduciaries or ERISA plans themselves. Plan
Furthermore, while PBMs may function as service providers to ERISA plans, the provision does not interfere with the contractual relationship between plans and PBMs in ways that would implicate central plan administration functions. Plans can still direct PBMs to implement network strategies that serve participants’ interests; the provision simply establishes parameters for how those strategies may be communicated to participants.
If this provision prohibited promotional activities, copayment variations, and incentives built into the plan terms themselves, it would impact plan structure and benefit design in ways that could trigger preemption concerns. By contrast, regulating PBM promotions, discounts, rebates, or incentives that operate independently after the fact for beneficiaries does not impermissibly reach into plan administration. By regulating post-plan-design promotional activities rather than dictating fundamental plan structure, this requirement remains within permissible constitutional boundaries.
The limitation on guidance to preferred pharmacies in
c. Cost-Sharing Provisions
The Court now examines provisions that establish mandatory parity requirements between different pharmacy delivery channels and restrict plans’ ability to structure differential cost-sharing arrangements. Iowa contends these provisions constitute permissible cost regulations that prevent discriminatory reimbursement practices without dictating specific benefit designs, while Plaintiffs argue the requirements impermissibly eliminate fundamental plan design tools by mandating uniform cost-sharing structures that constrain fiduciary decision-making regarding optimal benefit arrangements.
i. Mail-Order Pharmacy Cost Provisions (Iowa Code §§ 510B.4B(1)(f) and 510B.8(3) )
Iowa‘s cost-sharing provisions include two specific mechanisms: first,
These provisions are preempted by ERISA because they impermissibly dictate fundamental aspects of plan design by mandating specific cost-sharing arrangements that eliminate plans’ discretion to structure benefits in ways that serve participants’ interests and control costs. Cost-sharing arrangements represent core elements of benefit plan design that ERISA reserves to plan sponsors and fiduciaries.
Mulready establishes that state laws regulating cost-sharing arrangements constitute impermissible interference with plan structure. The Tenth Circuit recognized that “cost-sharing arrangements” are “key benefit designs for an ERISA plan” that states cannot mandate without triggering preemption. 78 F.4th at 1198. Regulations dictating how plans must structure their cost-sharing obligations represent the type of plan design mandates that ERISA preempts.
The cost-sharing provisions in
The prohibition on differential cost-sharing between retail and mail-order pharmacies particularly illustrates the provisions’ interference with plan design. Mail-order pharmacies typically offer significant cost advantages for maintenance medications through bulk purchasing, reduced overhead, and operational efficiencies. Plans have historically used cost-sharing incentives to encourage participants to utilize these cost-effective options for appropriate medications. Iowa‘s provision eliminates this fundamental cost-containment strategy by requiring identical cost-sharing regardless of the delivery mechanism chosen.
These provisions operate to mandate specific benefit structures rather than merely affecting the costs of plan administration. In Rutledge, the state law required PBMs to reimburse pharmacies at a price equal to or higher than the price it cost the pharmacy to obtain the drug. State regulations that merely increase costs or alter incentives for ERISA plans fall outside ERISA‘s preemptive scope. Rutledge, 592 U.S. at 88. The Arkansas law was determined to simply establish a cost regulation, dictating how PBMs reimburse pharmacies. Although the Court recognized that this could have an effect on plans because PBMs may pass their increased costs onto the plans, the law did not require the plans to provide any particular benefit to any particular beneficiary in any particular way.
In contrast,
The practical consequence proves decisive: plans cannot customize benefit structures through differential incentives and agreements with various pharmacies because their PBMs would face potential state law compliance issues in administering such arrangements. These provisions mandate alterations to benefit design to ensure that cost-sharing obligations and fees remain constant regardless of pharmacy selection. By prohibiting differential cost-sharing between retail and mail-order facilities, the statutes do more than establish pricing floors—they require uniform benefit structures across pharmacy categories.
The cost-sharing provisions in
d. Network Standards
The Court turns to provisions governing the qualifications PBMs may impose on pharmacy network participants. The pharmacy-accreditation standard limits PBMs to requiring only those credentials consistent with state licensing requirements, preventing the imposition of additional or more stringent qualifications. Plaintiffs argue this provision, while seemingly directed at PBMs, effectively constrains plan sponsors’ ability to ensure specialized pharmacy capabilities for complex medications. Iowa defends the provision as protecting state regulatory authority over professional licensing while preventing PBMs from using excessive credentialing demands to inappropriately restrict network access.
i. Pharmacy-Accreditation Standard for Network Participation (Iowa Code § 510B.4B(1)(c) )
Under
The accreditation standard is not preempted by ERISA because it regulates PBM network curation practices without dictating plan structure or requiring specific benefits. The Eighth Circuit‘s decision in Wehbi directly addresses similar accreditation requirements and provides controlling precedent for this analysis. In Wehbi, the court considered a North Dakota law that limited accreditation requirements PBMs could impose on pharmacies and concluded that such regulations do not warrant preemption. 18 F.4th at 968.
The Wehbi court recognized that while accreditation requirements might “cause some disuniformity in plan administration,” they do not “requir[e] payment of specific benefits” or “bind[] plan administrators to speсific rules for determining beneficiary status.” Id. at 968 (quoting Rutledge, 592 U.S. at 86-87). Rather, these requirements constitute “regulation of a noncentral matter of plan administration with de minimis economic effects.” Id.; see also Gobeille, 577 U.S. at 320. The provision here operates in substantially the same manner as the North Dakota law upheld in Wehbi.
The accreditation standard represents an exercise of traditional state regulatory authority over pharmacy licensing and qualification requirements. States have long possessed the power to determine who is qualified to dispense prescription drugs and to establish professional standards
By limiting PBM accreditation requirements to those consistent with state licensing standards, the provision ensures that pharmacy network participation decisions are based on legitimate professional qualifications rather than arbitrary or excessive credentialing demands. This approach supports the state‘s interest in maintaining uniform professional standards while preventing PBMs from using accreditation requirements as a mechanism to inappropriately restrict network access.
Network inclusion decisions and coverage requirements remain within PBM and plan discretion. The provision merely establishes that accreditation requirements, when imposed, must
be reasonable and consistent with state professional standards. PBMs retain discretion to establish other network participation criteria, including geographic considerations, service quality metrics, contract terms, and reimbursement requirements.
The regulation falls within the category of “laws of general applicability” that “operate in an area traditionally left to state regulation” and therefore do not trigger ERISA preemption. N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 661 (1995) (citation omitted). These regulations address PBM conduct in areas beyond ERISA‘s scope rather than interfering with central plan administration functions.
The provision‘s impact on plan administration is minimal and indirect. Although it may affect the composition of available pharmacy networks by preventing PBMs from imposing excessive accreditation requirements, it does not mandate specific network structures or require plans to contract with particular providers. Any effects on plan design flow from pharmacies credentialed under the state standard, which restricts PBMs from establishing their own accreditation requirements for network participation.
The similarity between Iowa‘s accreditation provision and the North Dakota law upheld in Wehbi is particularly significant. Both provisions limit PBM accreditation requirements to standards consistent with state licensing rules, and both operate to prevent PBMs from using excessive credentialing demands to inappropriately restrict network access. The Eighth Circuit‘s analysis in Wehbi therefore applies directly to the Iowa provision.
Unlike other provisions in SF 383 that set specific restrictions on how PBMs may create and utilize their pharmacy networks in ways that affect the structure and design of the plans themselves, accreditation requirements for network participation do not create effects that cascade bаck to alter fundamental plan design. The provision regulates the professional qualifications that may be required for network participation without dictating the substantive terms of benefit coverage or the structural arrangements through which benefits are delivered.
The accreditation standard in
The Court now addresses provisions that regulate the financial arrangements between PBMs, plans, and pharmacies. The pass-through rebate requirement mandates that PBMs transfer all manufacturer rebates to health plans, while reimbursement rate provisions establish minimum payment standards and require equal treatment between affiliated and unaffiliated pharmacies. Plaintiffs characterize these provisions as impermissible interference with fiduciary contracting decisions and plan administration. Iowa contends they constitute permissible cost regulations that increase transparency and prevent self-dealing without dictating plan structure or benefit design.
i. Pass-Through Rebates (Iowa Code § 510B.8(4) )
Iowa law now requires PBMs to “pass through pricing” under which PBMs must transfer 100% of manufacturer rebates to health plans. The provision mandates that all rebates received by PBMs from pharmaceutical manufacturers “be passed through to the health carrier or employee plan sponsor” which eliminates PBMs’ ability to retain portions of these rebates as compensation.
This requirement falls outside ERISA‘s preemptive scope as a permissible cost regulation that does not dictate plan structure or interfere with central matters of plan administration. Under Plaintiffs’ theory, this provision regulates a central part of ERISA plan administration by intruding on fiduciary duties through restrictions on PBM contracting methods and prohibitions on rebate-based or pricing-mechanism compensation. They argue that ERISA requires fiduciaries not enter into contracts for more than reasonable compensation, and that the law restricts fiduciary discretion by controlling compensation arrangements.
Plaintiffs fail to demonstrate how this provision actually intrudes on the fiduciary duty to avoid contracts for more than reasonable compensation. Although the provision clearly affects PBMs and the current system where they retain a significant portion of manufacturer rebates, it benefits ERISA plans and sponsors by ensuring that rebates flow to them rather than being retained by PBMs. This approach appears to further rather than hinder fiduciary duties by ensuring that financial benefits from manufacturer relationships reach the plans and their participants.
Fiduciary contracting with PBMs remains unrestricted; the provision simply requires PBMs to take specific action if they receive rebates from manufacturers. This operates more like a cost regulation, similar to requiring PBMs to pay pharmacies specific reimbursement rates, than an actual intrusion on plan sponsors’ fiduciary duties. The provision establishes a procedural requirement for rebate handling without dictating the substantive terms of plаn benefits or requiring specific coverage decisions.
Plaintiffs also argue that the provision‘s express mention of ERISA creates both impermissible “connection with” and “reference to” preemption because the statute specifically states that rebates must pass through to the health carrier or employee plan sponsor “as permitted by ERISA.” They contend that ERISA is essential to this provision‘s operation because without it the provision would have no effect. [ECF No. 16 at 23].
This argument fails because the law does not make an impermissible reference to ERISA. The provision applies to all PBMs regardless of whether they contract with ERISA plans or non-ERISA plans. ERISA plans are not essential to the provision‘s operation because the law reaches
The provision functions as a transparency and cost regulation that establishes how PBMs must handle manufacturer rebates without mandating specific plan structures or benefit designs. Plans maintain complete authority over their formularies, network composition, and benefit arrangements. The requirement affects the financial flows between PBMs and plans but does not constrain plan design decisions or require particular coverage arrangements.
The pass-through rebate requirement in
ii. Reimbursement Provisions (Iowa Code §§ 510B.8B(1) and 510B.8B(2) )
SF 383 prohibits PBMs from setting reimbursement rates for non-affiliated pharmacies at levels lower than the rates paid to affiliated pharmacies for the same drugs.
These provisions are not preempted by ERISA because they constitute permissible cost regulations under Rutledge. The Supreme Court in Rutledge specifically upheld an Arkansas law requiring PBMs to reimburse pharmacies at rates at least equal to the pharmacy‘s acquisition cost. 592 U.S. at 87–88. There is no principled distinction between Iowa‘s reimbursement rate requirements and the Arkansas law upheld in Rutledge. The requirement that PBMs reimburse all pharmacies at least as much as they pay their own affiliated pharmacies represents a permissible cost regulation that addresses potential conflicts of interest in PBM reimbursement practices. This provision operates similarly to the cost floors established in Rutledge by ensuring that non-affiliated pharmacies receive fair reimbursement rates compared to PBM-owned entities.
Plan structure and specific benefit requirements remain outside this provision‘s scope. Plans retain complete discretion over their formularies, network composition, and benefit design. The regulation affects the business relationship between PBMs and pharmacies without constraining plan design decisions or mandating particular coverage arrangements. Plans may still customize reimbursements and negotiate аgreements with pharmacies, subject only to the requirement that non-affiliated pharmacies receive rates no less favorable than those paid to affiliated entities.
This regulation falls within the state‘s traditional authority to prevent unfair business practices and ensure competitive markets. The provision addresses the potential for PBMs to favor their own affiliated pharmacies through preferential reimbursement, which could distort market competition and disadvantage independent pharmacies.
The requirement that PBMs reimburse retail pharmacies at NADAC or WAC rates is squarely permissible under Rutledge. The Supreme Court approved an Arkansas law that required pharmacy reimbursement
The NADAC reimbursement standard establishes a cost floor for prescription drug benefits obtained through retail channels without dictating plan choices about benefit structure. Like the Arkansas regulations in Rutledge, this provision represents cost regulation that affects the pricing methodology for pharmacy benefits without mandating plan structure or requiring specific coverage decisions.
Plans need not “adopt any particular scheme of substantive coverage” under this provision, which merely establishes minimum reimbursement standards that may affect costs or alter incentives for ERISA plans. Rutledge, 592 U.S. at 88. They retain full discretion over their formularies, network composition, coverage levels, and benefit design; they simply face regulated pricing for benefits they choose to provide through retail pharmacies.
Plaintiffs appear to concede that the NADAC pricing provision would survive preemption analysis, arguing only that the NADAC pricing is tied to the rate scheme that involves preempted provisions, such as the dispensing fee for retail pharmacies, in ways that render the entire pricing structure inseverable and inappropriate to maintain as part of the statutory scheme. The severability issue will be addressed in the Court‘s analysis below, but the NADAC reimbursement standard represents a standalone cost regulation that survives the preemption challenge under established precedent.
These provisions regulate PBM-pharmacy relationships and pricing methodologies without dictating plan structure or requiring specific benefits. The regulations affect the operational costs of providing benefits but do not directly dictate how benefits are structured or delivered to participants.
Accordingly, the reimbursement rate parity and standardization requirements in
iii. Dispensing Fee for All Prescriptions (Iowa Code § 510B.8B(3) )
Rutledge supports the validity of this requirement as a permissible cost regulation outside ERISA‘s preemptive reach. Plaintiffs acknowledge that dispensing fees genеrally fall within the category of cost regulations that ERISA permits, but argue that this particular fee should be preempted because its immediate effective date creates “acute” financial effects that effectively dictate plan choices.
The dispensing fee regulation operates similarly to the PBM reimbursement requirements that the Supreme Court upheld in Rutledge. The Rutledge court specifically recognized that States may “establish[] a floor for the cost of the benefits that plans choose to provide” without triggering ERISA preemption. 592 U.S. at 90. The dispensing fee functions in precisely this manner by establishing a minimum reimbursement amount that PBMs must pay to retail pharmacies, thereby setting a
Like the Arkansas regulations in Rutledge, the dispensing fee represents “nothing more than cost regulation” that affects the pricing methodology for pharmacy benefits without dictating plan structure or requiring specific coverage decisions. The fee does not mandate that plans provide particular benefits, cover specific medications, or structure their networks in particular ways. Plans retain full discretion over their formularies, network composition, coverage levels, and benefit design; they simply face higher costs for benefits they choose to provide through retail pharmacies.
The Supreme Court‘s analysis in Rutledge demonstrates that cost regulations may permissibly “merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.” 592 U.S. at 88 (citing Travelers, 514 U.S. at 668). The dispensing fee operates exactly within these parameters by increasing the cost of retail pharmacy services while preserving plan discretion over whether and how to provide those services to participants.
Plaintiffs’ argument that the dispensing fee creates impermissibly “acute” financial effects relies on an overly restrictive interpretation of this concept that is not supported by Supreme Court precedent. The Court in Rutledge and other decisions has used “acute” to describe economic effects that are so severe as to eliminate meaningful choice and effectively coerce particular plan structures. The standard requires economic pressure that rises to the level of “an exorbitant tax leaving consumers with a Hobson‘s choice” or effects “so acute that it will effectively dictate plan choices.” Travelers, 514 U.S. at 664; Rutledge, 592 U.S. at 88.
The $10.68 dispensing fee, while representing a new cost obligation, does not approach the level of economic coercion that would trigger this exception to permissible cost regulation. Plaintiffs themselves acknowledge that the fee would not be preempted if it “took effect later,” indicating that the fee amount itself is not inherently coercive. This concession undermines any argument that the fee creates acute effects within the meaning of Supreme Court precedent.
The comparison to the cost regulation upheld in Travelers further supports this conclusion. In Travelers, the Court found no acute effects from a hospital surcharge that could reach up to 13% of billing rates for certain patients. 514 U.S. at 650, 662. The dispensing fee here, at $10.68 per prescription, represents a far less substantial cost impact than the percentage-based surcharge in Travelers and therefore cannot be сonsidered acute under established precedent.
Plaintiffs’ focus on the immediate effective date of July 1, 2025, misconstrues the nature of the “acute” standard. The Court‘s use of “acute” in ERISA preemption analysis refers to the severity of economic impact rather than the timing of implementation. Although sudden implementation may create administrative challenges, it does not transform an otherwise permissible cost regulation into an impermissibly acute economic effect unless the underlying cost burden is itself coercive. Moreover, Iowa‘s new dispensing fee will not impose immediate economic impact on plans and their sponsors. The statute requires PBMs to pay the fee directly to retail pharmacies. Although PBMs may eventually renegotiate their contracts with plans and plan sponsors to account for this added cost, Plaintiffs have repeatedly emphasized that existing contracts cannot be immediately amended. They therefore
The dispensing fee also falls within the state‘s traditional authority to regulate the business of pharmacy and establish professional fee standards. States have long possessed the power to determine appropriate compensation levels for professional services, and the dispensing fee represents an exercise of this authority rather than an attempt to regulate ERISA plan design.
Defendant correctly argues that the dispensing fee constitutes standard cost regulation that affects the pricing methodology for pharmacy services without dictating plan choices. The fee establishes a floor for professional dispensing compensation while preserving plan discretion over all fundamental benefit design decisions. This approach aligns with the Supreme Court‘s recognition in Rutledge that states may regulate PBM reimbursement practices as part of their traditional oversight of commercial relationships.
The dispensing fee for all prescriptions in
f. Deductible Provisions (Iowa Code §§ 510B.8(6) ; 510B.8(5) ; and 510B.8(7) )
The Court turns to provisions governing how patient payments toward prescription drugs must be credited against deductible obligations and coordinated with federal health savings account requirements. These provisions present distinct constitutional questions because they directly regulate the relationship between plans and participants rather than intermediary conduct. Plaintiffs maintain these requirements impermissibly dictate fundamental cost-sharing structures that constitute core elements of benefit plan design, while Iowa defends them as administrative requirements that ensure proper accounting of patient contributions without constraining underlying plan architecture.
Under
i. Credit Toward Deductible (Iowa Code § 510B.8(6) )
Unlike other provisions that regulate PBM conduct, this provision directly affects the relationship between plan sponsors and beneficiaries by mandating how deductible contributions must be calculated and applied. The provision requires plans to structure their deductible arrangements in a particular manner, which represents exactly the type of plan design mandate that ERISA preempts.
This requirement exceeds permissible cost regulation by directly constraining how plans must handle participant payments toward deductible requirements. This goes to the heart of benefit plan design and administration, areas that ERISA reserves to plan sponsors and fiduciaries. The mandatory nature of the deductible crediting requirement eliminates plan discretion over fundamental aspects of benefit structure.
ii. PBM Requirement and Exception for High-Deductible Health Plans (Iowa Code §§ 510B.8(5) and 510B.8(7) )
The provision operates as an administrative mandate that governs PBM operations without constraining fundamental plan design authority. Although it directs how PBMs must account for payments made by or on behalf of covered persons, it neither mandates particular cost-sharing structures nor dictates how plans must configure their benefit arrangements. Plans retain complete discretion over formularies, network composition, cost-sharing levels, and underlying benefit designs. The requirement affects administrative processing of existing cost-sharing obligations without compelling plans to restructure their coverage schemes.
This provision functions analogously to the cost regulations sustained in Rutledge, which imposed procedural requirements on PBM operations without mandating specific plan structures or benefit designs. The mandate that PBMs credit third-party payments toward cost-sharing obligations affects the computational methodology for determining participant obligations under existing plan terms but does not compel plans to adopt particular substantive coverage arrangements.
This provision represents an exception for PBM requirements governing how they consider the fulfillment of cost-sharing obligations
These provisions together require PBMs to count amounts paid by a covered person toward their cost-sharing contributions while preserving health savings account eligibility. Regardless of the cost-sharing arrangement established in the plan, this provision regulates how PBMs administer the benefits rather than the structure or design of the plan itself. This will almost undoubtedly have an impact on plan administration by altering incentives, but it does not mandate specific plan choices about benefit structure. Rutledge, 592 U.S. at 88.
The provision falls within the category of cost regulations that affect PBM administration without constraining fundamental plan design decisions. The requirement addresses the intersection between PBM cost-sharing administration and federal health savings account regulations without dictating how plans must structure their underlying benefit arrangements.
g. Reporting and Transparency Provisions
The Court will next evaluate the provisions requiring disclosure of pricing methodologies and network information to state regulators and the public. The quarterly reporting and internet publication requirements mandate that PBMs disclose drugs reimbursed significantly above or below national average costs, while notice requirements compel third-party payors to inform area pharmacies of network participation opportunities. Unlike the direct plan regulation examined in previous sections, these provisions target disclosure obligations that may fall outside ERISA‘s core concerns. The State emphasizes its legitimate oversight interests, while Plaintiffs counter that reporting requirements apрlicable to ERISA plans necessarily intrude upon the federal regulatory framework governing plan administration.
i. Quarterly Reporting and Internet Publication (Iowa Code § 510B.8B(4)(a) –(d) )
The quarterly reporting and internet publication requirements escape ERISA preemption because they target PBMs alone, not ERISA plans or their sponsors, which remain subject to distinct reporting obligations under the federal regulatory framework. This distinction proves decisive. In Gobeille, the Vermont statute imposed reporting and disclosure mandates directly upon ERISA plans and their insurers. The Court determined that such requirements necessarily intrude upon ERISA‘s comprehensive reporting, disclosure, and recordkeeping regime—obligations that constitute a central part of the uniform system of plan administration. 577 U.S. at 323. State regulations of this character must yield to federal authority, the Court explained, lest individual states impose “novel, inconsistent, and burdensome reporting requirements on plans” that would fragment the uniform administration Congress intended. Id.
ii. Notice Requirement about In-Network Pharmacies (Iowa Code § 510B.4B(2)(b) )
The notice requirement is not preempted by ERISA because it imposes only modest disclosure requirements with de minimis impact on plan administration.
Although this provision governs third-party payors rather than PBMs, it does not trigger automatic preemption. The analysis in Wehbi proves instructive, where reporting requirements applicable to both PBMs and third-party payors survived a preemption challenge. Iowa‘s notice requirement demands disclosure of only fundamental information—the sort of “modest disclosure requirements” that impose but de minimis burdens on uniform plan administration and thus remain permissible under established precedent. Wehbi, 18 F.4th at 969.
The notice requirement does not compel disclosure of proprietary pricing information, reimbursement methodologies, or other competitively sensitive plan details. Rather, it requires straightforward notification of participating pharmacy locations, which serves a basic consumer information function without creating the type of burdensome reporting obligations that interfere with uniform plan administration.
Overall, the requirement resembles the permissible disclosures in Wehbi rather than the impermissible reporting requirements in Gobeille. It does not require ongoing record-keeping, regular reporting to government agencies, or public disclosure of sensitive business information. The basic nature of the required information to be reported to beneficiaries and the limited scope of the disclosure obligation distinguish it from the more intrusive reporting requirements that courts have found preempted.
The reporting and internet publication requirements in
h. Contract Terms and Enforcement
The Court next examines provisions that dictate the substantive terms of agreements between ERISA plans and their service providers. The contract terms provision mandates particular pass-through pricing specifications in third-party payor agreements, while the supersession requirement ensures these state-imposed terms override any conflicting negotiated provisions. Both the general enforcement provision permitting beneficiary lawsuits and the appeal process requirements for PBM-pharmacy disputes raise questions about state interference with ERISA‘s exclusive remedial scheme. These provisions present the most direct challenge to fiduciary autonomy in service provider relationships,
i. Contract Terms Between Third-Party Payor and PBM (Iowa Code § 510B.8D(1) )
ERISA preempts this provision through its impermissible restriction of fiduciary discretion in contracting arrangements and interference with central matters of plan administration. Unlike the pass-through rebate requirement in
ERISA fiduciaries have clear obligations to enter into contracts with reasonable costs for plan beneficiaries and to exercise prudent judgment in selecting and monitoring service providers. See
The provision goes beyond permissible cost regulations upheld in Rutledge by mandating specific contractual terms rather than merely establishing cost floors or pricing methodologies. Although cost regulations will typically affect the amounts paid for services without needing to constrain the structure of contractual relationships, this provision dictates the substantive terms that must be included in third-party payor agreements. This represents the type of direct interference with plan administration that ERISA reserves to federal oversight.
In practice, this provision will limit third-party payors’ discretion in constructing their agreements in ways they may deem most reasonable or beneficial for plan administration and beneficiaries. When plan fiduciaries determine that alternative contractual arrangements might better serve participant interests or provide superior plan administration, the mandatory contract terms prevent implementation of those arrangements.
This requirement directly constrains fiduciary decision-making regarding service provider relationships, a сentral matter of plan administration under ERISA. The selection and oversight of service providers, including the negotiation of appropriate contractual terms, represents a core fiduciary responsibility that ERISA reserves to plan sponsors and administrators.
Plaintiffs note that Defendant does not meaningfully address their argument that pass-through pricing requirements for third-party payor/PBM contracts intrude upon central matters of plan administration by implicating service-provider compensation arrangements. The absence of substantive response to this argument suggests acknowledgment that such contractual mandates exceed permissible state authority.
The provision cannot be justified under Rutledge because that case did not involve contract requirements between ERISA plans and PBMs. Rather, Rutledge addressed
ERISA preempts
ii. Supersession Over Contrary Contract Terms (Iowa Code § 510B.8D(2) )
ERISA preemption extends to this provision through its inseverability from Iowa § 510B.8D(1) and its compounding of the underlying contractual mandate‘s constitutional infirmities. The supersession clause makes no sense without the prior section establishing mandatory contract terms and cannot operate independently of those requirements. It cannot be given effect with the other provision enjoined. See
Additionally, this provision exacerbates the interference with fiduciary discretion identified in the analysis of
By mandating that state-imposed contract terms supersede negotiated agreements, the provision directly interferes with the contractual relationship between ERISA plans and their service providers. This represents an impermissible intrusion into central matters of plan administration by preventing fiduciaries from exercising their judgment regarding appropriate contractual arrangements with PBMs.
The supersession requirement also undermines the principles of contract law that ordinarily govern commercial relationships between sophisticated parties. When plan fiduciaries determine that particular contractual arrangements would better serve their participants’ interests, the supersession clause prevents implementation of those arrangements regardless of their merit or appropriateness for the specific plan.
The provision operates as a direct constraint on fiduciary decision-making that goes beyоnd permissible cost regulation. Rather than merely affecting the pricing of services, the supersession clause ensures that state regulatory preferences override the professional judgment of plan fiduciaries regarding optimal contractual structures for their particular circumstances.
The mandatory nature of the supersession requirement eliminates the type of flexibility in service provider relationships that ERISA contemplates for plan administration. ERISA reserves to plan fiduciaries the authority to structure their relationships with service providers in ways that best serve plan participants, subject to their fiduciary obligations to act prudently and in participants’ best interests.
i. Enforcement Provisions
The Court concludes its ERISA analysis by examining provisions that establish alternative remedial mechanisms for statutory violations. The general enforcement provision permits covered persons and pharmacies to bring lawsuits for any SF 383 violation, while the appeal process requirements establish internal procedures for PBM-pharmacy disputes. The constitutional concern centers on whether these state enforcement mechanisms impermissibly supplement or duplicate ERISA‘s comprehensive remedial scheme. Iowa maintains that enforcement provisions targeting entities outside ERISA‘s regulatory framework remain permissible, but Plaintiffs assert that any alternative remedy affecting plan administration conflicts with federal exclusivity principles.
i. General Enforcement Provision (Iowa Code § 510B.4B(4) )
The Supreme Court has held that “any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted.” Davila, 542 U.S. at 209. Complete ERISA preemption applies when an individual could have brought
their claim under
The broad language of this provision reaches well beyond PBM conduct to encompass the fundamental terms and relationships binding plans, beneficiaries, and fiduciaries. SF 383‘s various requirements apply directly to health benefit plans and third-party payors, thereby exposing
When beneficiaries seek to enforce violations of statutory provisions that apply to their
Defendant‘s assertion that this constitutes a separate state enforcement mechanism for legal duties independent of
Allowing beneficiaries to sue their plans and third-party payors for violations under SF 383, regardless of the specific nature of those violations, supplements
ii. Appeal Process Requirements (Iowa Code § 510B.8E )
Although the results of these appeals may cause plans to recalculate how much they and the beneficiary owe, that represents a mere incidental effect, and
The appeal process requirements limit appeals to matters between PBMs and pharmacies, a relationship not governed by
The expansion in SF 383 to permit appeals of “any matter” does not change the fundamental reasoning in Rutledge. The appeal process required of PBMs for pharmacies is not an impermissible duplication, supplement, or supplanting of the
4. First Amendment Challenge
Having addressed Plaintiffs’ federal preemption claims, the Court turns to their constitutional challenge under the First Amendment‘s protection of commercial speech. SF 383‘s anti-referral provision prohibits health benefit plans and third-party payors from making pharmacy referrals, while the notice requirement compels disclosure of network participation terms to unrelated pharmacies. The constitutional analysis differs fundamentally from
a. Commercial Speech Protection Under the First Amendment
The First Amendment, made applicable to the states through the Fourteenth Amendment, provides that government “shall make no law . . . abridging the freedom of speech.”
Commercial speech encompasses a broad range of expression, including pricing information concerning lawful transactions. Va. State Pharm. Bd. v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 761–64 (1976). Laws restricting commercial speech are subject to intermediate scrutiny under the framework established by the Supreme Court. Cent. Hudson, 447 U.S. at 563.
b. The Central Hudson Test
The Central Hudson framework begins with a threshold determination of whether the commercial speech at issue qualifies for First Amendment protection. Government regulation of commercial speech is assessed in a four-part inquiry: First, the commercial speech at issue must concern lawful activity and not be misleading. Otto, 744 F.3d at 1055. If the speech concerns unlawful activity or is misleading, it receives no First Amendment protection.
Second, the government must demonstrate that its interest in regulation is substantial. Id.
Third, the challenged regulation must directly advance the government‘s asserted interest. This prong requires the government to show that the statute advances a substantial interest “in a direct and material way.” Rubin v. Coors Brewing Co., 514 U.S. 476, 487 (1995) (quoting Edenfeld v. Fane, 507 U.S. 761, 767 (1993)). The burden is not satisfied by speculation or conjecture; rather, the government must
Fourth, the regulation must be no more extensive than necessary to further the government‘s interest. In assessing this prong, courts consider whether numerous and obvious less-burdensome alternatives to the restriction exist, as this is certainly a relevant considerаtion in determining whether the fit between ends and means is reasonable. City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 417 n.13 (1993).
The material degree standard in the third prong is critical; otherwise, a state could easily restrict commercial speech in the service of other objectives that could not justify a burden on commercial expression themselves. Greater New Orleans Broad. Ass‘n v. United States, 527 U.S. 173, 188 (1999).
This intermediate scrutiny framework balances the constitutional protection afforded to commercial speech with the government‘s legitimate regulatory authority. Although commercial expression enjoys First Amendment protection, the government may regulate such speech in furtherance of substantial interests, provided the regulation directly advances those interests and is no more extensive than necessary to achieve them.
c. Threshold Challenge Framework
As discussed above, Plaintiffs have brought an as-applied challenge seeking relief limited to SF 383‘s enforcement against
Defendant‘s facial challenge characterization would require Plaintiffs to prove that “no set of circumstances” exists under which the challenged provisions would be constitutional—a standard that ignores the targeted nature of their complaint. The Supreme Court‘s admonition that the facial-versus-as-applied distinction “goes to the breadth of the remedy employed by the Court, not what must be pleaded in a complaint” reinforces that Plaintiffs’ request for targeted relief does not transform their challenge into a facial attack on the statute‘s validity. Citizens United, 558 U.S. at 331.
d. Central Hudson Application
SF 383 contains three provisions that constrain commercial speech and mandate disclosure in ways that invoke First Amendment scrutiny. The first prohibits health benefit plans, third-party payors, health carriers, and PBMs from making pharmacy “referrals.”
The challenged provisions regulate commercial speech through both content-based and speaker-based restrictions, thereby invoking intermediate scrutiny under Central Hudson. The anti-referral provision discriminates based on content by targeting speech that favors particular pharmacies in referral communications—a form of content discrimination that parаllels the constitutional violation the Supreme Court identified when Vermont prohibited certain uses of prescriber information while permitting others. Sorrell v. IMS Health Inc., 564 U.S. 552, 564 (2011). The provision also discriminates based on speaker identity by singling out health benefit plans, third-party payors, and PBMs for disfavored treatment.
The notice requirement presents distinct but related constitutional issues. By compelling disclosure of commercially sensitive information to unrelated third parties, the mandate “necessarily alters the content of the speech” and constitutes impermissible compelled expression. Riley v. Nat‘l Fed‘n of the Blind of N.C., Inc., 487 U.S. 781, 795 (1988).
As noted earlier, the Central Hudson inquiry is whether the commercial speech is misleading. Speech that is “inherently misleading” is speech that “inevitably will be misleading” to consumers. Bates v. State Bar of Ariz., 433 U.S. 350, 372 (1977). The “inherently misleading” character of speech may be inferred from the “particular content or method of the advertising” as well as from “experience [that] has proved that in fact such advertising is subject to abuse.” In re R.M.J., 455 U.S. 191, 203 (1982). Such misleading advertising may be prohibited entirely. Id. Whether speech is “inherently misleading” presents a question of law. Peel v. Att‘y Reg. & Disciplinary Comm‘n of Ill., 496 U.S. 91, 108 (1990) (plurality opinion).
Addressing this threshold inquiry, the regulated speech here concerns truthful information about lawful commercial transactions—specifically, communications regarding pharmacy services. The State does not contend that such speech misleads consumers or promotes unlawful activity. The anti-referral provision prohibits health benefit plans and PBMs from directing beneficiaries toward particular pharmacies based on fees, cost-sharing arrangements, or other plan considerations—speech that serves both the economic interests of the speakers and the informational needs of consumers. Cent. Hudson, 447 U.S. at 561–62.
Defendant argues that the anti-referral provision differs meaningfully from the anti-promotion provision by permitting information sharing and cost-comparison communications. Yet the statutory language operates with similar restrictive effect in practice. The provision broadly prohibits plans and plan sponsors from “discriminating” against pharmacies “with respect to referrals“—language that constrains what plans may communicate to beneficiaries about available pharmacy options.
Second, while Iowa may advance substantial interests in protecting rural pharmacies and ensuring healthcare access, these objectives cannot justify suppressing truthful commercial information. The Supreme Court has made clear that restrictions premised on the “fear that people would make bad decisions if given truthful information” constitute impermissible governmental paternalism. Thompson v. W. States Med. Ctr., 535 U.S. 357, 374 (2002).
SF 383‘s practical effect compounds this constitutional defect by preventing plan sponsors from discharging their fiduciary duties to inform participants about the most advantageous pharmacy options—a consequence that subverts rather than advances consumer protection. The State‘s legitimate interest in supporting rural pharmacies cannot overcome the First Amendment‘s protection of truthful sрeech that simultaneously serves consumer welfare and the economic interests of plan sponsors. Where the government seeks to achieve policy objectives by restricting the flow of accurate commercial information, the constitutional calculus weighs against such suppression.
Third, the challenged provision fails to directly advance Iowa‘s asserted interests. The anti-referral provision suppresses factually accurate information regarding optimal pharmacy choices, leading Plaintiffs to characterize these restrictions as “an outright effort to make clear that the state is forcing employers and their employees to subsidize certain pharmacies over others” rather than addressing demonstrable harm. [ECF No. 16 at 31]. As Plaintiffs observe, while “[p]romoting rural pharmacies might be a legitimate government interest . . . muzzling employers from speaking the truth is not.” Id.
Iowa maintains that the provisions advance substantial interests in “transparency, protecting consumer choice, and limiting PBMs’ ability to self-deal” yet fails to articulate how suppressing truthful information that fulfills fiduciary obligations serves these objectives. [ECF No. 24-1 at 47]. Rather than protecting rural pharmacies through direct subsidies or ensuring equitable reimbursement structures, these provisions merely silence information that might inform consumer decisions. This approach represents, at best, an indirect strategy that sacrifices First Amendment principles without meaningfully furthering the State‘s proclaimed goals. The nexus between prohibiting truthful commercial speech and preserving rural pharmacy access remains entirely speculative—a constitutional failing that Central Hudson does not permit.
Fourth, the restrictions are more extensive than necessary. Iowa possessed alternatives to achieve its stated objectives without restricting truthful speech, including direct subsidies to rural pharmacies, minimum reimbursement standards (as established elsewhere in SF 383), or mandatory disclosure of PBM practices to regulators. Iowa does not meaningfully address less restrictive alternatives, instead defending its chosen approach of speech suppression. The State‘s failure to consider or pursue these alternatives undermines any claim that SF 383‘s speech restrictions are narrowly tailored. Rather, Iowa chose the constitutionally problematic approach of suppressing speech when multiple less restrictive
e. Notice Requirement Analysis
Defendant argues the notice requirement merits deferential review because it requires only disclosure of “purely factual and uncontroversial information.” [ECF No. 24-1 at 46]; see Zauderer v. Off. of Disciplinary Counsel, 471 U.S. 626, 651 (1985). Iowa contends that requiring third-party payors to notify all pharmacies in their coverage area of network participation requirements serves legitimate transparency interests and should receive the same deferential treatment accorded to routine commercial disclosures. The State analogizes to disclosure requirements upheld in other circuits, particularly the First Circuit‘s decision in Rowe, where disclosure requirements between PBMs and their existing customers survived constitutional scrutiny. This argument fails on multiple grounds.
First, Zauderer applies only to disclosures addressing “inherently misleading” commercial speech. Otto, 744 F.3d at 1062 (holding that Zauderer applies only to disclosures addressing “inherently misleading” commercial speech). The notice requirement in SF 383 does not remedy misleading conduct because it requires disclosures to pharmacies with whom third-party payors have no relationship. Defendant identifies no misleading practices that such notice would address.
Second, even under Zauderer‘s deferential standard, the notice requirement proves constitutionally problematic. The provision is not “reasonably related to the State‘s interest in preventing deception of consumers” because the State makes no argument that the requirement addresses consumer deception. Zauderer, 471 U.S. at 651. Rather, the State characterizes its purpose as allowing willing pharmacies fair opportunity to participate in a network—an objective unrelated to consumer deception.
Third, requiring indiscriminate disclosure of commercially sensitive plan terms constitutes an undue burden. Plaintiffs say that the notice requirement forces them to “reveal commercially sensitive information” they otherwise would not disclose to third parties with whom they have no preexisting relationship. [ECF No. 16 at 29]. They contend that requiring “uniform disclosure to all area pharmacies, regardless of whether any given pharmacy demonstrates interest in participating in a third-party payor‘s network” imposes significant implementation costs and competitive ramifications that render the requirement unduly burdensome under Zauderer. Id. at 31 n.15. Iowa responds that transparency is “a feature, not a bug” of its regulatory scheme, arguing that the State has substantial interests in “promoting consumer choice and transparency and protecting against misleading practices that disrupt care.” [ECF No. 24-1 at 47].
The implementation costs and competitive ramifications of mandatory disclosure to all area pharmacies—regardless of their interest in participation—exceed constitutional boundaries. The requirement compels disclosure of competitively sensitive network terms and reimbursement information to entities that may be competitors or may have no legitimate interest in participation. This indiscriminate approach differs materially from traditional disclosure requirements that address ongoing commercial relationships or remedy specific misleading practices. As one court recently
Defendant seeks to bolster its position by analogizing to disclosure requirements upheld in other Circuits. This reliance on Rowe proves misplaced. That decision upheld disclosure requirements between PBMs and their existing customers regarding ongoing transactions—a materially different situation from SF 383‘s requirement that third-party payors disclose sensitive information to unrelated pharmacies. The panel specifically noted that the challenged provisions involved “routine disclosure of economically significant information” in existing commercial relationships. Rowe, 429 F.3d at 316. SF 383‘s notice requirement lacks this crucial limitation.
Defendant advances a broader defense of the State‘s regulatory framework, arguing that the challenged provisions serve substantial interests in “transparency, protecting consumer choice, and limiting PBMs’ ability to self-deal.” [ECF No. 24-1 at 47]. Even accepting these as legitimate governmental objectives, the constitutional inquiry focuses on means rather than ends. The State‘s chosen approach—suppressing truthful commercial information—fails to directly advance these interests and employs unnecessarily sweeping restrictions on protected expression.
Prohibiting plan sponsors from communicating the comparative advantages of particular pharmacies does not enhance transparency but diminishes it by withholding relevant information that consumers need to make informed decisions. This restriction similarly undermines rather than promotes consumer choice by constraining the guidance available to plan participants. When governmental means prove not merely ineffective but actively counterproductive to stated ends, the constitutional balance tips decisively against such regulation. The State cannot satisfy Central Hudson‘s demanding standard through measures that achieve the opposite of their purported purpose.
f. Conclusion
The challenged provisions of SF 383 impose content-based and speaker-based restrictions on truthful commercial speech without adequate constitutional justification. The anti-referral provision prevents disclosure of factually accurate information and guidance that would assist consumer decision-making, while the notice requirement compels disclosure to unrelated parties without sufficient justification. Under either Central Hudson‘s intermediate scrutiny or Zauderer‘s more deferential framework, these provisions fail constitutional review. Plaintiffs have demonstrated a likelihood of success on their First Amendment claims sufficient to support preliminary injunctive relief.
5. Remaining Factors for Preliminary Injunction Analysis
The Court‘s determination that Plaintiffs demonstrate a likelihood of success on several of their claims requires analysis of the remaining preliminary injunction factors under the Dataphase analysis. The irreparable harm inquiry focuses on both the immediacy and recoverability of threatened injury, while the balance of equities weighs Plaintiffs’ demonstrated harm against potential injury to the State from enjoining a duly enacted statute. Plaintiffs assert they face immediate and unrecoverable compliance costs alongside constitutional deprivations that cannot be remedied through subsequent monetary relief. Iowa responds that preliminary relief would frustrate the State‘s sovereign authority
a. Irreparable Harm
Plaintiffs demonstrate a likelihood of irreparable harm sufficient to support preliminary injunctive relief. The inquiry encompasses both the immediacy and recoverability of the threatened injury, as well as the constitutional dimensions of the alleged violations.
Plaintiffs face substantial and immediate financial consequences from SF 383‘s implementation. As detailed above, actuarial analyses projects compliance costs of $121 per participant annually, with specific provisions adding over $10 per prescription filled at retail pharmacies. [ECF No. 6-1 ¶¶ 16–22] (Bartle Decl.). Pella Corporation‘s estimates, likewise described earlier, project annual costs exceeding $1.1 million. [ECF No. 6-2 ¶ 30] (Veenstra Decl.). These expenditures commence immediately upon the statute‘s July 1 effective date and continue indefinitely during litigation.
The threat of unrecoverable economic loss constitutes irreparable harm where, as here, recovery through subsequent litigation remains highly improbable. Iowa Utils. Bd. v. FCC, 109 F.3d 418, 426 (8th Cir. 1996). Defendant enjoys qualified immunity from damages claims unless his conduct violates clearly established statutory or constitutional rights of which a reasonable person would have known. Z.J. by and through Jones v. Kansas City Bd. of Police Comm‘rs, 931 F.3d 672, 693 (8th Cir. 2019). Given the evolving nature of
The loss of constitutional protections independently supports a finding of irreparable harm. It has long been established that First Amendment deprivations, even of brief duration, “unquestionably constitute[] irreparable injury.” Powell v. Noble, 798 F.3d 690, 702 (8th Cir. 2015) (quoting Elrod v. Burns, 427 U.S. 347, 373 (1976)); see also Ohlensehlen v. Univ. of Iowa, 509 F. Supp. 3d 1085, 1103 (S.D. Iowa 2020) (noting that “[t]he denial of a constitutional right is a cognizable injury and an irreparable harm.“) (citation omitted). SF 383‘s immediate effective date creates irreparable structural harm that cannot be easily remedied. Once the statute takes effect, Plaintiffs must modify
SF 383‘s immediate effect creates an additional form of irreparable harm by placing Plaintiffs in an untenable position between conflicting legal obligations.
Defendant argues that Plaintiffs’ litigation timing “vitiates much of the force” of their irreparable harm claims, noting they sought relief only two business days before SF 383‘s effective date despite monitoring the legislative process. [ECF No. 24-1 at 49]. This argument is unpersuasive. Plaintiffs filed suit within two weeks of the Governor‘s signature and more than a week before the effective date—a reasonable timeframe given the complexity of federal preemption litigation and the need to coordinate among multiple parties. Any timing pressure stems from the legislature‘s decision to impose an effective date of merely sixteen days between enactment and implementation, not from dilatory conduct by Plaintiffs.
The record establishes that Plaintiffs face immediate, substantial, and largely irreparable harm from SF 383‘s enforcement. The combination of unrecoverable financial costs, constitutional deprivations, and structural disruption to
b. Balance of Harms and Public Interest
When a plaintiff seeks to restrain governmental action, the balance of equities and public interest factors largely merge. Eggers v. Evnen, 48 F.4th 561, 564 (8th Cir. 2022) (collecting cases). The Court weighs the threat of irreparable harm demonstrated by the movant against the injury that granting the injunction will inflict on other parties to the litigation. MPAY Inc., 970 F.3d at 1020 (quoting Dataphase, 640 F.2d at 113).
Federal preemption carries particular significance in the preliminary injunction analysis. Express preemption of a statute means that “a finding with regard to likelihood of success fulfills the remaining preliminary injunction requirements.” United States v. Texas, 719 F. Supp. 3d 640, 695 (W.D. Tex. 2024) (cleaned up) (citation omitted); see also GEO Grp. v. Inslee, 720 F. Supp. 3d 1029, 1068 (W.D. Wash. 2024).
The balance of equities favors Plaintiffs, though the analysis is largely subsumed within the irreparable harm inquiry already addressed. The harm extends beyond Iowa‘s borders because many employers maintain uniform plans across multiple states, forcing nationwide termination of cost-saving programs to achieve compliance with Iowa-specific requirements. Such broad disruption to established benefit structures contradicts
Defendant argues that enjoining SF 383 inflicts irreparable harm on the State by preventing enforcement of a duly enacted statute and undermining Iowa‘s sovereign
However, the State “lack[s] a meaningful equity in attempting to enforce a patently preempted ordinance.” Couser v. Shelby Cnty., 681 F. Supp. 3d 920, 948 (S.D. Iowa 2023). Any interest the State has in enforcing its laws generally becomes obviated where the law appears “invalid.” Id.; accord Missouri v. Trump, 128 F.4th 979, 997 (8th Cir. 2025) (describing governmental interest in enforcing a law as “minimal” given likelihood that the law exceeded agency authority).
The public interest likewise supports preliminary relief. There exists a “substantial public interest in ensuring that governmental agencies abide by federal laws.” Saxena v. Noem, No. 5:25-CV-0505-KES, 2025 WL 1149498, at *3 (D. S.D. Apr. 18, 2025). It is “always in the public interest to protect constitutional rights.” Carson v. Simon, 978 F.3d 1051, 1061 (8th Cir. 2020) (citation omitted).
Finally, the Court notes that preliminary relief preserves the status quo by preventing the implementation of a сomprehensive regulatory scheme that fundamentally alters the relationship between
6. Severability
The Court‘s conclusion that some provisions of SF 383 are likely invalid while others are not requires a determination of whether the problematic provisions may be severed from the remainder of the statute. SF 383 contains an express severability provision directing the application of
If any provision of an Act or statute or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act or statute which can be given effect without the invalid provision or application, and to this end the provisions of the Act or statute are severable.
Severability analysis requires courts to determine “whether the valid and the invalid parts of a statute are independent and separable, or interdependent.” State v. Monroe, 236 N.W.2d 24, 35 (Iowa 1975) (en banc). This inquiry focuses on “legislative intent, as indicated by the words employed and the considerations underlying the enactment of the statute.” Id. Severance is appropriate “if it does not substantially impair legislative purpose, the enactment remains capable of fulfilling the apparent legislative intent, and the
The severability inquiry asks whether the legislature‘s core objectives can survive the removal of invalid provisions. Courts preserve a statute‘s valid portions unless doing so would destroy the legislature‘s “paramount intent or chief purpose” or if “the legislature probably would not have enacted the statute at all if the invalid part had been eliminated.” Monroe, 236 N.W.2d at 35–36. The remaining provisions must be capable of independent operation—“complete in itself and capable of being executed in accordance with the apparent legislative intent . . . wholly independent of that which was rejected.” Id. at 35.
This doctrine serves constitutional separation of powers principles by ensuring that courts “leave the valid parts in force on the assumption that the legislature would have intended those provisions to stand alone.” Breeden, 887 N.W.2d at 608. Courts have applied this “rule of constitutional restraint for over 100 years,” recognizing that the judicial role requires preserving rather than destroying legislative enactments wherever constitutionally permissible.
SF 383 encompasses multiple discrete regulatory provisions that can function independently. The statute addresses pharmacy network access, reimbursement standards, transparency requirements, and enforcement mechanisms through separate provisions that serve distinct but related purposes within Iowa‘s comprehensive approach to PBM regulation.
The anti-discrimination provisions, any-willing-provider requirements, and cost-sharing mandates all serve the legislative purpose of ensuring equitable treatment of pharmacies within PBM networks. These provisions nevertheless operate through different mechanisms and do not depend upon one another for their effectiveness. For example, the reimbursement rate requirements that prohibit PBMs from paying affiliated pharmacies more than unaffiliated entities would advance the legislative goal of preventing self-dealing even if network access provisions were preempted.
Similarly, the transparency and reporting requirements serve the independent purpose of regulatory oversight and can function effectively regardless of the validity of other provisions. The pass-through pricing requirements address manufacturer rebate handling and operate independently of network composition or cost-sharing arrangements.
Several provisions present closer questions of interdependence. The mandatory dispensing fee in
The Court identifies one additional provision that cannot survive independently:
Some of SF 383‘s provisions remain severable from those found likely preempted or unconstitutional. The express severability
The Court will therefore enjoin only those provisions found likely preempted or unconstitutional, along with the limited number of dependent provisions identified above that cannot properly function independently. This approach preserves the maximum constitutionally permissible scope of Iowa‘s regulatory scheme while protecting Plaintiffs from likely invalid state interference with federal
7. The Proper Reach of Injunctive Relief
The proper scope of preliminary injunctive relief presents considerations fundamentally altered by the Supreme Court‘s recent decision in Trump v. CASA, Inc., 606 U.S. ----, 2025 WL 1773631 (2025), which definitively resolved the longstanding question of federal courts’ authority to issue universal injunctions.
Plaintiffs acknowledge that CASA precludes universal relief but argue that complete relief for each plaintiff requires extending the injunction beyond the named parties to encompass their “contractors and agents who assist in thе administration of their health benefit plans, including their PBMs.” [ECF No. 39-1 at 27]. They contend that without such extension, “the preliminary injunction would have little value, since it would permit the Commissioner to enforce SF 383 against the very entities that Plaintiffs utilize to administer the prescription drug benefits program in their plans.” Id. Plaintiffs characterize this as merely implementing CASA‘s directive to fashion its ruling to “award[] complete relief” to each plaintiff rather than seeking impermissible universal coverage. Id.
In CASA, the Supreme Court established clear boundaries for injunctive relief issued by federal courts under the Judiciary Act of 1789. CASA directs that federal courts may award only plaintiff-specific relief and that injunctions must be no “broader than necessary to provide complete relief to each plaintiff with standing to sue.” CASA, 2025 WL 1773631, at *15. The Court emphasized that “‘complete relief’ is not synonymous with ‘universal relief’ but rather constitutes ‘a narrower concept’ rooted in equity‘s traditional authority to ‘administer complete relief between the parties.‘” Id. at *11 (cleaned up) (quoting Kinney-Coastal Oil Co. v. Kieffer, 277 U.S. 488, 507 (1928)). Although party-specific injunctions sometimes may “incidentally” benefit nonparties, such benefits are permissible only when they flow naturally from relief that is itself limited to remedying the plaintiffs’ particular injuries. Id. The Supreme Court further clarified that the complete relief principle is a “ceiling” rather than a mandate, noting that “complete relief is not a guarantee—it is the maximum a court can provide.” Id. at *12. Courts must ensure that any injunction falls within traditional limits on equitable power and comports with “principles of equity” that have historically governed the scope of judicial remedies. Id. at *15.
Under CASA‘s framework, the Court finds that extending preliminary relief to Plaintiffs’ contractors and agents is appropriate to afford Plaintiffs effective relief. The modern structure of employee benefit administration creates functional interdependence between
The Court does not embrace Plaintiffs’ contention that extension of the injunction is necessary because they are entitled to complete relief. Under CASA, complete relief operates as a ceiling, not a floor. Courts cannot award relief merely because it might be more convenient or comprehensive for plaintiffs. The inquiry focuses on whether relief limited to the named plaintiffs would provide meaningful protection for their interests.
The practical realities of employee benefit administration nevertheless support extending preliminary relief to Plaintiffs’ service providers. Modern prescription drug benefit programs operate through an integrated system where
This extension falls within CASA‘s recognition that party-specific injunctions may sometimes benefit nonparties when such benefits flow naturally from relief tailored to remedy Plaintiffs’ particular injuries. The extension here does not seek to protect the general public or nonparty interests for their own sake. Rather, it operates to ensure that relief granted to Plaintiffs can be meaningfully implemented given the realities of employee benefit plan administration.
The Court therefore concludes that preliminary relief should extend to Plaintiffs’ contractors and agents who assist in the administration of their health benefit plans, including their PBMs, to the extent necessary to ensure effective relief for the named Plaintiffs. This extension is limited to preventing enforcement of those specific SF 383 provisions the Court has found likely invalid as applied to
Within 24 hours after the filing of this Order, Plaintiffs shall promptly provide to the Court a list of contractors and agents they currently utilize for plan administration, enabling the Commissioner to understand precisely which entities are covered by this preliminary relief.
8. Security Requirements Under Rule 65(c)
Defendant seeks an $80,000 bond based on the maximum regulatory penalties that could be imposed under SF 383—$10,000 for each Plaintiff and $10,000 for their PBMs. This calculation fundamentally misconceives the purpose of
III. CONCLUSION
This case presents the familiar tension between state regulatory authority and federal preemption, complicated by the modern realities of employee benefit administration. Iowa‘s comprehensive approach to PBM regulation reflects legitimate concerns about market concentration and rural healthcare access. Yet the Constitution‘s allocation of regulatory authority between state and federal governments requires careful adherence to established boundaries, particularly where Congress has included express preemption provisions through comprehensive legislation like
The Court‘s analysis reveals that SF 383 crosses constitutional lines in multiple respects. Several provisions impermissibly dictate the structure and administration of employee benefit plans by mandating network compositions, cost-sharing arrangements, and contractual terms that
The remaining provisions of SF 383 that survive constitutional scrutiny reflect permissible exercises of state authority over professional licensing, cost regulation, and commercial relationships outside
Defendant Iowa Insurance Commissioner Doug Ommen, his officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with him who receive actual notice of this injunction by personal service or otherwise, are enjoined from enforcing the following provisions of Iowa Senate File 383 against Plaintiffs and their contractors and agents who assist in the administration of their health benefit plans:
The following provisions are enjoined as preempted by
Iowa Code § 510B.1(4) (anti-discrimination requirements);Iowa Code §§ 510B.4B(1)(b) ,510B.4B(2)(a) (any-willing-provider standards);Iowa Code § 510B.4B(1)(d) (open-access standard for specialty drugs);Iowa Code §§ 510B.4B(1)(f) and510B.8(3) (mail-order pharmacy and cost-sharing provisions);Iowa Code § 510B.8(6) (deductible credit requirements);Iowa Code §§ 510B.8D(1) ,510B.8D(2) (mandatory contract terms and supersession provisions); andIowa Code § 510B.4B(4) (general enforcement provision).
The following provisions are enjoined as violative of the First Amendment:
Iowa Code § 510B.1(4) (anti-referral provision) andIowa Code § 510B.4B(2)(a) (compelled disclosure requirements).
Finally, the following provisions are enjoined as inseverable from the foregoing invalid provisions:
Iowa Code § 510B.8D(2) (supersession over contrary contract terms) andIowa Code § 510B.8B(3) (dispensing fee provision that cannot survive without the anti-discrimination framework).
The preliminary injunction shall remain in effect pending final resolution of this matter or further order of the Court. Within 24 hours of this Order, Plaintiffs shall provide the Court with a list of contractors and agents currently utilized for plan administration. No injunction bond is required under
IT IS SO ORDERED.
Dated this 21st day of July, 2025.
STEPHANIE M. ROSE, CHIEF JUDGE
UNITED STATES DISTRICT COURT