Healthcare Headlines
Iowa Law Places New Restrictions on PBMs; Industry Groups Immediately File Suit
Iowa Governor Kim Reynolds signed Senate File 383 into law, placing new restrictions on pharmacy benefit managers (PBMs). Under the new law, PBMs are prohibited from:
- Prohibiting a beneficiary from utilizing an in-network pharmacy or imposing any monetary advantages or penalties that could affect the beneficiary's choice of pharmacy, such as variance in cost sharing, a reduction in reimbursement for services of the in-network pharmacy, promoting one pharmacy over another, and comparing the reimbursement rates of a pharmacy against mail order rates.
- Denying pharmacies and pharmacists from becoming a network provider if they meet the terms and requirements of the health plan and accept the reimbursement rates.
- Imposing additional requirements such as accreditation, certification, and credentialing on pharmacists or pharmacies that are inconsistent or more stringent than those required by the Iowa Board of Pharmacy.
- Unreasonably designating a prescription drug as a specialty drug to prevent a beneficiary from accessing the drug or limiting a beneficiary's access from an in network pharmacy.
- Requiring beneficiaries to exclusively use a mail order pharmacy.
- Imposing conditions of coverage or payment on beneficiaries that are more costly or restrictive than those the beneficiary would experience if they had used a mail order pharmacy or other pharmacy that can provide the services at the same cost and copayment as a mail order pharmacy.
Other key parts of the law require PBMs to pass through 100% of all rebates they receive to the health plan; reimburse pharmacies at the same rate as the PBMs' affiliated pharmacies (which also must not be less than the most recent national average drug acquisition cost); and pay pharmacists a $10.68 dispensing fee. The law also sets forth minimum requirements to allow for pharmacies to appeal PBM decisions, including direct access to PBM decision-makers on appeals and a minimum of 30 days to initiate an appeal. PBMs are required to respond to any appeal within seven days of receipt of any appeal.
Industry groups filed a Complaint for Injunctive and Declaratory Relief shortly after the passage and signing of the bill, seeking to enjoin the enactment and arguing that the law is unconstitutional as it is preempted by federal law and violates the free speech protections of the First Amendment.
PBM Lobby Files Suit Against Arkansas to Halt PBM Ownership of Pharmacies
As previously reported in "Health Headlines: April 2025," Arkansas Governor Sarah Huckabee Sanders signed House Bill 1150 into law, making Arkansas the first state to prohibit pharmacy benefit managers (PBMs) from owning or operating pharmacies within the state. The bill will go into effect January 1, 2026.
On June 9, 2025, the Pharmaceutical Care Management Association, which represents 20 PBMs, and Navitus Health Solutions filed suit in an effort to stop the law from going into effect. The complaint argued that the law is unconstitutional, will inflict irreparable harm on businesses, and result in a significant loss of jobs across the industry. In seeking the court's grant of a preliminary injunction barring enforcement of the law while the suit proceeds, the PBM plaintiffs argued the law would "wipe[] away an enormous swath of the prescription-drug marketplace in Arkansas," leading to a disruption to medication access "for patients in need of health-sustaining and often life-saving drugs," which could lead to lower drug adherence, worse health outcomes, and higher healthcare costs. The plaintiffs also argued that the "only stakeholders better off will be the local pharmacies who will reap greater profit from ill-conceived legislation designed to pick economic winners and losers."
HHS-OIG Issues Unfavorable Opinion for Payments by Medical Device Company for Exclusion Screenings
The U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) issued an unfavorable advisory opinion about possible kickbacks in vendor screening services.
Under the proposed arrangement, the requester, which is a medical device company, would pay the costs associated with its customers' (including hospitals, health systems, and ambulatory surgery centers) use of third-party screening services to conduct and monitor the medical device company's exclusion from federal healthcare programs and ensure compliance with other legal requirements, such as compliance with the "requirements of a particular Medicare Advantage plan." The third-party screening service would charge the medical device company an annual subscription fee on a per-customer basis at an estimated yearly cost of $450,000.
HHS-OIG concluded that the arrangement could generate prohibited remuneration under the Anti-Kickback Statute because customers would normally bear the cost of the screening services and, therefore, the medical device company's payment of the third-party screening service fees could induce customers to purchase items or services from the medical device company, some of which could be reimbursable under federal healthcare programs. HHS-OIG reiterated its concern regarding the provision of free items or services to referral sources that, in addition to being prohibited remuneration under the Anti-Kickback Statute, could also result in anticompetitive behavior by steering customers to the medical device company over competitors that are unable or unwilling to cover the costs of screening.
United States Senators Propose Significant Cuts to Medicaid
On June 16, 2025, the United States Senate Committee on Finance released an updated draft of Senate Republicans' budget reconciliation bill. Among other changes, this draft proposes even more significant cuts to Medicaid than the House of Representatives had in the version of the bill they passed in May.
In addition to the provisions included by the House of Representatives, such as requiring states to increase the frequency with which they confirm Medicaid enrollees' eligibility and implementing monthly work requirements as a condition of Medicaid eligibility for certain groups, Senate Republicans made additional cuts, including:
- Implementing caps on Medicaid-expansion states' provider taxes, used to finance states' shares of Medicaid expenditures.
- Imposing new restrictions on state-directed payments, which allow states to make supplemental payments for Medicaid-covered services under managed care organization contracts, by limiting federal government matching rates for such payments.
- Eliminating Medicaid and Children's Health Insurance Program eligibility and restricting Medicare eligibility for groups including refugees, asylum seekers, certain abused spouses and children, certain victims of trafficking, and certain Cuban immigrants.
- Excusing only adults with dependent children under 14 from the House-imposed monthly work requirements, rather than excusing adults with any dependent children as proposed by the House.
Senate Republicans continue to debate and make changes to the draft, in an effort to pass the bill by July 4, 2025.
July 3, 2025 Update: The bill was passed by the Senate on July 1, 2025 and the House of Representatives on July 3, 2025. The bill now awaits the President's signature.
Aspen Group Settles Data Breach Lawsuit for $4.4M
ADMI Corp., which does business as the Aspen Group (Aspen), has agreed to a $4.4 million settlement to resolve a class action lawsuit against WellNow Urgent Care (WellNow) and other Aspen entities, stemming from a ransomware attack that occurred in April 2023. The breach affected nearly 600,000 individuals across its brands, including WellNow, Aspen Dental, and Aspen Dental Management, exposing sensitive data such as Social Security numbers, health records, and biometric information. The lawsuit alleged that Aspen failed to implement adequate cybersecurity measures to protect this data. In response, the company stated it has since strengthened its security infrastructure. The settlement is pending court approval and aims to compensate affected individuals as well as prevent future incidents.
This settlement serves as yet another reminder that data privacy and security, particularly with respect to protected health information, remain key areas of risk.
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