Gov. Kim Reynolds has signed into law Senate File 383, which will regulate and cut costs associated with pharmacy benefit managers, or PBMs.

PBMs are companies that manage prescription drug benefits for health insurance plans and employers. Many refer to them as the middlemen between prescription drug manufacturers, insurers and pharmacies, and negotiate the price and rebates involved.

Proponents say the bill will ease financial burden on pharmacies, while opponents believe it will lead to higher costs for employers and their employees.

The new law goes into effect July 1.

The bill’s sponsor Rep. Brett Barker, who works as a pharmacist, told the Business Record that PBMs drive up costs for pharmacists because they are not always fully reimbursed for their costs when distributing some medications. He said 200 small pharmacies across the state have closed during the past decade because of costs associated with PBMs.

Under the new law, PBMs will be required to reimburse pharmacists a dispensing fee of $10.68 for preparing and dispensing medications.

The Iowa Association of Business and Industry and other business groups opposed the legislation, saying it would increase costs for Iowans by $340 million.

ABI released this statement about the governor signing the bill into law:

“ABI is disappointed in today’s action. ABI testified at every turn in favor of legislation that would support small independent pharmacies in Iowa. The bill that the governor signed today is not that. Senate File 383 includes expensive, unneeded provisions that are going to drive up the costs of pharmacy services in Iowa without any discernable improvement in patient care. Iowans – including businesses and employees – will bear these costs at the pharmacy counter and in the structure of their health care plans. This is an additional headwind in an already challenging business environment. Now law, ABI will take every opportunity to mitigate the increased costs on our members and their team members throughout Iowa.”

In a statement, the governor explained her decision, saying it was not an easy choice to approve the bill.

“After extensive research and thoughtful conversations with employers and stakeholders on all sides of this complex issue, I made the decision to sign SF 383 in an effort to continue improving our health care system by bringing greater accountability to the role of Pharmacy Benefit Managers,” she said in the statement.

She said Texas, Georgia, Indiana and Montana passed similar bills this year.

Reynolds added that the complexity of the bill and lack of verifiable data made signing the bill a difficult decision.

“My administration will closely monitor implementation to mitigate and ensure that any unintended consequences for private employers are addressed,” she stated.

The Iowa Insurance Division will conduct oversight on the new law and will create a report on its effects.