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Iowa Senate File 383: What it means for your prescription drug benefits

posted by TrueNorth Employee Benefits on Friday, June 20, 2025

As your strategic partner in employee benefits, TrueNorth Companies is committed to keeping you informed about significant legislative changes that could impact your organization’s financial health and talent strategy. Iowa’s recently enacted Senate File 383, now law and effective July 1, 2025 (for new or renewed contracts), introduces substantial reforms to prescription drug benefits management. This legislation is designed to enhance transparency and fairness within the pharmaceutical supply chain, particularly impacting Pharmacy Benefits Managers (PBMs) and, by extension, your employee health benefit costs.

Understanding the core of SF 383 

Senate File 383 directly addresses PBM practices that have contributed to opaque pricing and limited control for plan sponsors. Important provisions include:

1. Elimination of “spread pricing” with pass-through pricing: The payment a PBM receives from a health plan (your company) for a prescription drug must be equivalent to the payment the PBM makes to the dispensing pharmacy. Historically, PBMs sometimes kept a “spread” – the difference between what they charged the plan and what they paid the pharmacy.
2. 100% rebate pass-through: To reduce premiums, the law requires that 100% of all rebates received by a PBM must be passed through to the health carrier or, if applicable, to the employee plan sponsor, maximizing the financial benefit of these rebates for your organization.
3. Improved pharmacy reimbursement and stability: Retail pharmacies (defined as those that are not pharmacy chains with 20+ locations in 20+ states, or publicly traded entities, and do not exclusively provide mail-order dispensing) must be reimbursed at no less than the most recently published National Average Drug Acquisition Cost (NADAC) or, if the NADAC is unavailable, the Wholesale Acquisition Cost (WAC). Furthermore, a mandatory professional dispensing fee of $10.68 per prescription will be paid to these retail pharmacies, acknowledging the pharmacist’s role in patient care and the costs associated with dispensing medication.
4. No discrimination against pharmacies or patient choice: PBMs are explicitly prohibited from discriminating against pharmacies or pharmacists, or from limiting a covered person’s choice of pharmacy. This means:
   • Plans cannot incentivize or penalize members to choose one pharmacy over another.
   • Patients cannot be required to use a mail-order pharmacy for their prescriptions.
   • Pharmacies meeting plan requirements must be allowed to participate in the network under identical reimbursement terms as similarly classified pharmacies.
5. Copay assistance applied to deductibles/out-of-pocket maximums: Generally, any amount paid by or on behalf of a covered person towards their prescription drug cost-sharing must be applied to their deductible and out-of-pocket maximums. There’s an exception for High-Deductible Health Plans (HDHPs) where this applies after the minimum deductible is met, except for preventative care.
6. Appeals process for pharmacies: The law establishes a formal appeal process for pharmacies to challenge reimbursement rates, aiming for quicker resolution and fairer adjustments when needed.

What this could mean for you

While this bill champions transparency and supports the sustainability of local pharmacies, it is projected to introduce new cost dynamics for employer-sponsored health plans. These changes, particularly the mandatory dispensing fees and altered reimbursement structures, could lead to an increase in overall pharmacy-related expenses for health plans.