Des Moines, Iowa — A federal court has temporarily blocked the enforcement of significant elements of a new state law designed to regulate pharmacy benefit managers (PBMs) and health plans in Iowa. On July 21, 2025, the U.S. District Court for the Southern District of Iowa issued a preliminary injunction, citing potential conflicts with the Employee Retirement Income Security Act of 1974 (ERISA) and the First Amendment’s protection of commercial speech.
This ruling follows a temporary restraining order issued by the court on June 30, a day before the law was set to take effect. The court later extended the restraining order to July 21 due to scheduling conflicts, after holding a hearing on the preliminary injunction on July 18.
In this case, a group of Iowa employers and health plans governed by ERISA challenged the law, arguing it encroached on federal protections related to plan design and administration. The plaintiffs contended that the provisions hindered accurate communication between health plans, PBMs, and beneficiaries.
The Judge’s decision included blocking several key provisions of the law. For instance, while the requirement for PBMs to pass through manufacturer rebates was upheld, the court struck down a specific mandate dictating contract terms as it interfered with the fiduciary responsibilities outlined in ERISA. The ruling also prohibited a requirement that beneficiary payments be counted towards deductibles—deemed as overstepping the bounds of permissible regulation.
Additionally, various pharmacy network restrictions were enjoined. The court found that prohibiting discriminatory treatment of pharmacies and mandating open access to pharmacy networks would unduly limit plan sponsors’ discretion in network design. The ruling noted that such limitations intrude on fiduciary duties by disrupting legitimate business considerations such as cost and quality.
The court also found issues with a fixed dispensing fee of $10.68, ruling that it could unintentionally discourage plans from working with rural pharmacies, the very aim the law intended to support. Other provisions enjoined include an enforcement mechanism that would allow beneficiaries and pharmacies to sue ERISA plans and any stipulation that would authorize the law to override conflicting contractual terms.
On the First Amendment front, the court found that certain restrictions violated protections for commercial speech. A ban on referrals to specific pharmacies and a mandate for disclosure of network participation were both cited as problematic, as they could suppress truthful communication regarding lawful transactions.
While some provisions of the law were enjoined, others were upheld, including those governing the appeals process for pharmacies challenging PBM reimbursement decisions. The court deemed transparency requirements, which necessitate quarterly reporting of pricing data, to be valid and not infringing on ERISA administration.
In an 87-page opinion, Chief Judge Stephanie M. Rose emphasized that plaintiffs had enough standing to challenge the law, observing the significant interdependence between health plans and PBMs. The court reiterated that ERISA preempts state laws that dictate the foundational structure of employee benefit plans, asserting that the contested provisions of the Iowa law crossed that line.
This ruling represents a pivotal moment in the ongoing national discourse surrounding state regulations on PBMs and their preemption under ERISA. Mirroring previous court decisions, such as the Tenth Circuit’s ruling on Oklahoma’s similar law, it sets a precedent for evaluating how state laws intersect with federal regulations.
Going forward, states contemplating similar legislation will need to tread carefully, considering the implications of ERISA preemption and First Amendment rights. The decision might also encourage states to revisit existing PBM regulations that affect ERISA-covered plans.
The preliminary injunction will remain in effect until the case reaches a final resolution. Plaintiffs are tasked with providing a list of their PBM contractors to ensure they are included under the injunction, while the Commissioner maintains authority to enforce other law provisions against non-plaintiff PBMs and payers.
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