A lawsuit has been filed in federal court seeking to halt enforcement of a law supporters say is designed to regulate and cut costs associated with pharmacy benefit managers.

The lawsuit filed by the Iowa Association of Business and Industry and four other plaintiffs is also asking the court to find the legislation, signed into law on June 11, illegal.

The lawsuit acknowledges that Iowa lawmakers had good intentions when they passed Senate File 383: Help rural pharmacies threatened by national-chain and mail-order pharmacies and by pharmacy benefit managers, or PBMs, which manage prescription drug benefits for health insurance plans and employers.

To accomplish their goals “lawmakers used a sledgehammer,” the lawsuit states. The bill sparked new and broad-reaching rules that will cost the Iowa health benefits plan community $300 million annually, the lawsuit alleges.

The bill, slated to go into effect on July 1, “adds far-reaching, draconian and expensive new measures” to a portion of the Iowa Code that regulates PBMs, the lawsuit states.

The lawsuit argues that the legislation establishes a regulatory regime that is contrary to the federal Employee Retirement Income Security Act that regulates most health benefits for Iowa residents. Consequently, the Iowa law is overridden by federal law, the lawsuit states.

In addition, the lawsuit argues the law restricts commercial free speech related to pharmacy benefits and networks, making it illegal for employers to tell their employees about ways to save money, such as avoiding a $10.68 fee by using certain pharmacies.

Rather than help independent pharmacies, particularly in rural areas, the new law shifts costs “onto employers and their employees and even [benefits] some large corporate pharmacies,” the lawsuit states.

“We’re challenging this new Iowa law because it’s going to raise health care costs for businesses of all sizes across the state by hundreds of millions of dollars,” Nicole Crain, ABI’s president, said in a prepared statement. “It will also disrupt the prescription drug coverage that Iowans count on, and it even stops health plans from giving people simple, money-saving information, like which pharmacy has the better deal.”

Supporters have said that the legislation was needed because PBMs drive up costs for patients, and that pharmacies are not always fully reimbursed for their costs for medicines. In the past 10 years, 200 small pharmacies have closed in Iowa because of costs associated with PBMs, Rep. Brett Barker, an Iowa lawmaker who sponsored the bill, recently told the Business Record.

On Monday, Barker said he’s not surprised that the lawsuit was filed.

“The PBM playbook across the country has been to bully, to bluster and then, when that fails, to sue,” Barker said. “We are confident that the bill complies with precedence from the U.S. Supreme Court and Eighth Circuit. … There is nothing new in Iowa’s bill that hasn’t been enacted in other pro-business states.”

Other plaintiffs in the lawsuit, which name Iowa Insurance Commissioner Doug Ommen as the defendant, include Iowa Bankers Benefit Plan, Iowa Laborers District Council Health and Welfare Fund, Des Moines Orthopaedic Surgeons PC and Iowa Spring Manufacturing & Sales Co.

To read the entire lawsuit, click here.