Wellmark sues to block enforcement of new law on pharmacy benefit managers

Iowa’s largest health insurer, Wellmark Blue Cross-Blue Shield, is suing the Iowa insurance commissioner to block enforcement of a new state law that attempts to regulate pharmacy benefit managers.

Earlier this year, state lawmakers and the governor approved Senate File 383, which regulates pharmacy benefit managers, employee benefit plans, insurance carriers, and other third-party payors that provide or administer prescription drug benefits.

The Iowa Association of Business and Industry filed a lawsuit in June to block enforcement of the new law. On July 21, 2025, a federal judge ruled the law was, in some respects, illegal and invalid and issued an injunction blocking its enforcement

However, that court ruling was limited in that it prevents the state from enforcing the law only against the plaintiff in the case, ABI, and its members and contractors.

In its newly filed lawsuit over Senate File 383, Wellmark notes that nowhere in the ABI ruling did the court suggest that non-parties to that case were precluded from similarly challenging any future enforcement efforts, although the injunction in the ABI case is currently on appeal to the Eighth Circuit Court of Appeals.

In its lawsuit against Iowa Insurance Commissioner Doug Ommen, Wellmark says the scope of the injunction raises the question of whether Ommen can “legitimately seek to enforce” the new law.

“The answer to that question, in Wellmark’s view, should be ‘no,’” Wellmark argues, stating that the court found the law is preempted by the federal Employee Retirement Income Security Act, or ERISA, and that it also violates the First Amendment to the U.S. Constitution.

Despite that, Wellmark argues, on Sept. 24, 2025, Ommen issued guidance in the form of a bulletin indicating he believes he is “obligated” to enforce the new law “in its entirety” against all regulated entities who were not plaintiffs in the ABI case.

In addition, Wellmark says, the commissioner recently asked Wellmark for information regarding the new law’s implementation, signaling possible investigatory and enforcement efforts.

“Wellmark believes that the appropriate scope of the preliminary injunction should include Wellmark’s administration of all of its business accounts and individual insurance products — but Wellmark acknowledges the full scope of the preliminary injunction in this respect is subject to reasonable competing interpretations,” the lawsuit states. “That lack of clarity now necessitates Wellmark seeking relief in this court.”

The insurer says its legal action will help prevent “many piecemeal complaints” being filed to extend the ruling in the ABI case to others who weren’t part of that lawsuit.

“Wellmark had hoped to avoid filing this lawsuit,” the company states in its petition, adding that the commissioner’s position on enforcement, as well as Wellmark’s own interests and those of the people it insures, necessitates court intervention.

“The court should issue an injunction halting, and declare illegal, (the commissioner’s) enforcement of Senate File 383 with respect to the plans and policies Wellmark insures and administers for those who are not parties to ABI,” the petition states.

In addition to Wellmark Blue Cross-Blue Shield of Iowa, the plaintiffs in the case include affiliates Wellmark Inc., Wellmark Health Plan of Iowa, and Wellmark of South Dakota. The Iowa Insurance Division and Ommen have yet to file a response to the lawsuit, and the Iowa Capital Dispatch was unable Thursday to reach the division’s spokesperson for comment.

Wellmark is Iowa’s largest provider of health insurance and related administrative services, and also is Iowa’s largest provider of health insurance for individuals, such as those served by the health insurance exchange through the Affordable Care Act. According to the company, through its plans and policies, Wellmark now serves more than 800,000 people in Iowa.

New law backed by pharmacy lobbyist turned legislator

Senate File 383, which supporters have said will help financially support Iowa’s pharmacies, imposed new regulations on the pharmacy benefit managers, or PBMs, that negotiate drug prices on behalf of health insurers.

The floor manager of the bill in the Iowa House was Rep. Brett Barker, a Story County Republican who is vice president of pharmacy for NuCara Management Group, an Iowa company that oversees 35 pharmacies. Barker has also served on the board of the Iowa Pharmacy Association, which lobbied the Iowa Legislature to approve the bill earlier this year. In 2022 and 2023, before his November 2024 election to the Iowa House, Barker worked as a lobbyist for the pharmacy association.

Among other requirements, the bill includes a provision for pharmacists to be paid a dispensing fee of $10.68 for preparing and dispensing medications. Opponents of the bill have argued it will increase Iowa consumers’ pharmaceutical costs by tens of millions of dollars annually.

As part is its lawsuit, Wellmark claims the legislation is one of “the most expensive, single Iowa legislative enactments ever passed effecting an increase in costs for health-benefit plans,” and says it will lead to the “largest increase in health benefit plan costs for Iowa’s third-party payors from any source of legislation — federal or state — since the enactment of the Affordable Care Act by Congress in 2010.”

The company estimates that for the plans and policies it insures or administers, the new law will increase costs by nearly $100 million annually, and that the individuals covered by Wellmark policies will face an additional $40 million in costs.

When signing the bill into law, Reynolds indicated it was a “difficult decision” for her.

“After extensive research and thoughtful conversations with employers and stakeholders on all sides of this complex issue, I made the decision to sign Senate Filed 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 a written statement. “My administration will closely monitor implementation to mitigate and ensure that any unintended consequences for private employers are addressed.”