Iowa’s Pharmacy Crisis: Benefit Managers under Fire by Experts



Nearly 100 pharmacies across Iowa have closed their doors since 2008, with independent pharmacies witnessing the largest hit, partly due to insurance payouts not covering drug costs. This trend is largely attributed to the lack of transparency and oversight of pharmacy benefit managers (PBMs), intermediary businesses that negotiate drug prices and reimbursements between insurance providers and drug manufacturers, with three companies controlling about 80% of the market. A bipartisan proposal introduced by Iowa Republican U.S. Rep. Mariannette Miller-Meeks seeks to tackle this issue by changing the payment system to PBMs to a flat fee rather than a percentage of a drug’s cost.

Iowa Pharmacies Close as Insurance Payouts Fall Short of Drug costs

According to recent research from Drake University, nearly 100 pharmacies across Iowa have shut down since 2008, largely due to insufficient insurance payouts for drug costs. Independent pharmacies have seen the most significant impact, with 87 stores closing between 2008 and 2022. The Iowa Pharmacy Association survey indicated that 40% of member pharmacies anticipate closure within the next 12 months, affecting over 133,000 patients’ access to medication.

Pharmacists, lawmakers, and patient advocates point to Pharmacy Benefit Managers, or PBMs, as the primary cause of this crisis. PBMs act as intermediaries between insurance providers and drug manufacturers, playing a significant role in drug prices and pharmacy reimbursements. However, their operations lack transparency and oversight, leading to criticism from industry stakeholders.

Proposed Bipartisan Bill Tackles PBM Practices

U.S. Representative Mariannette Miller-Meeks recently introduced a bipartisan proposal aimed at addressing PBM practices that inflate drug costs. The proposal plans to use a flat fee to compensate PBMs rather than basing payments on a drug’s cost. This is one of several PBM-related proposals this year aimed at reducing costs and increasing pricing transparency for patients.

The new bill introduced by Miller-Meeks uses delinking policies, enabling PBMs to charge a flat fee for drug placement rather than a percentage of the drug cost. This approach aims to prevent PBMs from creating complicated contracts that drive up prices. The bill also proposes a ban on “risk-mitigation pricing” and patient steering, promoting fair practice in the industry.

Despite criticism, PBMs argue that they are effectively reducing drug costs and negotiating the best prices for their clients.

Efforts to Protect Rural Pharmacies

Senator Chuck Grassley has been a driving force in promoting legislation to increase drug pricing transparency and hold pharmaceutical benefit managers accountable. A proposed amendment requires the Department of Health and Human Services to report the effects of changes in Medicare Part D, specifically in relation to rural pharmacies.

As pharmacy closures continue to threaten access to medication, especially in rural areas, the restrictions on PBMs included in Representative Miller-Meeks’ bill provide some hope. While not a complete solution, they represent a significant step towards addressing the challenges faced by pharmacies in Iowa and across the nation.

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