Eighth Circuit: Iowa PBM Law Appeal Challenges SF 383 Injunction

• The Eighth Circuit is reviewing Iowa's 2025 law, Senate File 383, which regulates pharmacy benefit managers (PBMs) and health benefit plans.
• A lower court previously enjoined 13 provisions of the law, prompting Iowa to appeal for full reinstatement while plaintiffs seek to invalidate the entire statute.
• Judges expressed strong skepticism regarding Iowa's argument that plaintiffs lack standing to challenge the law.
• The court also questioned Iowa's claim that the law is shielded from federal preemption by the ERISA Insurance Savings Clause.
• The appeal's outcome will determine the scope of state authority over healthcare intermediaries and set precedents for ERISA preemption challenges.

The Eighth Circuit's decision will clarify the extent of state authority to regulate PBMs and other healthcare intermediaries, impacting the balance between state efforts to control healthcare costs and practices, and federal preemption under ERISA.

The Eighth Circuit Court of Appeals recently heard arguments concerning Iowa's Senate File 383 (SF 383), a comprehensive 2025 statute designed to regulate pharmacy benefit managers (PBMs) and health benefit plans. The state enacted the law with the stated aim of curbing anti-competitive practices within the healthcare system, specifically targeting issues such as predatory reimbursement rates, self-dealing by PBMs with affiliated pharmacies, and the practice of steering patients away from independent local pharmacies. Iowa contends that SF 383 is crucial for preserving market competition, assisting consumers, preventing the closure of community pharmacies, and ultimately safeguarding patient access to care across the state.

However, the legislation faced immediate legal challenges from the Iowa Association of Business and Industry, alongside several self-funded Employee Retirement Income Security Act (ERISA) plan sponsors. These groups initiated a lawsuit against Iowa Insurance Commissioner Doug Ommen, seeking to block the law's implementation. In July 2025, a lower federal court issued a preliminary injunction, halting the enforcement of 13 specific provisions of SF 383. This ruling prompted the current appeal to the Eighth Circuit, where Iowa is seeking a complete reversal of the injunction, while the plaintiff groups are advocating for the invalidation of the entire statute.

A central point of contention during the appellate hearing revolved around the standing of the plaintiffs to challenge SF 383. Iowa's Deputy Solicitor General Patrick Valencia argued that the various business and healthcare organizations that filed the lawsuit lacked standing because the law's provisions directly regulate only pharmacy benefit managers, not the plaintiffs themselves.

However, the judges on the panel expressed significant skepticism regarding this argument. U.S. Circuit Judge James Loken, for instance, characterized Iowa's position as pushing for a "novel result," noting that plaintiffs challenging federal preemption of state laws governing benefit plans have historically been permitted to contest healthcare regulations. Loken pressed Valencia on whether the state's rigid interpretation of standing implied that employers and plan sponsors could only sue if a state law posed an immediate existential threat. Anthony Shelley, representing the health plans and business groups, countered Iowa's argument by asserting that any harm inflicted upon pharmacy middlemen directly impacts his clients, as legal liabilities, fines, or compliance penalties imposed on intermediaries are inevitably passed on to the health plans. Shelley emphasized this point, stating that the injunction against PBMs also directly affects the health plans they represent.

Another critical legal battleground in the appeal concerns the applicability of federal preemption under ERISA. Iowa argued that SF 383 is shielded from preemption by the ERISA Insurance Savings Clause, a provision designed to protect state laws that regulate insurance, banking, or securities. This clause, Iowa contended, allows the state to maintain its regulatory authority over PBMs.

However, the appellate bench again pushed back against the state's interpretation. Senior U.S. Circuit Judge Morris Arnold explicitly stated his disagreement, indicating that the statute in question addresses the relationship between PBMs, healthcare providers, and plan owners, rather than constituting an insurance dispute. Furthermore, the plaintiffs highlighted that PBMs carry a fiduciary responsibility to assist beneficiaries in securing the most cost-effective benefits. Concerns were also raised during the hearing about the swift implementation timeline of SF 383, which was slated to take effect shortly after its signing in June 2025, potentially leaving insufficient time for healthcare plan companies to adjust their coverage and operations.

The Eighth Circuit's decision will clarify the extent of state authority to regulate PBMs and other healthcare intermediaries, impacting the balance between state efforts to control healthcare costs and practices, and federal preemption under ERISA. The outcome of this appeal will establish significant precedents concerning standing challenges for similar state laws and the interpretation of the ERISA Insurance Savings Clause. This ruling holds substantial implications for the operational frameworks of health plans, pharmacy benefit managers, and ultimately, for consumers and employers in Iowa and potentially across other states contemplating similar regulatory measures.

Compliance officers and legal counsel for health plans and pharmacy benefit managers operating in Iowa should closely monitor this Eighth Circuit appeal. Its outcome will determine the enforceability of SF 383, clarifying the scope of state regulation over healthcare intermediaries and setting potential precedents regarding ERISA preemption and standing challenges for similar state laws.

Source: Original reporting on Eighth Circuit proceedings