On July 21, 2025, the U.S. District Court for the Southern District of Iowa issued a comprehensive preliminary injunction blocking enforcement of key provisions of Iowa Senate File 383 (the Act), a sweeping law aimed at regulating pharmacy benefit managers (PBMs) and health plans. The Court found that multiple provisions of the law are likely preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and violate the First Amendment’s protections for commercial speech.

This ruling follows the Court’s earlier issuance of a temporary restraining order (TRO) on June 30, 2025, just one day before the law’s effective date. The TRO was extended until July 21, 2025, due to reassignment and scheduling conflicts. A hearing on the preliminary injunction was held on July 18, 2025.

For background on the law and the initial Temporary Restraining Order, please see our prior blog post: Federal Court Temporarily Halts Iowa’s PBM Reform Law Amid Legal Challenges.

The plaintiffs, a coalition of Iowa employers and ERISA-governed health plans, argued that the Act unlawfully intrudes on federally protected plan design and administration, and restricts truthful communications between plans, PBMs, and participants.

Key Provisions Enjoined

The Court enjoined enforcement of several core provisions of the Act as applied to the plaintiffs and their PBM contractors:

• Rebate Pass-Through. While the Court upheld the general requirement that PBMs pass through manufacturer rebates to health plans, it enjoined the provision mandating the inclusion of specific contract terms between PBMs and third-party payors, finding it interferes with fiduciary discretion under ERISA.
• Accumulator Ban. The provision requiring all beneficiary payments to count toward a participant’s deductible was enjoined. The Court held this mandate directly regulates cost-sharing structures, a core element of ERISA plan design, and “goes too far in dictating cost-sharing requirements for beneficiaries in their benefit plans.” While nearly 20 states have also enacted standalone laws banning copay accumulator programs, this is the first such law to be enjoined by a federal court on ERISA preemption grounds. What sets the Act apart is not necessarily the substance of the accumulator ban itself, but the broader statutory framework in which it was enacted. Unlike other states that have targeted fully insured plans regulated under state laws, the Act applies broadly, including self-funded ERISA plans.
• Pharmacy Network Restrictions. The Court enjoined several pharmacy network-related provisions, including:
  • The anti-discrimination clause prohibiting differential treatment of pharmacies. The court found that this mandate impermissibly interfered with plan sponsors’ discretion to design networks based on cost, quality, or other fiduciary considerations. The court emphasized that this restriction “prevents plan fiduciaries from making the very distinctions between providers that sound business judgment and fiduciary duty would dictate.”
  • Any-willing-provider requirements mandating open access to pharmacy networks. The court concluded that this provision “eliminate[s] the customizability and discretion that ERISA reserves to plan sponsors,” and likened it to mandates that courts have consistently found to “strik[e] at the heart of network and benefit design.”
  • Restrictions on steering patients to preferred or specialty pharmacies through days’ supply limits or other payment conditions. The Court reasoned that this restriction undermines fiduciary obligations to ensure appropriate care delivery and cost management for complex medications. The Court noted that the restrictions “prevent[] plan sponsors from making strategic decisions about provider networks based on legitimate considerations including clinical expertise, patient safety, care coordination capabilities, and cost-effectiveness.”
• Dispensing Fee. Although the National Average Drug Acquisition Cost/ Wholesale Acquisition Cost reimbursement standard was upheld, the Court enjoined the fixed $10.68 dispensing fee, finding it inseverable from other invalid provisions and potentially counterproductive to the law’s stated goal of supporting rural pharmacies. The Court noted that if “anti-discrimination and anti-steering provisions are preempted while the dispensing fee remains, the fee could incentivize plans and PBMs to avoid affected pharmacies entirely, producing an effect opposite to the legislature’s protective intent.”
• Enforcement Provision. The Court enjoined the Act’s general enforcement provision, which would have allowed beneficiaries and pharmacies to sue ERISA plans for alleged violations. The Court found this provision to be a violation of ERISA’s exclusive remedial scheme. Additionally, the Court enjoined the law’s supersession clause, which would have allowed the law to override conflicting terms in PBM, plan, and pharmacy contracts.
• First Amendment Violations. The Court found that certain provisions likely violate the First Amendment by restricting truthful commercial speech. Specifically, it enjoined:
  • The anti-referral provision prohibiting plans and PBMs from directing participants to particular pharmacies.
  • A compelled disclosure requirement mandating that third-party payors notify all area pharmacies of network participation opportunities.

Provisions Upheld by the Court

While the Court enjoined several provisions of the Act, it also upheld certain components of the law that it found did not interfere with ERISA plan administration or violate constitutional protections:

• Appeals Process. The Court upheld the pharmacy appeal process, concluding that it governs the relationship between PBM and pharmacies without intruding on ERISA-regulated plan administration. This provision allows pharmacies to challenge reimbursement decisions and other PBM actions through a defined administrative process.
• Transparency Requirements. The Court also upheld the Act’s quarterly reporting and internet publication requirements. These provisions require PBMs to disclose certain pricing and reimbursement data to state regulators and the public. The Court found these to be permissible transparency measures that do not interfere with ERISA plans or fiduciary duties and thus fall within the state’s regulatory authority.

Court’s Reasoning

In an 87-page opinion, Chief Judge Stephanie M. Rose found that:

• Standing. Plaintiffs had Article III standing to challenge the Act, including provisions that primarily regulate PBMs. It emphasized the “functional interdependence” between ERISA plans and PBMs, noting that modern health plans cannot feasibly administer pharmacy benefits without PBM services. Because the challenged provisions would impose direct compliance costs and interfere with plan administration, the Court concluded that the plaintiffs faced concrete and particularized injuries sufficient to establish standing. The Court also recognized that indemnification clauses in PBM contracts could expose plan sponsors to financial liability, further reinforcing their standing to sue.
• ERISA Preemption. The Court emphasized that ERISA preempts state laws that “dictate the fundamental architecture of employee benefit plans.” The Court found “that several of [the Act]’s provisions cross the line from permissible cost regulation into impermissible structural mandates that govern central matters of plan administration.” The Court determined that these mandates impermissibly intrude on areas reserved for federal oversight, such as plan design, fiduciary discretion, and cost-sharing structure.
• First Amendment. Applying the Supreme Court’s four-part test from Central Hudson Gas & Elec. v. Public Svc. Comm'n, 447 U.S. 557 (1980), the Court concluded that the speech at issue “concerns truthful information about lawful commercial transactions” and that the State’s justification, protecting rural pharmacies, did not warrant suppressing such speech. The court emphasized that “restrictions premised on the ‘fear that people would make bad decisions if given truthful information’ constitute impermissible governmental paternalism” (quoting Thompson v. W. States Med. Ctr., 535 U.S. 357, 374 (2002)). It further noted that the Act’s speech restrictions failed to directly advance Iowa’s asserted interests and were more extensive than necessary, especially given the availability of less restrictive alternatives such as direct subsidies or reimbursement reforms. Ultimately, the court concluded that the challenged provisions “impose content-based and speaker-based restrictions on truthful commercial speech without adequate constitutional justification.”
• Scope of Relief. Citing the U.S. Supreme Court’s recent decision in Trump v. CASA, the Court limited the scope of injunctive relief to the named plaintiffs and their contractors, rejecting a universal injunction but ensuring “complete but not broader-than-necessary” protection. Other entities, including non-plaintiff PBM and payors, remain subject to enforcement of the law.

Implications

This decision marks a significant development in the national debate over state PBM regulation and ERISA preemption. It echoes the Tenth Circuit’s decision in PCMA v. Mulready, where similar provisions in Oklahoma’s PBM law were struck down. Further, the court’s detailed and methodical opinion, spanning nearly 90 pages, offers a robust framework for evaluating the intersection of state PBM laws with federal ERISA and First Amendment protections, and may serve as a persuasive guidepost for other courts reviewing similar legislation across the country. With the Supreme Court declining to review Mulready, the Iowa litigation may become a new focal point for federal courts evaluating the limits of state authority in this space. The decision may also prompt states to reevaluate the scope and structure of existing PBM laws, particularly those that affect ERISA-covered plans. Going forward, states considering similar legislation will likely need to account more carefully for ERISA preemption and constitutional constraints, as this ruling underscores the legal risks of overstepping federal boundaries.

The ruling also reinforces the constitutional protections for commercial speech in health care, signaling that states must tread carefully when crafting laws that restrict communications between plans, PBMs, and beneficiaries.

What’s Next

The preliminary injunction will remain in effect pending final resolution of the case. Plaintiffs must submit a list of their PBM contractors to the Court so that those PBMs, acting as agents of the plaintiffs, are also covered by the injunction and shielded from enforcement of the enjoined provisions. The Commissioner retains authority to enforce the remaining provisions of the Act against non-plaintiffs, including PBMs and payers not affiliated with the plaintiffs.