S.F. 315 Section 1. NEW SECTION . 8A.319 Pharmacy benefits manager 1 reverse auctions. 2 1. This section may be cited as the “Iowa Competitive 3 Pharmacy Benefits Managers Marketplace Act” . 4 2. As used in this section, unless the context otherwise 5 requires: 6 a. “Market check” means a technology-driven evaluation of an 7 incumbent pharmacy benefits manager’s prescription drug pricing 8 based on benchmark comparators derived from pharmacy benefits 9 manager reverse auction processes conducted in the United 10 States over the immediately preceding twelve months. 11 b. “Participant bidding agreement” means an online 12 agreement that details common definitions, prescription drug 13 classifications, rules, data access and use rights, and other 14 optimal contract terms that benefit the state and that all 15 bidders must accept as a prerequisite for participation in a 16 pharmacy benefits manager reverse auction. 17 c. “Pharmacy benefits manager” means the same as defined in 18 section 510B.1. 19 d. “Pharmacy benefits manager reverse auction” means a 20 transparent and competitive bidding process conducted online 21 that starts with an opening round of bids and allows qualified 22 pharmacy benefits manager bidders to counteroffer a lower price 23 for as many rounds of bidding as determined by the department 24 for a multiple health plan prescription drug purchasing group. 25 e. “Price” means the projected cost of a pharmacy benefits 26 manager’s bid to provide prescription drug benefits to allow 27 direct comparison of the comparably calculated costs of 28 competing pharmacy benefits managers’ proposals over the 29 duration of the pharmacy benefits manager’s services contract. 30 f. “Self-funded public sector health plan” means any group 31 benefit plan under chapter 509A. 32 3. Consistent with section 8A.311, and notwithstanding any 33 other law to the contrary, the department shall enter into a 34 contract for the services of a pharmacy benefits manager for 35 -1- LSB 1499SV (3) 91 nls/ko 1/ 8

S.F. 315 the administration of benefits of self-funded public sector 1 health plans in compliance with this section. 2 4. Prior to November 1, 2025, the department shall procure 3 all of the following based on price, capabilities, and other 4 factors deemed relevant by the department: 5 a. A technology platform with the capabilities to conduct 6 a pharmacy benefits manager reverse auction. The department 7 shall ensure that the technology platform possesses, at a 8 minimum, the capacity to do all of the following: 9 (1) Conduct an online reverse auction of pharmacy 10 benefits manager services using a software application and 11 high-performance data infrastructure to intake, cleanse, and 12 normalize pharmacy benefits manager data with development 13 methods and information security standards that have been 14 validated by receiving service organization control 2 and 15 national institute of standards and technology certification, 16 or successor information technology security certifications, as 17 identified by the office of the chief information officer. 18 (2) Automate repricing of diverse and complex pharmacy 19 benefits managers’ prescription drug pricing proposals to allow 20 direct comparison by the state of the comparably calculated 21 costs of pharmacy benefits managers’ bids using one hundred 22 percent of annual prescription drug claims data available 23 for state-funded health plans, or a multiple health plan 24 prescription drug purchasing group, and using code-based 25 classification of drugs from nationally accepted drug sources. 26 (3) Simultaneously evaluate diverse and complex multiple 27 proposals from full-service pharmacy benefits managers, 28 including average wholesale price, guaranteed net cost, and 29 national average drug acquisition cost pricing models, as 30 well as proposals from pharmacy benefits administrators and 31 specialty drug and rebate carve-out service providers. 32 (4) Produce an automated report and analysis of pharmacy 33 benefits managers’ bids, including ranking of pharmacy benefits 34 managers’ bids based on comparative costs and qualitative 35 -2- LSB 1499SV (3) 91 nls/ko 2/ 8

S.F. 315 aspects of the bids following the close of each round of 1 reverse auction bidding. 2 (5) Perform electronic, line-by-line, claim-by-claim review 3 of one hundred percent of invoiced pharmacy benefits managers’ 4 prescription drug claims, and identify all deviations from the 5 specific terms of the pharmacy benefits manager’s services 6 contract that resulted from the reserve auction process. 7 b. Related services from the operator of the technology 8 platform identified in paragraph “a” , which at a minimum shall 9 include all of the following: 10 (1) Evaluation of the qualifications of pharmacy benefits 11 manager bidders. 12 (2) Pharmacy benefits manager reverse auction services to 13 support the department in comparing pricing for the pharmacy 14 benefits manager procurement. 15 (3) Related professional services. 16 5. The department shall not award a contract for the 17 technology platform and technology operator services to a 18 vendor that is a pharmacy benefits manager or to a vendor that 19 is managed by, or a subsidiary or affiliate of, a pharmacy 20 benefits manager. 21 6. The vendor awarded the contract by the department 22 shall not outsource any part of the pharmacy benefits manager 23 reverse auction or any part of the electronic, line-by-line, 24 claim-by-claim review of invoiced pharmacy benefits manager 25 prescription drug claims. 26 7. With technical assistance and support provided by the 27 technology platform operator, the department shall specify the 28 terms of the participant bidding agreement. The terms of the 29 participant bidding agreement shall not be modified except by 30 specific consent of the department. 31 8. a. The technology platform used to conduct the reverse 32 auction shall be repurposed over the duration of the pharmacy 33 benefits manager’s services contract as a pharmacy claims 34 adjudication engine to perform electronic, line-by-line, 35 -3- LSB 1499SV (3) 91 nls/ko 3/ 8

S.F. 315 claim-by-claim review of one hundred percent of invoiced 1 pharmacy benefits manager’s prescription drug claims, and to 2 identify all deviations from the specific terms of the pharmacy 3 benefits manager’s services contract. 4 b. The department shall reconcile the electronically 5 adjudicated pharmacy claims, as described in paragraph “a” , 6 with pharmacy benefits manager’s invoices on a monthly or 7 quarterly basis to ensure that state payments shall not exceed 8 the terms specified in any pharmacy benefits manager’s services 9 contract. 10 9. a. The first pharmacy benefits manager reverse auction 11 shall be completed and the services contract shall be awarded 12 to the winning pharmacy benefits manager with an effective 13 date beginning January 1, 2026. Subsequent contracts must 14 be awarded no later than three months prior to termination 15 or expiration of the current pharmacy benefits manager’s 16 services contract for a covered group, such as the state 17 employees benefits group, that includes only active employees 18 and dependents, but does not include retiree participants 19 in a Medicare part D employer group waiver program pursuant 20 to the federal Medicare Prescription Drug, Improvement, and 21 Modernization Act of 2003, Pub. L. No. 108-173. 22 b. In the event an eligible covered group that includes 23 retiree participants in a Medicare part D employer group 24 waiver program pursuant to the federal Medicare Prescription 25 Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 26 108-173, opts to use the processes and procedures under this 27 section, the relevant pharmacy benefits manager reverse auction 28 shall be completed and the pharmacy benefits manager services 29 contract shall be awarded to the winning pharmacy benefits 30 manager no later than six months prior to termination or 31 expiration of the pharmacy benefits manager’s services contract 32 currently covering the retiree employer group waiver program 33 participants. 34 10. The department may perform a market check for providing 35 -4- LSB 1499SV (3) 91 nls/ko 4/ 8

S.F. 315 pharmacy benefits manager services during the term of the 1 current pharmacy benefits manager’s services contract in order 2 to ensure continuing competitiveness of incumbent prescription 3 drug pricing during the term of a pharmacy benefits manager’s 4 services contract. 5 11. a. Three years after the first services contract is 6 awarded to a pharmacy benefits manager pursuant to subsection 7 9, paragraph “a” , any self-funded public sector health plan 8 shall have the option to conduct a pharmacy benefits manager 9 reverse auction for the specific self-funded public sector 10 health plan utilizing the technology platform and technology 11 operator services selected by the department under this 12 section. 13 b. This section shall not apply to nonprofit, 14 nongovernmental health maintenance organizations with respect 15 to managed care plans that provide a majority of covered health 16 care services through a single contracted medical group. 17 c. Any self-funded public sector health plans that opt 18 to conduct a pharmacy benefits manager reverse auction shall 19 retain full autonomy over determination of the individual 20 health plan’s respective prescription drug formularies and 21 pharmacy benefit designs, and shall not be required to adopt 22 a common prescription drug formulary or common prescription 23 pharmacy benefit design. 24 12. Notwithstanding subsection 3, the department may elect 25 to vacate the outcome of a pharmacy benefits manager reverse 26 auction if the lowest-cost pharmacy benefits manager’s bid 27 is not less than the projected cost trend for the incumbent 28 pharmacy benefits manager’s services contract as verified by 29 the department. The department may utilize a consultant to 30 conduct the verification. The cost trend shall be projected 31 by the technology platform operator using industry-recognized 32 data sources and shall be subject to review and approval by 33 the department in advance of the pharmacy benefits manager 34 reverse auction. Methodology shall be applied consistently in 35 -5- LSB 1499SV (3) 91 nls/ko 5/ 8

S.F. 315 projection of cost and savings to the state with regard to the 1 incumbent pharmacy benefits manager’s services contract and 2 competing pharmacy benefits manager reverse auction bids. 3 Sec. 2. EFFECTIVE DATE. This Act, being deemed of immediate 4 importance, takes effect upon enactment. 5 EXPLANATION 6 The inclusion of this explanation does not constitute agreement with 7 the explanation’s substance by the members of the general assembly. 8 This bill relates to pharmacy benefits manager reverse 9 auctions and group insurance for public employees. 10 “Pharmacy benefits manager reverse auction” (reverse 11 auction) is defined in the bill as a transparent and 12 competitive bidding process conducted online that starts 13 with an opening round of bids and allows qualified pharmacy 14 benefits manager (PBM) bidders to counter-offer a lower price 15 for as many rounds of bidding as determined by the department 16 of administrative services (DAS) for a multiple health plan 17 prescription drug purchasing group. “Price” is defined as 18 the projected cost of a PBM’s bid to provide prescription 19 drug benefits to allow direct comparison of the comparably 20 calculated costs of competing PBMs’ proposals over the duration 21 of the PBM’s services contract. 22 Consistent with Code section 8A.311, and notwithstanding 23 any other law to the contrary, the department shall enter into 24 a contract for the services of a PBM for the administration 25 of benefits of self-funded public sector health plans. 26 “Self-funded public sector health plans” is defined as 27 any group benefit plan under Code chapter 509A. Prior to 28 November 1, 2025, DAS shall procure a technology platform with 29 capabilities to conducting a PBM reverse auction, and related 30 services from the operator of the technology platform. The 31 requirements for the technology platform and for the related 32 services are detailed in the bill. 33 DAS is prohibited from awarding a contract for either 34 the technology platform or the technology operator services 35 -6- LSB 1499SV (3) 91 nls/ko 6/ 8

S.F. 315 to a vendor that is a PBM or a vendor that is managed by, 1 or a subsidiary or affiliate of, a PBM. The vendor awarded 2 the contract by DAS shall not outsource any part of the 3 PBM reverse auction or of the electronic, line-by-line, 4 claim-by-claim review of invoiced PBM prescription drug 5 claims. With technical assistance and support provided by the 6 technology platform operator, DAS shall specify the terms of 7 the participant bidding agreement. 8 The technology platform used to conduct the reverse auction 9 shall be repurposed over the duration of the PBM’s services 10 contract as a pharmacy claims adjudication engine to perform 11 electronic, line-by-line, claim-by-claim review of 100 percent 12 of invoiced PBM drug claims, and to identify all deviations 13 from the specific terms of the PBM’s services contract. 14 DAS is required to reconcile the electronically adjudicated 15 pharmacy claims with PBM invoices on a monthly or quarterly 16 basis to ensure that state payments shall not exceed the terms 17 specified in any PBM’s services contract. 18 The first PBM reverse auction shall be completed and the 19 PBM services contract shall be awarded to the winning PBM 20 with an effective date beginning January 1, 2026. Subsequent 21 services contracts must be awarded no later than three months 22 prior to termination or expiration of the current PBM’s 23 services contract for a covered group, such as the state 24 employees benefits group, that includes only active employees 25 and dependents, but does not include retiree participants in 26 a Medicare part D employer group waiver program (Medicare 27 employer group) pursuant to the federal Medicare Prescription 28 Drug, Improvement, and Modernization Act of 2003 (Medicare 29 Act). If an eligible covered group that includes retiree 30 participants in a Medicare employer group pursuant to the 31 Medicare Act opts to use the processes and procedures under the 32 bill, the relevant PBM reverse auction shall be completed and 33 the PBM services contract shall be awarded to the winning PBM 34 no later than six months prior to termination or expiration 35 -7- LSB 1499SV (3) 91 nls/ko 7/ 8

S.F. 315 of the current PBM’s services contract covering the Medicare 1 employer group. 2 DAS may perform a market check for providing PBM services 3 during the term of the current PBM’s services contract. 4 “Market check” is defined in the bill. 5 Three years after the first services contract is awarded 6 to a PBM, self-funded public sector health plans shall have 7 the option to conduct a PBM reverse auction. Any self-funded 8 public sector health plans that opt to conduct a PBM reverse 9 auction shall retain full autonomy as detailed in the bill. 10 The bill shall not apply to nonprofit, nongovernmental 11 health maintenance organizations with respect to managed care 12 plans that provide a majority of covered health care services 13 through a single contracted medical group. 14 DAS may elect to vacate the outcome of a PBM reverse auction 15 if the lowest-cost PBM bid is not less than the projected cost 16 trend for the incumbent PBM contract as verified by DAS or by 17 a consultant retained by DAS. 18 The bill takes effect upon enactment. 19 -8- LSB 1499SV (3) 91 nls/ko 8/ 8