Fiscal Note
Fiscal Services Division
HF 626 – Prescription Drug Formularies, Preserving Patient Stability (LSB1359HV.2)
Staff Contact: Xavier Leonard (515.725.0509) xavier.leonard@legis.iowa.gov
Fiscal Note Version – Final Action
Description
House File 626 relates to continuity of care and nonmedical switching by health carriers
(carriers), health benefit plans (plans), and utilization review organizations (utilization reviews)
and does the following:
• Defines terms.
• Prohibits limiting or excluding the coverage of a prescription drug (prescription) for a
medically stable (stable) covered person on such drug, if all of the following apply:
• The prescription was previously approved by the carrier for the covered person.
• The covered person’s prescribing health care professional (prescriber) has prescribed
the drug for the covered person’s medical condition within the previous six months.
• The covered person continues to be an enrollee of the plan.
• Coverage as described in the previous bullet point and subpoints is required to continue
through the last day of the covered person’s plan eligibility or through the last day of the plan
year, whichever is earlier.
• Clarifies that limitations and exclusions of coverage referred to in the Bill include the
following:
• Limiting or reducing the maximum coverage for a covered prescription.
• Increasing cost sharing for a covered prescription.
• Moving a prescription to a more restrictive tier if the carrier uses a formulary with tiers.
• Removing a prescription from a formulary, with exceptions permitted for clinical safety
concerns by the federal Food and Drug Administration (FDA) and for manufacturer
discontinuance of the prescription.
• Clarifies that the Bill does not prohibit a substitution, formulary change, or preference by a
carrier for a prescription that has the same generic name and demonstrated bioavailability,
or that is an interchangeable biological product.
• Clarifies that the Bill is not to prohibit a health care professional from prescribing another
prescription drug covered by the carrier that the health care professional deems medically
necessary.
• Permits the Commissioner of Insurance to enforce compliance with the Bill.
• Establishes applicability of the Bill beginning January 1, 2025.
Background
“Nonmedical switching” refers to the practice of switching a stable patient’s medication for
reasons unrelated to the patient’s health. The practice may also be referred to as “formulary-
driven switching,” “therapeutic switching,” or simply “switching.”
“Bioavailability” refers to the proportion of a drug that enters the circulation when introduced into
the body and is, therefore, able to have an active effect. Without bioavailability, the drug will not
take effect.
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“Interchangeable biological product” refers to a biosimilar product that meets additional FDA
requirements. These additional requirements are outlined by the Biologics Price Competition
and Innovation Act at the federal level. The requirements include showing that an
interchangeable product is expected to produce the same clinical results as the reference
product for any given patient. Additionally, for products administered to patients more than
once, the risk in terms of safety and reduced efficacy of multiple switches between an
interchangeable product and a reference product must be evaluated by the FDA.
“Biosimilar” means a biological product that is highly similar to, and has no clinically meaningful
differences from, an existing FDA-approved reference product. “No clinically meaningful
difference” applies to product safety, purity, and potency (safety and effectiveness). Biosimilar
drugs must pass tests by the FDA to receive this label.
House File 626 is estimated to impact approximately 25.2% of the population (807,000). This
includes individual coverage, fully insured small and large employer groups, self-insured public
employees, and the State of Iowa Plan.
Of the individuals not covered by the mandate, approximately 47.9% are covered by
government-sponsored health insurance, 23.0% are covered by employer coverage that is
governed by the federal Employee Retirement Income Security Act of 1974 (ERISA), and the
remaining 3.9% are uninsured. Additional details are presented in Figure 1.
Figure 1 — Population Covered by Insurance Plans Regulated by Iowa Law
Iowa Percent of
Type of Coverage Population Population
Total Population 2022 3,200,517 100.0%
Included in Mandate
Individual Coverage 102,399 3.2%
Fully Insured Small Employer Group 140,349 4.4%
Fully Insured Large Employer Group 294,013 9.2%
Self-Insured Public Employees 215,000 6.7%
State of Iowa Plan 55,000 1.7%
Total 806,761 25.2%
Not Included in Mandate
Employer (self-insured + other types not listed) 736,868 23.0%
Uninsured 126,000 3.9%
Other Public (Military, Tricare, Veterans Affairs) 21,600 0.7%
Medicare 658,382 20.6%
Medicaid + Children’s Health Insurance Plan 850,906 26.6%
Total 2,393,756 74.8%
Source: Iow a Insurance Division, Department of Insurance and Financial Services, and Wellmark
Assumptions
• The number of health insurance members covered by the Board of Regents and the State of
Iowa Plan will remain at current levels.
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• Formulary management provisions of the Bill will impact a carrier’s ability to manage care,
causing prescription costs to increase from 0.1% to 0.7%, based on the Milliman Frozen
Formularies Report.
• According to the Department of Administrative Services (DAS), there will be no increase in
administrative cost for the DAS to administer the State of Iowa Plan.
• According to Wellmark, there will not be an increase in administrative costs charged to the
State of Iowa Plan as a result of this Bill.
Fiscal Impact
House File 626 is estimated to increase the annual cost to the State of Iowa Insurance Plan and
the Board of Regents Insurance Plans between $203,000 and $1.7 million, as shown in
Figure 2, beginning in FY 2025.
Figure 2 — Annual Fiscal Impact Summary
Low Estimate of High Estimate of
Increased Increased
Pharmacy Costs Pharmacy Costs Pharmacy Costs
State University of Iowa $ 106,100,000 $ 85,000 $ 701,000
Iowa State University 29,200,000 23,000 193,000
University of Northern Iowa 6,400,000 5,000 42,000
University Total $ 141,700,000 $ 113,000 $ 936,000
State of Iowa 111,700,000 89,000 737,000
Total $ 253,400,000 $ 203,000 $ 1,673,000
Amounts may not total due to rounding.
Sources
Board of Regents
Department of Administrative Services
Iowa Insurance Division
Milliman Frozen Formularies Report
United States Food and Drug Administration (FDA)
Wellmark
Legislative Services Agency
/s/ Jennifer Acton
April 17, 2024
Doc ID 1449181
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov
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