Iowa audit says PBMs inflated taxpayer costs by $100 million

Iowa State Auditor Rob Sand released a report on pharmacy benefit managers used by the companies that run Iowa's Medicaid system

KCCI News 8

State Auditor Rob Sand released a report on pharmacy benefit managers, known as PBMs, used by the companies that run Iowa's Medicaid system.

PBMs act as middlemen between insurance companies, drug manufacturers and pharmacies.

In a press conference on Wednesday morning, Sand said that one of three PBMs analyzed amounted to about $100 million in back-end value.

The audit alleges that, through year-end reconciliation, PBMs have been taking back money that pharmacies make after prescriptions were already filled and paid for. These are what Sand calls "clawbacks.""This is something that can lead directly to and is evidence of spread pricing, which is prohibited under Iowa Medicaid because it can inflate costs for taxpayers, reduce the quality of care, and create financial hardships for pharmacies," said Sand.

In what Sand called a "lack of transparency," he said PBMs withheld important information for the audit.Sand spoke of PBMs' impacts on smaller, rural pharmacies, which have reportedly struggled to break even.

Additional Coverage: Small-town pharmacies struggle to break even amid industry squeeze, urge lawmakers for PBM reform

Some recommendations the audit gave were banning year-end reconciliations, giving auditors full information access, and having tougher enforcement penalties.

PBM regulation has been a talking point on both sides of the aisle. In 2025, Gov. Reynolds signed Senate File 383 into law, which would have tightened limits on PBM practices. A federal judge put parts of that law on pause... Continue Reading