State Auditor’s Report on Pharmacy Benefit Managers
State Auditor Rob Sand has released a report focusing on pharmacy benefit managers (PBMs) associated with Iowa’s Medicaid system. These PBMs serve as intermediaries among insurance companies, drug manufacturers, and pharmacies.
During a press conference on Wednesday morning, Sand stated that one of the three PBMs he assessed has a back-end value estimated at around $100 million. The audit claims that PBMs recover funds earned by pharmacies through year-end adjustments made after prescriptions are filled—a practice Sand refers to as “clawbacks.”
He explained that “this can lead directly to spread pricing and is evidence of it,” adding that such pricing practices are prohibited in Iowa Medicaid because they can increase costs for taxpayers, diminish care quality, and create financial strain for pharmacies.
Sand also highlighted a “lack of transparency,” indicating that PBMs are not providing crucial information needed for audits. He discussed the challenges faced by small, rural pharmacies that are allegedly finding it hard to remain profitable.
The audit suggests several reforms, including banning year-end adjustments, granting auditors full access to necessary information, and imposing stricter enforcement penalties. PBM regulation has become a contentious issue across political lines. In 2025, Governor Reynolds signed Senate File 383, which sought to further restrict PBM practices, though a federal judge has since suspended part of this legislation.
Sand, running for governor as a Democrat, is advocating for lower drug prices and enhanced regulation of PBMs. In response to the audit, Governor Reynolds’ office issued a statement claiming the report is “irrelevant and outdated.” They pointed out that it examines claims and practices from 2019 to 2021, failing to accurately reflect the current status of the Iowa Department of Insurance and Financial Services or Medicaid oversight.
The statement continued that the recommendations from the audit pertain to measures already implemented by Iowa Medicaid over three years ago, labeling the report a waste of taxpayer resources.
Reynolds’ office emphasized that she and Iowa legislators have actively worked against fraudulent PBM practices, pushing for reforms, enhancing oversight, and defending these efforts amidst challenges. They noted that Iowa has successfully recovered significant amounts in improper fees charged to pharmacies.
While the auditors may have arrived at their conclusions later than ideal, they ultimately recognized a sentiment long acknowledged by Iowans, the Republican Congress, and the Reynolds administration: that PBM practices need thorough examination, transparency, and reform—though the distinction lies in the fact that action is actively being taken.
