State Health Policy Action We’re Watching in July 2026
Key Takeaways
- Colorado received FDA authorization to import lower-cost prescription drugs from Canada, with the state estimating $46 million in consumer savings over three years through its Drug Importation Program.
- Indiana launched a pilot program using AI and machine learning to detect Medicaid fraud and identify suspect billing patterns before claims are paid, with results potentially informing other state programs.
- An Iowa audit found that pharmacy benefit managers collected approximately $100 million between 2019 and 2021 through pricing practices that allowed them to claw back payments previously made to pharmacies.
- North Carolina's new budget repeals certificate of need requirements for inpatient rehabilitation facilities and establishes stricter oversight for applied behavioral analysis therapy, including mandatory in-person assessments.
- Tennessee faces multiple lawsuits challenging its law that prohibits companies from owning both pharmacies and health insurers or pharmacy benefit managers, with the law set to take effect in July 2028.
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State Policy Developments Affecting Drug Costs, Medicaid, and Pharmacy Regulation
This month, state health policymakers moved on several fronts affecting drug costs, Medicaid oversight, and pharmacy regulation. Colorado received long-awaited FDA authorization to begin importing lower-cost prescription drugs from Canada, while Indiana turned to AI and machine learning to catch Medicaid fraud before claims are paid. An Iowa audit put a number on pharmacy benefit manager pricing practices, finding that PBMs collected roughly $100 million through "clawback" arrangements between 2019 and 2021. North Carolina's new budget repeals certificate-of-need requirements for inpatient rehabilitation facilities and tightens oversight of applied behavioral analysis therapy. And in Tennessee, a law separating pharmacy ownership from insurers and PBMs is already facing multiple lawsuits, years before it's set to take effect.
Which States Have Recently Taken Action on Drug Pricing and Medicaid Oversight?
How Is Colorado Implementing Prescription Drug Importation?
On June 15, Colorado Governor Jared Polis (D) announced that the U.S. Food and Drug Administration (FDA) authorized Colorado to import lower-cost prescription drugs from Canada. The state has been working on the Drug Importation Program since 2019, when the legislature passed the authorizing legislation, SB19-005. The application estimates potential consumer savings of $46 million over 3 years based on the included drugs, though the state indicated it is open to working with additional drug manufacturers and requested federal support in procuring a supply of eligible drugs.
How Is Indiana Using AI to Prevent Medicaid Fraud?
On June 24, the Indiana Family and Social Services announced a partnership with the Centers for Medicare & Medicaid Services (CMS) and Oracle to implement AI and machine learning to enhance Medicaid fraud, waste, and abuse (FWA) prevention. Notably, the state intends to use AI and machine learning to identify pre-payment suspect billing patterns, make claim edits and prior authorization triggers, and generate investigation case packages. Moreover, the pilot will help determine whether the program can be expanded to other state Medicaid programs, and CMS will receive a final proof-of-concept report for future program decisions.
What Did Iowa's Audit Reveal About Pharmacy Benefit Manager Practices?
On June 10, Iowa State Auditor Rob Sand (D) released a report on pharmacy benefit manager (PBM) practices related to Iowa Medicaid. The report found PBMs received about $100 million from 2019 to 2021 through an "effective rate" pricing model, which allowed them to reconcile prescription drug costs at the end of the year to receive "clawback" payments previously made to pharmacies. While data limitations made it difficult to estimate the total harm to Iowa Medicaid, Auditor Sand claimed that the effective rate pricing model has led to spread pricing in other states.
How Is North Carolina Changing Medicaid Funding and Behavioral Health Oversight?
On July 7, North Carolina Governor Josh Stein (D) signed North Carolina's budget (SB 257) into law, which fully funds Medicaid for the fiscal year, appropriating over $1 billion to the program and an additional $333 million for a Medicaid Contingency Reserve. Additionally, the budget repeals certificate-of-need (CON) laws for inpatient rehabilitation services, facilities, and beds and requires closed networks for peer support, research-based behavioral health treatment, and community support services. Moreover, under the new budget, applied behavioral analysis (ABA) providers must conduct ABA therapy assessments in person, prepaid health plans or the NC Department of Health and Human Services must approve service plans, and plans with over 16 hours of weekly therapy require more frequent reapproval.
What Legal Challenges Face Tennessee's New Pharmacy Ownership Law?
On June 16, the Pharmaceutical Care Management Association (PCMA) filed a complaint against the recently enacted Tennessee law (SB 2040) prohibiting an entity from simultaneously owning or controlling a pharmacy and a health insurer or pharmacy benefit manager (PBM). The suit, which mirrors complaints filed by Express Scripts and CVS, alleges that SB 2040 violates the Dormant Commerce Clause of the Constitution, is preempted by several government statutes, including ERISA and TRICARE, and is designed to advantage in-state competitors at the expense of out-of-state businesses. The plaintiffs seek a preliminary injunction before the law goes into effect on July 1, 2028, which CVS claims would force it to close 134 of its pharmacies in the state.
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Which states have received FDA approval to import prescription drugs from Canada?
Colorado received FDA authorization on June 15 to import lower-cost prescription drugs from Canada under its Drug Importation Program. The state estimates potential consumer savings of $46 million over 3 years based on the included drugs and has indicated openness to working with additional drug manufacturers.
How is Indiana using AI to detect Medicaid fraud?
Indiana announced a partnership with CMS and Oracle on June 24 to implement AI and machine learning for Medicaid fraud, waste, and abuse prevention. The state intends to use these technologies to identify pre-payment suspect billing patterns, make claim edits and prior authorization triggers, and generate investigation case packages. CMS will receive a final proof-of-concept report to determine whether the program can be expanded to other state Medicaid programs.
What did the Iowa audit find about pharmacy benefit manager spread pricing in Medicaid?
Iowa State Auditor Rob Sand's June 10 report found that PBMs received about $100 million from 2019 to 2021 through an "effective rate" pricing model, which allowed them to reconcile prescription drug costs at year-end to receive "clawback" payments previously made to pharmacies. The auditor claimed this pricing model has led to spread pricing in other states, though data limitations made it difficult to estimate total harm to Iowa Medicaid.
What certificate of need requirements did North Carolina eliminate in its 2025 budget?
North Carolina's budget (SB 257) repeals certificate-of-need laws for inpatient rehabilitation services, facilities, and beds. Governor Josh Stein signed the budget into law on July 7, which also fully funds Medicaid with over $1 billion appropriated to the program and an additional $333 million for a Medicaid Contingency Reserve.
What is Tennessee SB 2040 and why is it being challenged in court?
Tennessee SB 2040 prohibits an entity from simultaneously owning or controlling a pharmacy and a health insurer or pharmacy benefit manager. The Pharmaceutical Care Management Association, Express Scripts, and CVS filed complaints alleging the law violates the Dormant Commerce Clause, is preempted by federal statutes including ERISA and TRICARE, and advantages in-state competitors. The plaintiffs are seeking a preliminary injunction before the law goes into effect on July 1, 2028.