In The News | PBM State Fights Will Live On After High Court’s Petition Denial

• Oklahoma decision viewed as affirming broad ERISA preemption

• Employers increasingly challenging PBM laws across the country

Bloomberg Law

Reporter: Lauren Clason, Health benefits reporter

Litigation over state power to regulate pharmacy benefit managers is far from over, even after the US Supreme Court bolstered PBMs and employers that work with them by declining review of an Oklahoma statute.

The high court recently chose not to grant a petition to review Oklahoma’s Patient’s Right to Pharmacy Choice Act, which imposed a series of requirements on PBMs that the US Court of Appeals for the Tenth Circuit in 2023 said violated the Employee Retirement Income Security Act for self-insured plans. The overturned language included distance thresholds for in-network pharmacy access and a ban on patient discounts for using PBM-owned pharmacies.

The June 30 certiorari denial dealt a blow to states and pharmacy groups hoping to expand on Arkansas’ win at the high court in 2020 that sanctioned more authority for insurance commissioners to regulate PBMs’ payments to pharmacies.

Backlash against PBMs—which manage the drug benefit for health plans—has grown in recent years, resulting in state-level crackdowns. Critics across the political spectrum blame PBMs for anticompetitive tactics they say drive up drug prices and force independent pharmacies to close. Express Scripts, CVS Caremark, and UnitedHealth Group’s OptumRx dominate around 80% of the market.

Many health care lawyers view the court’s refusal to consider Oklahoma’s appeal in Mulready v. Pharmaceutical Care Management Association as a reinforcement of ERISA’s broad preemption authority, and Arkansas’ win in Rutledge v. Pharmaceutical Care Management Association as a narrow exception.

The Supreme Court only granted states power to regulate PBMs’ payments to pharmacies in Rutledge, whereas Oklahoma was seeking clearance on a number of broader restrictions the courts said intruded on core health plan operations.

“This is an implicit endorsement of the Tenth Circuit’s holding,” said Madison Connor, senior vice president of regulatory compliance and external affairs at consulting firm Employers Health. “And it sets an important post-Rutledge boundary that can be persuasive authority for other circuits.”

Cost Control

Pharmacy groups say ERISA only protects health plans themselves, not their third-party PBMs. National Community Pharmacists Association General Counsel Matthew Seiler said the Mulready decision incorrectly shielded PBMs as if they were plans... Continue Reading