Feds Tell High Court ERISA Doesn't Doom Arkansas PBM Law

Law 360

The federal government is urging the U.S. Supreme Court to undo the Eighth Circuit’s ruling that an Arkansas law regulating pharmacy benefit managers' drug reimbursement rates was trumped by ERISA, saying the finding stretched the federal law’s preemption provision too far.

U.S. Solicitor General Noel J. Francisco told the high court in his amicus brief Monday that the Eighth Circuit wrongly found that Arkansas’ Act 900 had an impermissible reference to and connection with Employee Retirement Income Security Act plans, triggering preemption.

The statute didn’t act immediately or exclusively on ERISA plans, and those plans weren’t essential to the operation of the law, the federal government said. And though Act 900 might have an indirect economic influence on ERISA plans, it didn’t force their administrators to choose any particular path, the solicitor general contended.

“Indeed, the [Supreme] Court has cautioned that, if state laws that merely influenced the choices of ERISA plans were preempted, courts would 'scarcely see the end of ERISA’s preemptive reach,'” the government said.

The Arkansas law at the center of the case was initially struck down by a federal court in March 2017 after the Pharmaceutical Care Management Association challenged the statute. The state took the case to the Supreme Court after the Eighth Circuit sided with the trade group on appeal.

The solicitor general asked the Supreme Court in December to grant Arkansas’ petition to review the Pharmaceutical Care Management Association’s win at the appeals court, and the justices agreed to do so in January. Arkansas filed a brief defending its law the following month.

In the brief Monday, the solicitor general also took aim at PCMA’s arguments for why the Arkansas statute was preempted by ERISA, saying that the trade group’s “concerns about the consequences of the Arkansas statute for nationally uniform plan administration are misplaced.”

Ultimately, the statute only imposed obligations on PBMs, not ERISA plans, according to the federal government.

Additionally, the court didn’t need to address whether the federal benefits law preempted the application of the Arkansas statute to ERISA plans managing prescription drug benefits themselves, since PCMA’s members weren’t plans, the solicitor general said.

The federal government further noted that the language of ERISA and the context surrounding its passage didn’t suggest that Congress meant for the federal benefits law to overtake the states’ regulation of health care costs.

“Holding that ERISA preempts Arkansas’s regulation of pharmacy reimbursement rates would thus stretch ERISA’s preemption provision beyond what history suggests Congress contemplated,” the solicitor general said.

Arkansas received an outpouring of support at the Supreme Court on Monday, with amicus briefs from 46 attorneys general and several pharmacy groups, including the National Association of Specialty Pharmacies and National Community Pharmacists Association.

The state was also backed by medical professional organizations, such as the American Medical Association and American Pharmacists Association.

“Having such large bipartisan support from the public and private sectors shows the overwhelming need to regulate abusive PBM reimbursement practices,” Arkansas Attorney General Leslie Rutledge said in a statement Tuesday. “Abusive PBM reimbursement practices are harming Arkansas patients and community pharmacies nationwide, all the while lining the pockets of PBMs with billions of dollars.”

But Michael B. Kimberly, an attorney for PCMA, told Law360 on Tuesday that they “don’t think that the amicus briefs filed yesterday paint a fair or accurate picture of the very important role that PBMs play in the health care market.”

In a statement following Arkansas’ February brief, the PCMA said the association believes “everyone deserves access to quality, affordable health care services, no matter the state one lives in.”

“Unique state laws governing the administration of pharmacy benefits are proliferating across the country, establishing vastly different standards,” PCMA said. “These inconsistent and often conflicting state policies eliminate flexibility for plan sponsors and create significant and costly administrative inefficiencies. This will result in increased premiums and prescription drug costs for patients and payers.”

“The Employee Retirement Income Security Act has long enabled employers to provide consistent, nationwide health care benefits due to its preemption of state laws,” the association added. “Federal preemption is a vitally important issue to ensuring high-quality health care for patients.”

Arkansas is represented by Nicholas Jacob Bronni, Leslie Rutledge and Shawn J. Johnson of the Arkansas Attorney General's Office.

The Pharmaceutical Care Management Association is represented by Michael B. Kimberly, Andrew C. Liazos, Sarah P. Hogarth, Paul W. Hughes and Matthew Waring of McDermott Will & Emery LLP.

The case is Rutledge v. Pharmaceutical Care Management Association, case number 18-540, in the Supreme Court of the United States.