Pharmacy Benefit Managers Regulations, Rutledge Decision and 8th Circuit
As our colleagues predicted, the Supreme Court decision in Rutledge v. Pharmaceutical Care Management Association (PCMA) encouraged state efforts to expand the regulation of pharmacy benefit managers (PBMs) and related practices. And as expected, this year has already seen a series of aggressive state laws aimed at expanding regulation in this area.
To quickly recap, in Rutledge, the Supreme Court ruled that the Employee Retirement Income Security Act of 1974 (ERISA) did not preempt an Arkansas law regulating reimbursement levels paid by PBMs to pharmacies. In its opinion, the Court distinguished between state PBM laws that “inappropriately govern[ ] a central issue of plan administration or interfere[ ] with nationally uniform plan administration ”and those that qualitatively“ increase costs or change incentives for ERISA plans without forcing plans to adopt a specific substantial coverage plan ”. But, the court did not provide a clear legal standard for lower courts to apply in subsequent legal challenges regarding other PBM regulations.
So far in 2021, more than 20 states have taken advantage of this season of uncertainty by introducing legislation and enacting rules that not only regulate reimbursement amounts for PBM pharmacies, but also, among other things, affect the makeup of the drug store. network of pharmacies, require the submission of annual price reports. , cap fees charged to pharmacies, expand licensing requirements and prohibit PBMs from influencing information exchanged at the pharmacy counter.
While state efforts to globally regulate PBMs are unlikely to abate on their own once state legislatures convene for their 2022 legislative sessions, the upcoming decision in an Eighth Circuit case recently contested challenging two North Dakota PBM laws could end up putting the kibosh on any further attempts by states to enter the PBM regulatory space at this time.
PCMA c. Wehbi already landed before the Supreme Court once (as PCMA c. Wilke), but was released and returned to the eighth circuit in light of Rutledge. At issue are two laws in North Dakota that regulate PBM activities that are also regulated by other states, including drug reimbursement and fees. The parties, who presented oral arguments on September 1, took predictable positions: the PCMA has primarily asserted that the laws of North Dakota are preempted by federal law because they have an impermissible “connection” to the ERISA (i.e. they made distinctions with the Arkansas law involved in Rutledge).
As a first impression case in federal courts of appeal since Rutledge, the decision of the Eighth Circuit in Wehbi is certain to have far-reaching implications, regardless of which party prevails. His consideration of the arguments of both parties, which will hopefully be well documented in a published opinion, will inform how the courts apply Rutledge to state the PBM legislation and draw a line between what are and are not considered permitted regulations. But given that a decision is not expected for several months, it remains to be seen whether more states will start or continue to legislate and impose additional regulations on PBMs, or if they will instead hang on to guidance. clearer of the eighth circuit before picking up the pen.
© 1994-2021 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC All rights reserved.Revue nationale de droit, volume XI, number 271