Monday, December 14, 2020

Court Upholds State Pharmacy Reimbursement Regulation Against ERISA Preemption Claim

The Supreme Court on Friday upheld Arkansas's law regulating the price that pharmacy benefit managers reimburse pharmacies for the cost of drugs covered by drug-prescription plans against an ERISA preemption challenge. The ruling leaves Arkansas's law in place.

The case, Rutledge v. Pharmaceutical Care Management Association, tested Arkansas's Act 900. That Act requires pharmacy benefit managers (PBMs, who act as intermediaries between prescription-drug plans and pharmacies that use them) to reimburse pharmacies (under the PBMs' maximum allowable cost schedules) at or above the rate that pharmacies paid to buy the drug from a wholesaler. The law was designed to ensure that pharmacies, particularly rural and independent pharmacies, could cover their costs and stay in business.

A national trade association of PBMs sued, arguing that the provision was preempted by the federal Employee Retirement Income Security Act. ERISA pre-empts "any and all State laws insofar as they may not or hereafter relate to any employee benefit plan" covered by ERISA.

The Supreme Court disagreed. Justice Sotomayor wrote for a unanimous Court (except Justice Barrett, who did not participate) that "ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage." She said that Act 900, which is "merely a form of cost regulation," is just such a plan. Moreover, she said that Act 900 doesn't "refer to" ERISA, because it doesn't "act[] immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law's operation." In short, "it applies to PBMs whether or not they manage an ERISA plan." 

Justice Thomas concurred, and wrote separately to again express "doubt" as to "our ERISA pre-emption jurisprudence." 

https://lawprofessors.typepad.com/conlaw/2020/12/court-upholds-state-pharmacy-reimbursement-regulation-against-erisa-preemption-claim.html

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