For those of you who have followed the long saga of pharmacy benefit managers (PBM) excesses, and state efforts to reign them in, may be aware that the question of the permissible scope of State regulation of PBMs has been slowly winding its way to the United States Supreme Court. After a false start last year by the Trump Administration’s threat of federal regulation, PCMA, the PBM industry group, chose a showdown with Arkansas at the SCOTUS O.K. Corral over state reforms that impacted pharmacy reimbursement mechanisms. PCMA claims the Arkansas Law Act 900, was pre-empted by the Employee Retirement Income Security Act (“ERISA”) because it improperly impacted federal regulation of ERISA plans. In essence, Act 900 requires PBMs to discontinue their use of unfair business practices by reimbursing pharmacies for generic drugs at prices equal to, or higher than the pharmacy acquisition cost.
After the Eighth Circuit granted PCMA’s motion for summary judgment, and held that Act 900 was preempted by ERISA, the Eighth Circuit affirmed the federal district court’s ruling. Subsequently, the Attorney General for the State of Arkansas petitioned the U.S. Supreme Court for certiorari. The U.S. Supreme Court, using its “phone a friend” (i.e. “amicus”) option, called upon the Solicitor General to weigh in on whether the Court should hear the case. The result was a brief to the Court recommending that the Supreme Court hear the case because the issue presents one of legal significance where there is a split of authority. The Solicitor General further recommended that the Arkansas Law be upheld on various grounds.
Most recently, on January 10, 2020, the Supreme Court granted the Attorney General’s petition for review of the Eighth Circuit’s controversial holding, which, among other things, has broad implications for states’ ability to keep a cap on drug prices, while simultaneously disallowing PBMs to use ERISA pre-emption as a shield against unfavorable regulations.
All in all, this is a very good sign for state PBM reform efforts, but probably not a free pass for more aggressive reforms that would directly, or more explicitly regulate the plans themselves.
Author Information:
Linda is Barclay Damon’s health care controversies team leader. A nationally recognized litigator with over 20 years of experience, she serves as lead litigation counsel as well as national, regional, and local counsel in the prosecution and defense of claims brought in state and federal courts on behalf of large groups of business and institutional clients.
Author Contact Information:
Linda J. Clark, Esq. lclark@barclaydamon.com
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Barclay Damon attorneys team across offices and practices to provide customized, targeted solutions grounded in industry knowledge and a deep understanding of our clients’ businesses. With nearly 300 attorneys, Barclay Damon is a leading law firm that operates from a strategic platform of offices located in the Northeastern United States and Toronto.
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