10th Circuit’s PBM Ruling Could Erode Similar State Laws

A recent Tenth Circuit decision invalidating portions of an Oklahoma law regulating pharmacy benefit managers (PBMs) based on preemption could negatively affect similar laws in other states. The appellate court found that the Employee Retirement Income Security Administration (ERISA) and Medicare Part D preempted the challenged provisions of the PBM law. In its decision, the Tenth Circuit also explicitly acknowledged that the U.S. Supreme Court ruling in Rutledge v. PCMA, in which the high Court found that ERISA did not preempt an Arkansas PBM law, did not alter its preemption analysis.

Some see the Tenth Circuit decision as a big victory for PBMs, who currently face scrutiny by state and federal governments. The decision is also good for employers seeking uniform administration of their plans nationwide. The decision also signals a return to ERISA preemption, in contrast with the court’s decision in PCMA v. Webhi, in which the Eighth Circuit Court of Appeals found that ERISA did not preempt certain portions of a North Dakota PBM law.

Furthermore, the Tenth Circuit decision could have a significant impact on the explosion of PBM laws in various states across the country, many of which contain restrictions on PBMs like those that the appellate court found preempted by ERISA and Medicare Part D. As a result, the legal validity of similar laws are now in question, with court challenges expected.

While the Oklahoma attorney general has not publicly commented on the decision, it is quite possible that the state will petition for a rehearing at the appellate level or file a writ of certiorari to the U.S. Supreme Court. Still, some attorneys remain skeptical that the high Court will consider the issue, even in the arguable presence of a split between the Tenth and Eighth Circuits on the preemption issue. For example, the Supreme Court may wait for a more fully developed record to ensure the issues are sufficiently ripe for consideration.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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