On Remand from Supreme Court, Eighth Circuit Rules That ERISA Does Not Preempt State PBM Regulation

The U.S. Court of Appeals for the Eighth Circuit recently issued its decision in Pharm. Care Mgmt. Ass’n. v. Wehbi, 2021 WL 5355916 (8th Cir. 2021), after reconsidering its prior ruling on remand from the U.S. Supreme Court. The Eighth Circuit reversed course from the prior ruling and concluded that ERISA did not preempt a North Dakota state law that governed relations between pharmacies and pharmacy benefit managers (PBMs). The court previously had held that ERISA preempted the state law, rendering it unenforceable. However, the U.S. Supreme Court subsequently held in Rutledge v. Pharm. Care Mgmt. Ass’n. 141 S. Ct 474 (2020) that ERISA did not preempt another state’s similar PBM law. As a result, the high Court directed the Eighth Circuit to reconsider its ruling in this case in the Rutledge decision.

The North Dakota PMB law regulates several aspects of the relationship between pharmacies and PBMs in the state. For instance, the law requires specific disclosures, regulates the fees that PBMs may charge pharmacies, and limits the co-payments that PBMs may charge.

In Rutledge, the Supreme Court noted that ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA. The primary concern of ERISA is state laws that require plan providers to structure their plans according to specific guidelines. As a result, the Court noted that not all state laws have an “impermissible connection” with ERISA benefits plans. For instance, if the law affects costs or alters incentives without determining the structure of the plans, then ERISA likely does not preempt the law.

Following the reasoning of the Supreme Court in Rutledge, the Eighth Circuit that none of the challenged provisions in the North Dakota law at issue in Wehbi had an impermissible connection with the ERISA plans. The court reached this conclusion, stating that the provisions at issue did not:

  • Regulate a central issue of plan administration
  • Interfere with uniform plan administration, or
  • Force a plan to adopt a specific structure in terms of coverage or choice of insurers

The Eighth Circuit also ruled that the law had no impermissible reference to ERISA plans, as the law was not exclusively applicable to ERISA plans. Therefore, the Eighth Circuit found that ERISA did not preempt the North Dakota law.

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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