PBM Regulation Drastically Increases in Multiple States Following Supreme Court Ruling

The U.S. Supreme Court’s decision in Rutledge v. Pharmaceutical Care Management Association, 141 S. Ct. 474 (2020), upheld an Arkansas law that regulated pharmacy benefit managers (PBMs). This landmark ruling rejected a trade group’s argument that the Employee Retirement Income Security Act (ERISA) preempted the state law. The U.S. Court of Appeals for Eighth Circuit soon followed suit by upholding a North Dakota law regulating PBMs. 

Previously, PBMs were unregulated in the otherwise highly regulated health care sector. These court decisions opened the door for a slew of state laws regulating PBMs. The decisions also increased Congressional scrutiny of PBMs due to concerns about antitrust law violations. 

According to the National Academy for State Health Policy, eighteen states passed twenty-four laws designed to regulate PBMs in 2021. Additionally, Michigan, New York, and Nebraska already have enacted five similar state laws so far, in 2022. 

Federal lawmakers and regulators also are looking to crack down on PBMs based on potential antitrust concerns. Three PBMs owned by the largest insurers currently control about 75% of the market – UnitedHealth Group Inc.’s OptumRx, CVS Health Corp.’s CVS Caremark, and Cigna Corp.’s Express Scripts. 

Politics has temporarily delayed federal regulators’ involvement with PBMs. For instance, the Federal Trade Commission (FTC)’s recent public vote on whether to study anticompetitive behavior among PBMs ended in a tie. Meanwhile, federal legislators have begun introducing bipartisan legislation requiring the FTC to study PBMs and requiring price transparency, which would significantly affect PBMs. In the absence of federal legislation, the patchwork of state laws is likely to continue, which can be a significant disadvantage for employers attempting to navigate different laws in every state. 

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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