A recent case argued in the Eighth Circuit, Rutledge v. Pharmaceutical Care Management Association, brings up questions of the extent to which ERISA preempts state law. In Arkansas, the Pharmacy Benefit Managers (PBMs) are regulated by state statute, but the question in Rutledge is whether this statute is preempted by ERISA. While Arkansas law requires PBMs to reimburse pharmacies for a generic drug at a rate that is at least what the pharmacy paid for the drug, ERISA regulations may control.
ERISA Pre-Emption
According to its regulations, ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” unless specifically exempted elsewhere. Case law, including previous cases before the Supreme Court, construed ERISA’s preemption clause to mean that ERISA preempts state laws even when the statute in question “has a connection with or reference to such a [benefit] plan.”
The Eighth Circuit held in Rutledge that the Arkansas statute applied to all PBMs. Because some PBMs are part of ERISA plans, ERISA preempts the Arkansas rule, making it unenforceable at least in connection with PBMs that are part of an ERISA plan. In its petition, Arkansas focused on preemption theory and argued that the statute at issue regulates a group that merely includes ERISA plans and administrators, and the law does not act exclusively on ERISA plans. The fact that some of the plans impacted are ERISA plans is not determinative of ERISA preemption status.
Position of the Solicitor General of the United States
The brief from the Solicitor General argues that the decision of the court of appeals erred in its decision that ERISA preempted state law. Further, the Solicitor General rejected an argument by the Pharmaceutical Care Management Association (PCMA), which argued that this particular case was not the right one to address the particular question of ERISA preemption.
It is likely that the recommendation to grant certiorari will be granted and the final decision of the Supreme Court will impact the operation of all PBMs as well as clarify the scope of ERISA preemption.
The team of benefits attorneys at Hall Benefits Law help our clients stay on top of these rulings and make sure they have the processes and procedures in place to comply with ERISA and other regulations. To learn more about the services we offer, reach out to our team by calling 678-439-6236 or visiting the Hall Benefits Law website.
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