Supreme Court Seeks Input on Scope of ERISA Preemption of PBMs

Pharmacy benefits management programs (PBMs) are under consideration by the U.S. Supreme Court thanks to a case they are currently hearing in which the court has been asked to define the scope of ERISA preemption regarding PBMs. The state of Arkansas sought and was granted certiorari in Rutledge v. Pharmaceutical Care Management Association. They want to know whether states have the ability, under the ERISA preemption clause, to regulate the rates charged by PBMs.

In order to decide the issue, the Supreme Court looks to many different sources of information. First and foremost, of course, the court looks at the briefs and oral arguments of each side. However, to further educate themselves on an issue and the likely repercussions of their decisions, the Court also solicits opinions from the Solicitor General and accepts briefs from non-party organizations who are knowledgeable on the subject.

ERISA Preemption of PBMs

PBMs manage prescription drug benefits. When someone purchases a prescription drug, the PBM bills the individual’s health plan and then reimburses the pharmacy. Currently, 36 states have passed legislation that regulates the rates a PBM charges. The issue raised by Arkansas is whether these state regulations are preempted by ERISA, leaving ERISA and not state legislation as the governing body of PBMs.

Following many other states, Arkansas enacted a law in 2013 that regulated PBMs. This law included an appeals process for pharmacies to challenge the PBMs reimbursement rates, supposedly to protect pharmacies from below-cost reimbursements. This law applied to reimbursements from both ERISA-governed and non-ERISA-governed health plans.

The Arkansas district court found that ERISA preempted the law (as did Medicare Part D). On appeal, the Eighth Circuit affirmed the ERISA preemption but reversed the Medicare preemption. The Eighth Circuit held that the law included ERISA-covered PBMs and thus had a connection to employee benefit plans, meaning that ERISA was the controlling law. Arkansas argues that merely because the law touches ERISA governed plans does not mean there should be preemption, especially as it also covers plans that ERISA does not govern.

ERISA Preemption at the Supreme Court

With the circuits split over ERISA preemption of state PBM regulations, this case is of interest to many benefit organization, lawyers, and counselors. The Supreme Court is studying the case from many angles and asking the Solicitor General to submit an opinion means they are looking for a position statement from the United States. As of now, the Solicitor General has not filed his brief.

The benefits attorneys at Hall Benefits Law will continue to pay close attention to this and a other cases currently before the U.S. Supreme Court as the outcomes will affect many of our clients. To learn more about the services we offer, reach out to our team by calling 678-439-6236, or visit the Hall Benefits Law website.

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