SCOTUS hears Arkansas case regulating PBMs

Updated: Oct. 6, 2020 at 6:07 PM CDT
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(KAIT) - The United States Supreme Court heard oral arguments in an Arkansas case regarding Pharmacy Benefit Manager regulation on Tuesday.

This is the first time in state history the nation’s high court will hear arguments in a case.

It was also the first time the Supreme Court will rule on a case involving Pharmacy Benefit Managers (PBMs).

Rutledge v. Pharmaceutical Care Management Association (PCMA) focuses on a law passed by the Arkansas legislature aimed at regulating pharmacy benefit managers.

The case centers around Act 900, an Arkansas law passed in 2015 prohibiting PBMs from reimbursing local pharmacies at a lower rate than they pay to fill prescriptions.

PBM’s are the middleman between pharmacies and insurance companies.

The large organizations negotiate prices pharmacists pay, and in recent years, the amounts reimbursed to pharmacies have dropped.

Attorney General Leslie Rutledge said she believes this has left independently owned and rural pharmacies struggling, with more than 16 percent of rural pharmacies closing in recent years.

PCMA filed a lawsuit to block Act 900 in 2015.

The U.S. District Court and the 8th Circuit Court of Appeals agreed that the federal Employee Retirement Income Security Act, or ERISA, preempts the law.

Several other states have similar laws to regulate PBM’s.

Attorney General Rutledge petitioned the Supreme Court to hear the case two years ago and is supported by several pharmacies groups nationwide, including the Arkansas Pharmacists Association, National Community Pharmacists Association, the American Pharmacists Association, and the National Alliance for State Pharmacy Associations.

Rutledge said this is a landmark case in determining whether the state government has the authority to regulate PBMs.

“This case and the impact of this case has to do with access to healthcare for all Americans. And that’s access to affordable healthcare," said Rutledge, “Again, our local, independently-owned pharmacies are on the frontlines every single day."

Shawn Johnson with the Attorney General’s Office said if this case is declared unconstitutional and ERISA is preempted, PBM’s will continue to adopt reimbursement rates for independent pharmacies as they currently do.

If the law is found constitutional, the state will continue to regulate PBM’s and independent pharmacies will be covered.

The CEO of the National Community Pharmacists Association, Doug Hoey, said from a marketplace standpoint if the ruling from the 8th Circuit Court of Appeals is upheld, we will continue to see independent pharmacies close and patients in rural areas lose access the healthcare pharmacies provide.

“Prior to the pandemic, in the prior two years, four percent, over 2,000, of all pharmacies closed their doors and were not replaced. So, that’s 2,000 fewer pharmacies that were available to consumers in previous years,” said Hoey. “We’ll continue to see that if there is not PBM reform. This would be the first volley into the beginning of PBM reform if the Supreme Court reverses the 8th Circuit. But, without that, there are some dire consequences for small businesses, for pharmacies, and for patients.”

The PCMA argues that Act 900 preempts the Employee Retirement Income Security Act of 1974.

“Act 900 responded to that practice by regulating what PBMs pay pharmacists,” Solicitor General Nicholas Bronni said. “That response is not preempted for three reasons. It doesn’t regulate benefits, it doesn’t regulate planned administration, and it doesn’t discriminate against ERISA entities.”

The respondent to the state said the law would make ERISA administrators comply with state-specific rules.

“Act 900 directly compels ERISA plan administrators to comply with state specific rules and procedures in administering their benefit programs,” Seth Waxman, respondent attorney said. “In doing so, it adds to a thicket of varying state laws that make uniformed plan administration impossible.”

To watch the full oral argument, click here.

For more on the Rutledge v. PCMA case, visit the Attorney General website here.

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