Monday, December 14, 2020
In a unanimous (8-0) opinion authored by Justice Sotomayor, the U.S. Supreme Court held that an Arkansas state law regulating rates at which pharmacy benefits managers (PBMs) reimburse pharmacies is not preempted by ERISA. (Justice Barrett took no part in the consideration or decision of the case.) While most people would not think of ERISA preemption issues as affecting their daily lives, the Court’s opinion could have greater implications than one might imagine given that at least forty states currently regulate some aspect of PBM activities, and the significant impact PBMs have on the cost of pharmaceuticals.
In
Rutledge v. Pharmaceutical Care Mgt. Assoc., U.S. –, 2020 WL 7250098 (Dec. 10, 2020), the Supreme Court held that ERISA’s broad express preemption will not reach a state law that focuses on the price of prescription drug benefits that a plan chooses to provide.
The particular question in
Rutledge was whether ERISA preempted an Arkansas law regulating the price at which pharmacy benefit managers (PBMs) reimburse pharmacies for the cost of drugs covered by ERISA prescription drug plans. The Court described PBMs as
a little-known but important part of the process by which many Americans get their prescription drugs. Generally speaking, PBMs serve as intermediaries between prescription-drug plans and the pharmacies that beneficiaries use. When a beneficiary of a prescription-drug plan goes to a pharmacy to fill a prescription, the pharmacy checks with a PBM to determine that person’s coverage and copayment information. After the beneficiary leaves with his or her prescri
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Rutledge v. Pharmaceutical Care Management Assn., No. 18-540: Arkansas’ Act 900 regulates the price at which pharmacy benefit managers (“PBMs”) reimburse pharmacies for the cost of drugs covered by prescription-drug plans. Respondent Pharmaceutical Care Management Association is a trade association representing PBMs that brought suit claiming that Act 900 is preempted by ERISA. The District Court concluded the law was preempted, and the Eighth Circuit affirmed. Today, the Court reversed, holding that Act 900 does not run afoul of ERISA’s express preemption of “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan,” because Act 900 has neither a connection with nor reference to such a plan. Justice Sotomayor issued the Court’s opinion, which was joined by all Members of the Court except Justice Barrett, who did not participate. Justice Thomas filed a separate concurren