Supreme Court Sides with States’ Right to Regulate Pharmacy Benefit Managers Reimbursement Rates

  • Arkansas AG Leslie Rutledge, obtained a ruling from the U.S. Supreme Court in Rutledge v. Pharmaceutical Care Management Association, 18-540, upholding Arkansas’s right to regulate the prices at which pharmacy benefit managers (“PMBs”) reimburse pharmacies for drugs covered by prescription-drug plans. A PBM challenged the Arkansas law that regulated PBM reimbursement rates (“Act 900”), arguing that it was preempted by the Employee Retirement Income Security Act (“ERISA”), and the U.S. Court of Appeals for the Eighth Circuit agreed. AG Rutledge appealed.
  • The Court’s decision held that ERISA did not preempt Act 900 because it did not relate to or have an impermissible connection with an ERISA plan. Rather, Act 900 was just a form of cost regulation that applied to PBMs regardless of whether they managed an ERISA plan or not, and therefore it did not govern a central matter of plan administration or interfere with nationally uniform plan administration as is required for ERISA preemption to be applicable.
  • As previously reported, AG Rutledge’s position was supported by a bipartisan group of 46 AGs who filed an amicus brief in the case, arguing that a more expansive interpretation of ERISA’s preemption clause would interfere with state’s traditional authority to regulate businesses for the purpose of protecting the health and welfare of their residents.