In a victory for patients and physicians, state lawmakers can continue to legislate on certain aspects of the operation of pharmacy benefit managers (PBMs) in their states, the U.S. Supreme Court recently ruled.
As the Litigation Center of the American Medical Association and the State Medical Societies and Arkansas Medical Society explained in a High Court brief, it is important to let states rule these entities as PBMs increasingly play a role. central role in the pricing of prescription drugs for the administration of drug benefits. .
Without laws like the one challenged in Arkansas, PBMs could operate with minimal transparency around drug pricing and other decisions, the AMA Litigation Center’s brief told the Supreme Court in the United States. case, Rutledge v. Pharmaceutical Care Management Association. This would make it difficult for physicians to determine which treatments a particular payer prefers, what level of cost-sharing their patients would incur, and whether drugs are subject to sometimes unreasonable use management requirements.
“This lack of transparency in drug coverage for patients can interfere with sound medical practice and can lead to delays and other disruptions in needed medical treatment,” the brief said. “Thus, the ability of patients and their physicians to have the information and even the latitude they need to make key drug decisions has been hampered by the kind of practices that state PBM legislation can properly. to treat. “
The Supreme Court’s unanimous decision overturned an opinion by the 8th United States Court of Appeals that the Federal Employee Retirement Income Security Act of 1972 (ERISA) prevailed over Arkansas law.
Learn more about cases in which the AMA Litigation Center provides support and learn about Litigation Center’s case selection criteria.
The case arose after the Pharmaceutical Care Management Association (PCMA) challenged a 2015 Arkansas law that sought to address concerns that PBMs often set prices too low to cover drugstore costs. This, in turn, would bankrupt many pharmacies. State lawmakers, like their counterparts in other states who have enforced legislative remedies, were particularly concerned about what the practice would mean for rural and independent pharmacies and their patients.
For generic drugs, Arkansas law requires PBMs to:
- Tie reimbursement rates to drugstore acquisition costs by updating their Maximum Allowable Costs (MAC) lists when wholesale drug prices increase.
- Provide administrative appeal procedures allowing pharmacies to challenge MAC reimbursement prices lower than the acquisition costs of pharmacies. If the pharmacy was unable to purchase the drug at a lower price from its typical wholesaler, a PBM must increase its reimbursement rate to cover the cost.
- That a pharmacy refuses to sell a drug to a beneficiary if the PBM concerned reimburses the pharmacy at a price lower than its acquisition cost.
The PCMA argued – and the US 8th Court of Appeals agreed – that state law fell within a framework established by the US Supreme Court in an earlier case, Gobeille c. Liberty Mutual Insurance Co., to determine if ERISA can prevail over a law. However, a state law is not permitted under ERISA if it “acts immediately and exclusively on ERISA plans” or if “the existence of ERISA plans is essential to the functioning of the law” . State law is also not permitted if it governs “a central question of the administration of the scheme” or “interferes with the uniform administration of the scheme nationwide”.
The AMA Litigation Center brief argued and the United States Supreme Court agreed that Arkansas law did not meet this preemption.
“However, ERISA does not prejudge state law that only increases costs, even if plans decide to limit benefits or charge higher rates to plan members as a result,” he said. declared the Supreme Court of the United States. “In short, [the law] is tantamount to cost regulation that has no link or impermissible reference to ERISA. “
Reversing the lower court’s decision was a positive outcome for patients and doctors alike, as allowing it to stand would have undermined Congress’ intent and swept “so broadly that it would invalidate all manner of national regulations traditional health care that has an indirect effect on ERISA plans, no matter the distance, ”the AMA litigation center’s brief told the court.