In 2015, the State of Arkansas adopted Act 900 in response to concerns that the reimbursement rates set by Pharmacy Benefits Managers (PBMs) were often too low to cover pharmacies’ costs, and that many pharmacies, particularly rural and independent ones, were at risk of losing money and closing. Under the Act, PBMs are required to reimburse Arkansas pharmacies at a price equal to or higher than that which the pharmacy paid to buy the drug from a wholesaler. The PBM trade association, the PCMA, filed suit in the Eastern District of Arkansas to effectively invalidate the Act as pre-empted by ERISA. The U.S. Supreme Court, however, ultimately ruled that the Act has neither an impermissible connection with nor reference to ERISA, and is therefore not pre-empted.
“In short, ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage….
“Act 900 does not act immediately and exclusively upon ERISA plans because it applies to PBMs whether or not they manage an ERISA plan. Indeed, the Act does not directly regulate health benefit plans at all, ERISA or otherwise. It affects plans only insofar as PBMs may pass along higher pharmacy rates to plans with which they contract. ERISA plans are likewise not essential to Act 900’s operation. Act 900 defines a PBM as any ‘entity that administers or manages a pharmacy benefits plan or program,’ and it defines a ‘pharmacy benefits plan or program,’ in turn, as any ‘plan or program that pays for, reimburses, covers the cost of, or otherwise provides for pharmacist services to individuals who reside in or are employed in Arkansas.’ Under those provisions, Act 900 regulates PBMs whether or not the plans they service fall within ERISA’s coverage….
“Finally, PCMA argues that Act 900’s enforcement mechanisms interfere with nationally uniform plan administration by creating ‘operational inefficiencies.’ But creating inefficiencies alone is not enough to trigger ERISA pre-emption.”
Rutledge v. Pharmaceutical Care Management Association, 141 S.Ct. 474 (2020).