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AHIP supports federal regulation of PBMs in Supreme Court case

Should states win their case to regulate how PBMs contract with pharmacies, plan costs will rise, AHIP says.

Susan Morse, Managing Editor

America's Health Insurance Plans has added its voice to an argument before the U.S. Supreme Court over whether states have the right to regulate pharmacy benefit managers.

Rutledge v. PCMA pits Arkansas Attorney General Leslie Rutledge against the Pharmaceutical Care Management Association.

In 2015, when Rutledge first took office, Arkansas law tried to regulate how pharmacy benefit managers contract with pharmacies under health plans governed by the Employee Retirement Income Security Act. The law, called Act 900, specifically sought to regulate pharmacy benefit managers' drug-reimbursement rates.

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Arkansas Act 900 required PBMs to raise reimbursement rates for drugs if they fell below the pharmacy's wholesale costs and created an appeal process for pharmacies to challenge PBM reimbursement rates, according to the Pharmacy Times. This effectively prohibited PBMs from reimbursing pharmacies below the pharmacies' cost of acquisition.

The U.S. Court of Appeals 8th Circuit Court upheld the argument by the Pharmaceutical Care Management Association that individual states can't regulate pharmacy benefit manager practices because state law is preempted by the uniform Employee Retirement and Income Security Act of 1974.

AHIP agrees and said that, should Arkansas win in the Supreme Court, plan costs would increase.

The case is scheduled to be heard on April 27, though that date may change.


In an amicus brief filed on April 1, AHIP voiced support for the uniform administration of employer-sponsored plans under ERISA, including the role and function of pharmacy benefit managers and other third-party administrators.

The Academy of Managed Care Pharmacy also sides with the PCMA, and has filed an amicus brief that argues a ruling in favor of Rutledge could introduce differing state laws and additional financial burdens that would be passed on to consumers through higher premiums.

On the other side of the debate, U.S. Solicitor General Noel Francisco sent a brief in which he disagreed with the appeals court decision. Francisco sided with attorney generals from 31 states and the District of Columbia, who want the U.S. Supreme Court to side with Arkansas.

And in March, the American Public Health Association, the National Community Pharmacists Association, the Arkansas Pharmacists Association and the National Alliance of State Pharmacy Associations filed an amicus curiae brief that stated PBM practices are harming patients and pharmacies by increasing drug costs and threatening patient access to medications and pharmacists.


The ERISA framework is aimed at encouraging employers voluntarily to form and maintain ERISA plans, AHIP said. PBMs act on behalf of ERISA plans in the area of administering prescription-drug benefits.


"Application of Act 900 and similar laws would cause upheaval in the administration of ERISA-governed prescription-drug claims," AHIP said in the brief. "First, it would increase plan costs markedly. Most notably, Act 900 nullifies an ERISA plan's benefit terms by imposing a reimbursement scheme that overrides the ERISA plan's own cost-effective benefit design."

Twitter: @SusanJMorse
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