By Michael W. Stevens and Mark Casciari

Seyfarth synopsis: Arkansas has sought certiorari on the question of the ability of states under the ERISA preemption clause to regulate the rates charged by PBMs, and the Supreme Court has asked for the input of the Solicitor General on whether it should decide the issue..

In Rutledge v. Pharmaceutical Care Management Association, No. 18-540, the Supreme Court has again been asked to define the scope of ERISA preemption. Thirty-six states have passed legislation regulating the rates charged by PBMs. The issue is whether such state laws are preempted by ERISA.

PBMs are entities that manage prescription drug benefits. They operate by billing health plans for participant prescriptions and then reimbursing pharmacies on behalf of the plans.

In 2013, Arkansas enacting a law purporting to regulate PBMs, and amended the law in 2015. The statute created an appeals process through which pharmacies could challenge the reimbursement rates offered by PBMs. The stated goal of the law was to protect pharmacies against below-cost reimbursement. The law applied to both ERISA and non-ERISA health plans.

An Arkansas district court found the law preempted by ERISA but not by Medicare Part D. The Court of Appeals for the Eighth Circuit affirmed as to ERISA preemption, but reversed on Medicare Part D preemption.

The Eighth Circuit held that the Arkansas law included PBMs that cover ERISA plans, so the law “relate[d] to and has a connection with employee benefit plans,” and was therefore preempted. In its petition for certiorari, Arkansas argued that merely because the law included ERISA governed plans, in addition to non-ERISA plans, there should be no preemption: “If a law regulates a class of third-party administrators or claims processors whose customers merely include ERISA plans, it logically follows that the law does not act immediately and exclusively upon ERISA plans, and that the existence of ERISA plans is not essential to the law’s operation.” Pet. at 18 (emphasis in original).

The Circuits are split on whether ERISA preempts all regulation of PBMs (the D.C. and Eighth Circuits), or whether ERISA preempts no regulations of PBMs (the First Circuit). After Arkansas submitted its petition for certiorari, the Supreme Court has requested that the Solicitor General provide the position of the United States. The Solicitor General has not yet submitted his brief.

Stay tuned to this blog for further updates. If the Supreme Court grants certiorari in this case, it will likely affect the operation of PBMs, and further define the scope of ERISA preemption.