Case seeks to clarify if the states can regulate corporate middlemen.
“The PBMs have been hiding behind a vaguely worded section of a federal law that was never supposed to apply to them,” saidB. Douglas Hoey, CEO of NCPA, which represents 21,000 locally owned pharmacies nationwide. “They operate without meaningful regulation, and because of that they’re able to stack the deck in their favor, and at the expense of community pharmacies and their patients.”
The case, Rutledge v. the Pharmaceutical Care Management Association, will be heard on April 27, 2020, the Court announced today. It originates from Arkansas, which passed a law in 2015 barring PBMs from reimbursing local pharmacies at a lower rate than what the pharmacies pay to fill the prescriptions. The PBM lobby, PCMA, challenged the law in court, which is when the APA and NCPA joined the effort to ensure the 2015 precedent stands.
“For countless years, PBMs have tightened the noose on pharmacists and their ability to serve their communities and provide access to life-saving medications and essential counseling,” said APA CEO and executive vice president John Vinson. “Instead, PBMs have prioritized profits and stockholders by using anti-competitive practices, self-dealing, and monopoly-like business practices to create an environment where patients, pharmacists, and employers suffer the consequences – patients lose their choice, pharmacists lose their jobs, and employers lose their money.”
That case made its way to the federal 8th Circuit Court of Appeals, where the judge ruled in favor of the PBMs. When Arkansas appealed the ruling, the Supreme Court asked the US Solicitor General to recommend whether to take the case. Not only did he urge the Court to take the case, but he argued strongly that the 8th Circuit erred in its decision.
“This US Supreme Court will address regulation of an industry built for profits, not patients. The ever-increasing flow of health care funding to the proverbial unregulated middle can be halted, and good patient care can be enhanced when states are permitted to regulate PBMs,” said APhA executive vice president and CEO Thomas Menighan. “Evidence is clear that the profits in the middle come at the expense of everyday Americans and is adversely impacting patient access to pharmacists’ patient care services.”
At the heart of the case is whether states like Arkansas can enact regulations that affect the PBMs, who argue that they are exempt by the Employee Retirement Income Security Act of 1974.
Rebecca Snead, CEO and executive vice president of NASPA, said the federal ERISA law was never meant to shield pharmacy benefit managers from state regulation. “State pharmacy associations have championed pro-patient, pro-employer, pro-pharmacy legislation for over 25 years with limited success due to the PBMs’ claims that they are pre-empted under ERISA. But the federal ERISA law was never intended to thwart states’ attempts to regulate the business of PBMs or the business of insurance,” said Snead.
There is wide bipartisan agreement in the states that PBMs must be regulated. In fact, 33 state attorneys general, both Democrats and Republicans, signed on to an amicus brief in 2018 supporting Arkansas’s appeal of the 8th Circuit Court’s decision to the Supreme Court. Additionally, all 50 state pharmacy associations, as well as the District of Columbia, will the brief.
“It’s rare to get bipartisan agreement on anything, so this level of support is overwhelming,” said Hoey. “State policymakers have an obligation to protect their residents and their local businesses from predatory business practices. The PBMs are driving up costs for patients, and they are limiting access for patients by systematically shutting down their local pharmacies.”
The case will be decided by the end of June. Click here for more information on Rutledge v. PCMA.