Attorney General Curtis Hill said today that states must be permitted to regulate pharmacy benefit managers (PBMs) in order to fight soaring prescription drug costs. In a filing to the U.S. Supreme Court, he and 45 other attorneys general are supporting efforts by the state of Arkansas to defend this prerogative.
While few people are even familiar with the term “PBMs,” roughly four out of five Americans get their prescription drugs through them. PBMs reimburse pharmacies on behalf of health care plans and, in turn, bill those plans for their beneficiaries’ prescriptions.
Although they initially played a modest role in the U.S. health care system, certain business practices of modern PBMs have had profound consequences for pharmacies, patients and states alike.
In 2015, Arkansas adopted a statute that requires PBMs to raise their reimbursement rate for a drug if that rate is below a pharmacy’s primary wholesaler’s price. The law also created an appeal process for pharmacies to challenge PBMs’ reimbursement rates.
Shortly after the law was passed, a trade association of PBMs challenged the statute, arguing it was preempted by a federal law — the Employment Retirement Income Security Act (ERISA). The Eighth Circuit Court of Appeals agreed with the trade association. Arkansas, though, petitioned for a review of the case by the U.S. Supreme Court, which was granted Jan. 10.
“Although this case centers on the state of Arkansas, an unfavorable ruling could jeopardize other states’ efforts to regulate PBMs,” Attorney General Hill said. “The Supreme Court should preserve states’ authority to fight rising prescription drug costs.”
In 2018, the Indiana General Assembly passed a statute that imposes transparency requirements on PBMs. Because Indiana’s law could also face an ERISA preemption challenge, Attorney General Hill said, Indiana has a strong interest in supporting Arkansas in this case.
The brief in Rutledge v. Pharmaceutical Care Management Association argues that there are compelling policy reasons why so many states have undertaken efforts to regulate PBMs. It also argues that ERISA does not preempt the regulation of relationships between PBMs and pharmacies because PBMs are not ERISA plans. Rather, the brief argues, PBMs are third-party businesses that contract with many different parties, including ERISA plans.