Arkansas Solicitor General Nicholas Bronni will defend before the U.S. Supreme Court the constitutionality of a state law regulating pharmacy benefit managers next Tuesday (Oct. 6).
Passed in 2015, Act 900 seeks to regulate pharmacy benefit managers (PBMs), which act as middlemen between pharmacists and insurance providers. Their reimbursement rates theoretically incentivize pharmacies to find lower wholesale drug prices.
Pharmacists say the PBMs’ reimbursement rates are too low – in fact, too often below the pharmacists’ cost of procurement. The law requires PBMs to increase reimbursements for generic drugs if they are below wholesale costs, and it created an appeals process for pharmacies to challenge the reimbursements.
When the law went into effect in September 2015, the Pharmaceutical Care Management Association (PCMA), which represents PBMs, immediately sued. The industry argued that state laws can’t preempt payments made for voluntarily created employee benefit plans in private industry under the Employee Retirement Income Security Act of 1974, otherwise known as ERISA. ERISA plans are not regulated by state insurance departments and are typically self-funded.
The Eastern District of Arkansas federal court enjoined the law in March 2017, so the state appealed to the U.S. Court of Appeals for the Eighth Circuit, which ruled in favor of the PCMA in June 2018. The case is Rutledge v. Pharmaceutical Care Management Association.
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