Amicus Brief Seeks Protection Of State Laws Regulating Pharmacy Benefit Managers

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Citing the substantial impact the U.S. Supreme Court's decision will have on PBMs' conduct toward specialty pharmacies, NASP urged the Court to take up Oklahoma's petition for review of the Tenth Circuit U.S. Court of Appeal decision.
United States Food, Drugs, Healthcare, Life Sciences
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Duane Morris, before the Supreme Court of the United States and on behalf of the National Association of Specialty Pharmacy (NASP), on June 14, 2024, filed an amicus brief in support of a petition for a writ of certiorari from Oklahoma Insurance Commissioner Glen Mulready, filed on May 10, in order to protect the rights of states to regulate pharmacy benefit managers (PBMs) in the matter of Pharmaceutical Care Management Association v. Mulready.

Citing the substantial impact the U.S. Supreme Court's decision will have on PBMs' conduct toward specialty pharmacies, NASP urged the Court to take up Oklahoma's petition for review of the Tenth Circuit U.S. Court of Appeal decision.

As NASP states in its amicus brief:

[T]he Court's decision in this case will impact the nationwide efforts by States to regulate the manner in which pharmacy benefit managers conduct themselves toward specialty pharmacies, which are serving the most vulnerable residents of such States. As a result, this case will substantially affect the day-to-day business of specialty pharmacies and their patients.

In August 2023, the Tenth Circuit found that the Employee Retirement Income Security Act (ERISA) and Medicare Part D partially preempted Oklahoma's Patient Right to Pharmacy Choice Act. That Act was passed in 2019 to regulate certain conduct of PBMs in order to protect the operations of independent pharmacies, including, for example, requiring plans to offer specific pharmacy network access to state residents, prohibiting certain fees charged to pharmacies by PBMs for participating in PBM networks, and implementing an "any willing provider" provision that requires PBMs to permit pharmacies willing to abide by the terms and conditions to participate in a PBM's network.

In reversing the district court's decision finding that the Act was not preempted by ERISA or Medicare Part D law, the Tenth Circuit held the Act's restrictions on network access and composition ran afoul of express preemption provisions in both the ERISA and Medicare Part D. Specifically, the panel held that the provisions of the Act directed or restricted "an element of plan structure or benefit design" and that a pharmacy network's scope was one of the "key benefit designs for an ERISA plan."

During the pendency of the district court's review of the matter brought by Pharmaceutical Care Management Association, the case was stayed while the U.S. Supreme Court considered the matter of Rutledge v. PCMA, in which the justices unanimously held that an Arkansas law regulating the reimbursement of PBM payments to network pharmacies was not preempted by ERISA.

Because of an apparent conflict with the 2020 Rutledge opinion as well a 2021 Eighth Circuit opinion, which upheld North Dakota PBM regulation as not preempted by ERISA, the U.S. Supreme Court has been urged to consider a review of the Tenth Circuit's decision.

Thousands of independent specialty pharmacies nationwide provide support to patients with rare diseases or chronic, complex conditions such as cancer, multiple sclerosis, rheumatoid arthritis or organ transplantation, for example, through the monitoring and management of drug therapy. The ability of independent specialty pharmacies to continue to service this most vulnerable population is dependent on regulation of PBMs, which control insureds' access to specialty pharmacies and what medications such individuals can or cannot have access to. The case now before the U.S. Supreme Court is critically important to upholding state laws that have gone into effect since Rutledge and for protecting the rights of states going forward to act to protect pharmacy competition and patient access to the pharmacy of their choice.

And, as further noted in NASP's amicus brief:

[a]n absence of meaningful regulation and a lack of transparency in the PBM market has allowed large PBMs with market dominance to deviate from their original purposes of acting as honest brokers to lower medical costs ... Without allowing States to regulate PBMs' discriminatory conduct against independent retail and non-affiliated specialty pharmacies, patient choice to access their pharmacies will suffer as more pharmacies are forced to limit the drugs they can dispense or will continue to be forced out of business.

Duane Morris will continue to monitor this significantly important decision by the U.S. Supreme Court.

For More Information

If you have any questions about this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Ryan F. Monahan, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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