HEALTH INSURANCE

Rutledge v. Pharmaceutical Care Management Association

Issues

Does the Employee Retirement Income Security Act of 1974 preempt a state law regulating pharmacy benefit managers’ drug-reimbursement rates?

This case asks the Supreme Court to decide whether an Arkansas state law regulating pharmacy benefit managers’ drug reimbursement rates is preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”). Whether ERISA preempts the state law, Act 900, depends on whether Act 900 has an impermissible connection to ERISA or refers to ERISA. Arkansas Attorney General, Leslie Rutledge, argues that ERISA does not preempt Act 900 because Act 900 is simply a basic rate regulation that does not have an impermissible connection to ERISA or refer to ERISA. The Pharmaceutical Care Management Association counters that ERISA, in fact, preempts Act 900, as Act 900 regulates a central part of ERISA plan administration, making it impermissibly connected to ERISA, and refers to ERISA. The Court’s decision in this case will influence the ability of states to regulate pharmacy benefit managers and, by extension, could impact the costs of prescription drugs and the access patients have to pharmacies.

Questions as Framed for the Court by the Parties

Whether the U.S. Court of Appeals for the 8th Circuit erred in holding that Arkansas’ statute regulating pharmacy benefit managers’ drug-reimbursement rates, which is similar to laws enacted by a substantial majority of states, is pre-empted by the Employee Retirement Income Security Act of 1974, in contravention of the Supreme Court’s precedent that ERISA does not pre-empt rate regulation.

In 2015, the State of Arkansas passed Act 900, a law created to regulate the practices of pharmacy benefit managers (“PBMs”). Pharm. Care Mgmt. Ass’n v. Rutledge at 1111. PBMs serve as a link between pharmacies and health plans.

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