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December 17, 2020
The holidays came a little early for Arkansas pharmacists when the Supreme Court of the United States (SCOTUS) provided its 8-0 opinion on the Rutledge vs. PCMA case in the favor of the State of Arkansas. The recent decision was not anticipated until later in 2021.
At the heart of the case was whether or not Arkansas Act 900 on attempting to regulate pharmacy benefit managers (PBMs) at the state level was permissible. Or, was the regulation of the PBMs by the states was pre-empted by ERISA, a federal law that governs benefit plans for employees.
Rutledge vs. PCMA: History
To back up, Arkansas Act 900 passed in 2015 looked at state rights to regulate PBMs. The Act:
- “Requires PBMs to reimburse Arkansas pharmacies at a price equal to or higher than that which the pharmacy paid to buy the drug from a wholesaler.
- Requires PBMs to tether reimbursement rates to pharmacies’ acquisition costs by timely updates to their discounted [maximum allowable cost drug] MAC lists when drug wholesale prices increase.
- PBMs must provide administrative appeal procedures for pharmacies to challenge MAC reimbursement prices that are below the pharmacies’ acquisition costs.
- If a pharmacy could not have acquired the drug at a lower price from its typical wholesaler, a PBM must increase its reimbursement rates to cover the pharmacy’s acquisition cost.
- PBMs must also allow pharmacies to “reverse and rebill” each reimbursement claim affected by the pharmacy’s inability to procure the drug from its typical wholesaler at a price equal to or less than the MAC reimbursement price.
- …Permits a pharmacy to decline to sell a drug to a beneficiary if the relevant PBM will reimburse the pharmacy at less than its acquisition cost.” (SCOTUS opinion, Rutledge vs. PCMA, at 2 & 3) https://www.supremecourt.gov/opinions/20pdf/18-540_m64o.pdf
Once the Act was passed, the Respondent (or other party to the case), which is the Pharmaceutical Care Management Association (PCMA), represented 11 of the largest PBMs in the country sued and explained that ERISA pre-empted this state law. The Supreme Court held that the Arkansas law is not pre-empted by ERISA, and therefore stands.
How Will This Decision Affect Employers and Plans?
Hopefully, this ruling will open the door to allow other states to open fair play and transparency laws between PBMs and pharmacies.
This, on one hand, will drive down costs for employers footing the bill of prescription drugs. On the other hand, smaller or more rural employers could potentially face higher drug prices if independent pharmacies cannot acquire drugs from drug wholesalers at better discounts than larger chain pharmacies.
Will these laws end up favoring the bigger pharmacy chains who have bigger buying power? It is not clear.
The bottom line: We at Apex cautiously are watching this breaking and disruptive holding as many states look to begin to regulate PBMs and potentially create more transparency in prescription drugs. This would holistically be a positive for patients, pharmacies and, ultimately, the employers who are paying for prescription drugs.
What about Indiana?
Indiana law already is on the books for the requirement of PBMs to register with the Indiana Department of Insurance (IDOI). Apex checked in with the IDOI recently, and received the following update:
- The IDOI implemented a PBM information filing process to comply with the Indiana PBM law requiring PBMs to register with the IDOI by December 31, 2020.
- The IDOI has been drafting PBM administrative rules and creating a PBM registration form, which they expect to finalize in 2021.
We will continue to monitor the impact of this historic SCOTUS ruling as it unfolds in Indiana and across the U.S.