Late last year, the Supreme Court released its decision in the Rutledge vs PCMA case. This case was about whether state laws regulating PBMs are preempted by ERISA (click here for more detail on the case). Generally, state laws are preempted by ERISA if they govern a “central matter of plan administration;” they interfere with national plan administration, or they act “immediately and exclusively” on ERISA plans. In this case, the Court unanimously decided that because Arkansas’s law is a form of cost regulation that does not direct plan choices and because it regulates PBMs regardless of whether the plans they service are ERISA plans, it is not preempted by ERISA.
This decision closely followed previous Supreme Court decisions about state laws and ERISA preemption. The primary focus of the Court’s decision, in this case, is on the price regulation aspects of Arkansas law. Other portions of the law requiring an appeals process for pharmacies and allowing pharmacies to decline to dispense a prescription were viewed by the Court as not interfering with matters central to plan administration.
The overarching takeaway from this decision is that the Court has provided clarity that state regulation of reimbursement rates that are not specifically targeted at ERISA plans is not likely to trigger ERISA preemption. In addition, the Court specifically says that the Arkansas law does not directly regulate health plans at all, noting that the only way plans are affected is if PBMs pass along higher rates to the plans. This could be seen as a line in the sand that determines whether a state law is preempted by ERISA based on whether it affects third-party administrators rather than health plans directly. The bottom line is that supporters of the Arkansas law and other similar state laws regulating PBMs are probably breathing a bit easier now.
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