Supreme Court Ruling Opens Door to State Regulations of PBMs

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On December 10, 2020, the Supreme Court of the United States held that Arkansas Act 900 is not pre-empted by ERISA, opening the door to state regulations of pharmacy benefit managers (PBMs). The Arkansas law requires PBMs to reimburse pharmacies no less than what pharmacies pay for generic drugs, and was adopted due to concerns that PBM reimbursement rates are often lower than pharmacy costs. Although the Court found ERISA preempted state laws in two recent cases (Aetna Health v. Davilia in 2004; Gobeille v. Liberty Mutual in 2016), the Court found the Arkansas law does not relate to plans covered by ERISA because Act 900 does not regulate the structure of benefits or require coverage of specific benefits. Justice Sotomayor noted that “ERISA does not preempt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.” Read the full opinion, captioned Rutledge v. Pharm. Care Mgmt. Assn., here.

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