States urge Supreme Court to review PBM case

A bipartisan group of state attorneys general is urging the U.S. Supreme Court to review a case they allege wrongfully limits states' ability to police pharmacy benefit managers. 

Minnesota Attorney General Keith Ellison (D) led a group of 32 attorneys general who filed an amicus brief with the high court Monday, asking justices to reconsider an August 2023 ruling that found federal laws supersede state laws regarding PBMs. 

Related: Oklahoma can't regulate PBMs' pharmacy networks: federal appeals court

Employers and health insurers hire PBMs to negotiate bulk medication discounts with drug manufacturers. Last year, 79% of prescription claims were processed by three companies – UnitedHealth Group’s OptumRx, Cigna Group’s Express Scripts and CVS Health’s Caremark –  according to an April 2024 report by the Drug Channels Institute. The vertically integrated companies also own large health insurers and pharmacy chains. 

The attorneys general are focused on a 2019 Oklahoma law that would have required PBMs to contract with any willing retail pharmacy and limit how they pushed patients to retail pharmacies owned by the same parent organization. PBM trade group the Pharmaceutical Care Management Association sued to block the law a week before it was scheduled to take effect in October 2019, alleging the state lacked statutory power to police PBMs and that the law violated employers' rights under the Employee Retirement Income Security Act of 1974 and Medicare Part D. 

The U.S. District Court for the Western District of Oklahoma granted the trade group a partial win in 2022, ruling that federal law around employer-sponsored coverage was not applicable but Medicare Part D applied. 

The association appealed the ruling, and the 10th Circuit Court of Appeals granted it a full win in August. The Oklahoma law would have infringed on employers’ rights because the PBM market is so consolidated that companies must contract with intermediaries, or face a competitive disadvantage, the appellate court ruled. 

Oklahoma Attorney General Glen Mulready (R) petitioned the Supreme Court to review the case in May, alleging the 10th Circuit decision steps on state rights and contradicts decisions in previous cases regarding PBMs. 

Federal oversight of the PBM industry is lacking and other states have held off pursuing additional regulations because of the legal uncertainty, Mulready said Tuesday.

“I think on the federal side, they haven’t really done much of anything,” he said. “I know there’s been a lot of conversations, but it’s pretty light as far as where Congress is willing to go on that."

Federal law fails to hold PBMs accountable for rising drug costs, retail pharmacy consolidation and lower professional standards among pharmacists, the attorneys general allege in the amicus brief. Their claims echo those made by the National Association of Attorneys General in February when it called on Congress to pass wide-ranging PBM legislation but that effort failed. Separately, the Federal Trade Commission is investigating PBMs’ influence on drug costs. 

The association will continue to defend the 10th Circuit's decision, spokesperson Greg Lopes said in an email. 

"The 10th Circuit was right to hold that Oklahoma's law is preempted under both ERISA and Medicare Part D, and we will continue to defend that decision," he said.