Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Blogs
    • AI
    • Deals
    • Layoff Tracker
    • HIMSS 2023
  • Opinion
    • Breaking Bias
    • Commentaries
    • Letters
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - AI and Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Sponsored Video Series - One on One
    • Sponsored Video Series - Checking In with Dan Peres
  • Data & Insights
    • Data & Insights Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Legal
October 06, 2020 01:50 PM

Supreme Court justices question whether states can regulate PBMs

Rachel Cohrs
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Modern Healthcare Illustration / Getty Images

    Supreme Court justices on Tuesday questioned whether states have the authority to regulate how much middlemen hired by insurance plans pay pharmacies.

    During oral arguments, several justices asked about the burden health plans face since many states have a patchwork of PBM regulations. The case, Rutledge v. Pharmaceutical Care Management Association, could decide the fate of those state PBM regulations. The justices are weighing whether the Employee Retirement Income Security Act allows states to force pharmacy benefit managers to pay pharmacies at least their cost of acquiring a drug.

    The conflict in the case is over an Arkansas law that requires PBMs to pay pharmacies at least the price stated by the pharmacy's wholesaler and regularly update their Maximum Allowable Cost price lists. The law also outlines a process for pharmacies to appeal particular MACs.

    Pharmacy benefit managers argue that a patchwork of state regulations that complicate plans' operations and that requiring PBMs to cover acquisition costs discourages pharmacies for searching out the lowest price from suppliers. America's Health Insurance Plans is not a party to the case, but asked the court to affirm the lower court's ruling for the sake of national uniformity.

    Justice Clarence Thomas highlighted a potential lack of uniformity as a potentially interesting issue for him, and PCMA counsel Seth Waxman, a partner at Wilmer Cutler Pickering Hale & Dorr, argued that compliance across state lines is onerous for PBMs acting on behalf of plans. However, Justice Samuel Alito pointed out that PBMs are sophisticated entities that already deal with a large volume of information.

    Justice Elena Kagan questioned whether having more than 40 different state standards created a patchwork of varying state regulation.

    "I'm wondering why that doesn't raise exactly the specter that the drafters of ERISA were concerned about," Kagan said.

    The 8th U.S. Circuit Court of Appeals decided that the Arkansas law was preempted by ERISA. Since the late Justice Ruth Bader Ginsburg's death, if the court were to come to a split decision the 8th Circuit's decision would stand.

    More than two dozen states, led by Arkansas, argue that the law should not be preempted because it only regulates rates between pharmacies and third-party administrators and does not change plans' administration decisions. The Trump administration supports the states' position.

    Justice Brett Kavanaugh appeared skeptical of states' argument that PBM reimbursement is completely separate from plan administration.

    "Why shouldn't ERISA care about costs that are going to be increased and thereby passed on in the form of worse benefits to Arkansas workers?" Kavanaugh asked Frederick Liu, who represented the Trump administration.

    Many of the nation's largest PBMs have merged with health insurers in recent years.

    Legislation regulating PBMs, which is generally supported by drugmakers, has gained popularity in state legislatures in recent years. In 2020 alone more than 150 bills regulating PBMs were introduced nationwide, and states including Colorado, Georgia, Idaho, Indiana and Maryland adopted new laws on the issue, according to data compiled the National Academy for State Health Policy.

    The larger implications of the case were on the mind of Justice Neil Gorsuch, who asked how a ruling for PBMs could affect regulation on other employer-provided benefits such as day care for employees' children. Lower court rulings on ERISA preemption on healthcare regulation have been somewhat inconsistent, so the case presents an opportunity for the justices to clarify their most recent stances.

    The court is expected to deliver an opinion by the end of June 2021 at the latest. If justices split 4-4 on the case, they may choose to rehear it.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    legal hospital
    FTC sues U.S. Anesthesia Partners, private equity firm
    Former Outcome Health CEO Rishi Shah 800x532.jpg
    Here's how much Outcome Health's founder spent fighting fraud charges
    Most Popular
    1
    CMS tries luring providers to revamped Medicare ACOs
    2
    Oregon joins other states in setting ratios for nurse staffing
    3
    Blue Shield CA taps Amazon, Mark Cuban, CVS for new PBM model
    4
    A health innovation hub grows in Lake Nona Medical City
    5
    Hospital-at-home providers push for Medicaid coverage
    Sponsored Content
    Daily Dose Newsletter: Sign up to receive a late afternoon weekday roundup of that day’s breaking news and developments in healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Help Center
    • Advertise with Us
    • Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Blogs
      • AI
      • Deals
      • Layoff Tracker
      • HIMSS 2023
    • Opinion
      • Breaking Bias
      • Commentaries
      • Letters
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
    • Data & Insights
      • Data & Insights Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing