Dec 18 2020

Supreme Court Rules Unanimously in Landmark PBM Case

Community pharmacies received a much-appreciated year-end gift when the U.S. Supreme Court ruled unanimously (8-0) in their favor in the landmark Rutledge v. Pharmaceutical Care Management Association (PCMA) case, which will have a direct impact on pharmacy benefit manager (PBM) practices.

According to the National Community Pharmacists Association (NCPA), the issue before the Court was the extent to which the federal Employee Retirement Income Security Act of 1974 (ERISA), which regulates private employee benefit plans, preempts states from regulating the amount that PBMs pay pharmacies to dispense medications covered by employee-sponsored health plans.

The foundation of the case, which was filed by Arkansas Attorney General Leslie Rutledge, was a 2015 Arkansas law prohibiting PBMs from reimbursing local pharmacies at a lower rate than what the pharmacies pay to fill prescriptions. According to NCPA, before the law was enacted PBMs were found to reimburse pharmacies at less than a pharmacy's cost to acquire the drug. "This and other pressures have contributed to more than 16 percent of rural independent pharmacies across the country closing their doors in recent years. In Arkansas, nearly 13 percent of independent pharmacies closed between 2006 and 2014 alone, NCPA noted,

PCMA, which is the trade association that represents PBMs, challenged the new law in court, which eventually found its way to the Supreme Court.

The Supreme Court, with all justices participating with the exception of Hon. Amy Coney Barrett, voted to reject PCMA's arguments, essentially ruling that the Arkansas law is not preempted by ERISA.

Justice Sonia Sotomayor issued the opinion for the Court, in which she wrote: "Arkansas Act 900 regulates the price at which pharmacy benefit managers reimburse pharmacies for the cost of drugs covered by prescription-drug plans. The question presented in this case is whether the Employee Retirement Income Security Act of 1974 (ERISA), pre-empts Act 900. The Court holds that the Act has neither impermissible connection with nor reference to ERISA and is therefore not pre-empted."

Reaction from the nation's pharmacy groups was fast and enthusiastic. "This is a historic day for independent pharmacists and their patients," said NCPA CEO Douglas Hoey.  "And it confirms the rights of states to enact reasonable regulations in the name of fair competition and public health."

Scott Knoer, executive vice president and CEO of the American Pharmacists Association said it was "a great day for pharmacists and their patients."  "For years," he noted, "PBMs have threatened the sacrosanct relationship between pharmacists and their patients and have never been forced to answer to any authority for their actions.  This opinion redresses that imbalance and returns the power to protect the interests of patients to the states and other local authorities, where it belongs."

While the overall impact of the decision remains to be seen, Arkansas Pharmacists Association CEO John Vinson said he expects to see increased drug pricing transparency, along with increased pharmacy access for patients and improved freedom of choice.