In a unanimous decision, the U.S. Supreme Court said it is lawful for Arkansas to impose certain regulations on pharmacy benefit managers, overturning lower court decisions. Thursday's ruling could open the door for other states to pass similar laws.
The PBM lobby had argued that federal law — specifically the Employment Retirement Income Security Act — bars states from imposing regulations on PBMs, including policies that affect rates. The Supreme Court ruled against the PBM lobby in an 8-0 decision. Justice Amy Coney Barrett did not participate in the case as she was not yet seated prior to oral arguments.
The central issue before the court was an Arkansas law passed in 2015 that sought to regulate what PBMs pay pharmacies for prescriptions. Specifically, the law forbid PBMs from reimbursing pharmacies below their cost to acquire a drug. Essentially, the law sought to institute a pricing floor for pharmacies as it is common for PBMs to reimburse pharmacies below the actual cost to acquire a drug from a wholesaler, putting financial pressure on pharmacies, particularly independent ones.
But the Pharmaceutical Care Management Association, the lobby for PBMs, argued the Arkansas law treaded into ERISA territory, which preempts any state law that relates to an employer-sponsored plan.
The Supreme Court said the PCMA argument misunderstands the bounds of ERISA. Justice Sonia Sotomayor wrote the opinion for the court.
The correct question is whether the state law disrupts the ability to provide uniform plan administration across its footprint.
The law is simply a form of cost regulation, the court said.
"It requires PBMs to reimburse pharmacies for prescription drugs at a rate equal to or higher than the pharmacy’s acquisition cost. PBMs may well pass those increased costs on to plans, meaning that ERISA plans may pay more for prescription-drug benefits in Arkansas than in, say, Arizona," the opinion reads.
And the Arkansas law applies equally to all PBMs and pharmacies in Arkansas and does not single out employer-sponsored plans, the court found.
PCMA said it was disappointed in Thursday's ruling.
"As states across the country consider this outcome, we would encourage they proceed with caution and avoid any regulations around prescription drug benefits that will result in higher healthcare costs for consumers and employers," PCMA said in a statement following Thursday's ruling.
Pharmacists cheered the news.
"This is a historic victory for independent pharmacies and their patients. And it confirms the rights of states to enact reasonable regulations in the name of fair competition and public health," National Community Pharmacists Association CEO B. Douglas Hoey said in a statement.