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Radar on Market Access: Supreme Court to Determine States' Ability to Regulate PBMs

Posted by Jane Anderson on Jan 23, 2020


The Supreme Court has agreed to hear a case that observers say ultimately could upend state-based efforts to regulate PBMs and potentially even lead to legislation on the federal level to rein them in, AIS Health reported. The lawsuit, which was brought by the Pharmaceutical Care Management Association, challenges a 2015 Arkansas law that requires PBMs to reimburse pharmacies at or above their wholesale cost for generic drugs.

The case boils down to whether PBMs are acting as agents under the Employee Retirement Income Security Act of 1974 (ERISA) and therefore are exempt from state-level regulation, or whether they are a "non-interested party and therefore subject to regulation," says Jeff Myers, founder of health care consulting firm OptDis. He says that he believes it's likely the high court justices will side with PCMA and the PBM industry, agreeing that ERISA bars state laws like the one at issue in Arkansas.

"If the Supreme Court were to say states have the ability to regulate the PBM marketplace inside ERISA plans…it would give states an almost unlimited ability to force payers to pay a rate [to pharmacies] they deem sufficient," Myers says. Independent pharmacy lobbies generally are quite powerful in states, and would demand higher rates, he says, adding that this would lead to higher drug prices overall.

If the Supreme Court rules that states can’t directly regulate PBMs, he adds, states may try to regulate them via insurers instead, and "stop attacking PBMs directly." He says this is the more likely scenario, and something the nine justices could be keeping in mind as they consider this case.

"If the PBMs win, the precedent it sets is that states have no ability to control" them under ERISA plans, Myers says. "The only way you can do it is by going to the actual payer and saying, 'This is a requirement for offering insurance in my state.'"

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Topics: Industry Trends, Provider, Payer