December 10, 2020
Decided December 10, 2020
Rutledge v. Pharmaceutical Care Management Ass’n, No. 18-540
Today, the Supreme Court held 8-0 that ERISA does not preempt an Arkansas statute regulating the rates at which pharmacy benefit managers reimburse pharmacies for prescription drug costs.
Section 514(a) of the Employee Retirement Income Security Act of 1974 (“ERISA”) preempts state laws that “relate to” employee benefit plans. 29 U.S.C.§ 1144(a). In 2015, Arkansas adopted a law, Act 900, to regulate the rates and procedures by which pharmacy benefit managers (“PBMs”) reimburse pharmacies for the costs of drugs administered on behalf of benefit plans. The Pharmaceutical Care Management Association, the trade association representing PBMs, filed suit alleging that ERISA preempted Act 900.
The Eighth Circuit held that Act 900 is preempted because it has an impermissible “connection with” ERISA plans by interfering with central plan functions and nationally uniform plan administration, and also because it impermissibly “refers to” plans by regulating PBMs administering benefits for the plans.
Does ERISA preempt Arkansas’ Act 900 regulating the rates and reimbursement procedures of pharmacy benefit managers?
ERISA does not preempt Arkansas’ Act 900. Act 900 merely affects costs without dictating plans’ choices of benefit structure, either directly or indirectly. It has neither an impermissible connection with nor a reference to ERISA plans.
“Act 900 is merely a form of cost regulation . . . [that] applies equally to all PBMs and pharmacies in Arkansas. As a result, Act 900 does not have an impermissible connection with an ERISA plan.”
Justice Sotomayor, writing for the Court
What It Means:
The Court’s opinion is available here.
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Appellate and Constitutional Law Practice
|Allyson N. Ho
|Mark A. Perry
|Helgi C. Walker
|Lucas C. Townsend
|Bradley J. Hamburger
Related Practice: Employee Benefits
|Richard J. Doren
|Heather L. Richardson
|Geoffrey M. Sigler
|Daniel J. Thomasch