As discussed in our Benefits Update dated June 13, 2023, a 10th Circuit panel recently heard oral arguments in the case of Pharmaceutical Care Management Association (PCMA) v. Mulready concerning the Patient’s Right to Pharmacy Choice Act (“Act”), an Oklahoma state law that regulates pharmacy benefit manager (“PBM”) networks. On August 15, 2023, the court issued its opinion, overturning the district court’s decision and holding that all the requirements imposed on PBMs by the Oklahoma law that were on appeal are preempted as applied to ERISA-covered group health plans.
The four requirements of the Act considered in the appeal were the following:
- The Retail-Only Pharmacy Access Standards require a PBM to ensure that a brick-and-mortar pharmacy within the pharmacy network is located within a set number of miles from at least 90 percent of covered individuals (or 70 percent in rural areas).
- The Probation-Based Pharmacy Limitation Prohibition prohibits a PBM from denying, limiting, or terminating a provider’s contract because an employee of the provider is on probation status with the Board of Pharmacy.
- The Any Willing Provider Provision prohibits a PBM from denying participation in its preferred network to any provider who is willing to accept the terms and conditions agreed to by other providers in the preferred network.
- The Cost-Sharing Discount Prohibition prohibits PBMs from requiring or incentivizing individuals to use cost-sharing discounts in order to receive prescription drugs from any in-network pharmacy.
The 10th Circuit held that each of the first, third, and fourth requirements “either directs or forbids an element of plan structure or benefit design” and therefore “governs a central matter of plan administration or interferes with nationally uniform plan administration.” Likewise, the court held that the second requirement similarly “forces plans to adopt a particular scheme of substantive coverage” since, particularly in combination with the Any Willing Provider Provision, it prohibits a plan from any effort to keep disciplined pharmacists out of its preferred network. Since all four requirements of the Act seek to regulate a central matter of plan administration, all four requirements were held preempted by ERISA.
The court’s opinion distinguished the case from Rutledge v. Pharmaceutical Care Management Association (PCMA), in which the Supreme Court held that an Arkansas law requiring PBMs to tie their reimbursement rates to pharmacies’ costs was not preempted by ERISA because it did not dictate plan choices. The 10th Circuit reasoned that, whereas the Arkansas law at issue in Rutledge merely resulted in an increase of costs for the PBM, the Act goes further by potentially having a direct effect on a plan’s network design, and therefore “governs a central matter of plan administration.”
Please contact Slevin & Hart for more information about this case and how it could affect your plan.
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