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3 min read

Pharmaceutical Care Management Association V. Mulready 10th Circuit

PCMA is vehemently contested Oklahoma's Patient's Right to Pharmacy Choice Act and its associated regulations, arguing that they are overridden by federal law, specifically ERISA and Medicare Part D. The district court initially ruled in favor of ERISA, stating that it did not supersede the Act, but acknowledged that Medicare Part D did preempt six out of the thirteen challenged provisions. PCMA appealed the district court's decision on four ERISA-related provisions and one provision related to Medicare Part D. The 10th Circuit opined that there are numerous advantages of utilizing PBMs, including their ability to negotiate rebates, effectively manage prescription-drug benefits, and design optimal pharmacy networks. Ultimately, the Court of Appeals reversed the district court's ruling, determining that both ERISA and Medicare Part D preempt the four contested provisions.

The Oklahoma legislature worked hard to pass the Patient's Right to Pharmacy Choice Act (S.B. 841) in April 2019. Unfortunately, Governor Kevin Stitt vetoed the bill due to concerns regarding federal preemption. Nevertheless, the legislature persisted and, two weeks later, passed a revised version of the Act (H.B. 2632) which Governor Stitt promptly signed into law.

Pharmacy benefit managers (PBMs) play a pivotal role in the prescription-drug market. There are three major PBMs, who collectively control 80-85% of the market. Moreover, there are four specific provisions of the Act that are central to the ongoing dispute: the Access Standards, the Discount Prohibition, the Any Willing Provider (AWP) Provision, and the robation Prohibition.

In response to the Act and its accompanying regulations, PCMA took legal action against Oklahoma in October 2019, seeking a declaration that both ERISA and Medicare Part D take precedence over the state law. The proceedings were temporarily halted by the district court, awaiting the outcome of the Rutledge v. PCMA case, which the Supreme Court ultimately decided in December 2020.

The district court's ruling favored ERISA, stating that it did not preempt the Act, but acknowledged that Medicare Part D did preempt six out of the thirteen contested provisions. PCMA, dissatisfied with the outcome, proceeded to appeal the district court's decision on four ERISA-related provisions and one provision associated with Medicare Part D.

The Court of Appeals found that ERISA contains a clear preemption clause that overrides state laws that "relate to" an ERISA plan. PCMA argues that the Act's regulations on pharmacy benefit managers (PBMs) have a strong "connection with" ERISA plans, while Oklahoma contends that the Act's focus is on PBMs rather than health plans. However, a state law can impact ERISA plans even if it does not explicitly regulate them. There are two Supreme Court cases, Metropolitan Life Insurance Co. v. Massachusetts and Rush Prudential HMO, Inc. v. Moran, which illustrate that state laws can pertain to ERISA plans even if they primarily regulate third parties. Moving on, the document proceeds to discuss the four provisions of the Act that PCMA is challenging on appeal: the Access Standards, the Discount Prohibition, the Any Willing Provider (AWP) Provision, and the Probation Prohibition. Ultimately, the document concludes that ERISA preempts the AWP Provision, while the other three provisions remain unaffected.

PCMA argued that three network restrictions are preempted by the Employee Retirement Income Security Act (ERISA): the Access Standards, the Discount Prohibition, and the Any Willing Provider (AWP) Provision. While the district court initially ruled that these provisions had no connection to ERISA plans, PCMA contends that they "mandate employee benefit structures" and "prohibit employers from structuring their employee benefit plans in a certain manner." Two cases from the Fifth and Sixth Circuits, CIGNA Healthplan of La., Inc. v. Louisiana ex rel. Ieyoub and Ky. Ass'n of Health Plans v. Nichols, are discussed in relation to similar state AWP laws that were preempted by ERISA. The three network restrictions in Oklahoma's law should also be preempted by ERISA since they limit PBMs from creating tailored pharmacy networks for plans. The Supreme Court's decision in Rutledge v. PCMA, which concluded that a state law regulating PBM reimbursement rates was not preempted by ERISA. However, the 10th found that the Oklahoma law is distinct because it extends beyond mere cost increases. Despite Oklahoma presenting six counterarguments, the Court of Appeals dismissed each of them.

There is also the contentious issue of the Probation Prohibition. This provision prohibits pharmacy benefit managers (PBMs) from penalizing a pharmacy by denying, limiting, or terminating its contract simply because one of its pharmacists is on probation with the Oklahoma State Board of Pharmacy. While the district court ruled that the Probation Prohibition does not impose specific requirements on ERISA plans, PCMA argued that it significantly influences the terms and conditions for network participation.

Oklahoma asserted that the Probation Prohibition merely safeguards pharmacists who still possess valid licenses to dispense drugs. The United States contended that ERISA does not preempt the Probation Prohibition as it only has a minimal impact on pharmacy-benefit design. The Court of Appeals found that the Probation Prohibition should be preempted by ERISA, as it compels PBMs to comply with all pharmacies, even those employing pharmacists on probation. Additionally, the Court delved into the saving and deemer clauses in ERISA, ultimately concluding that Oklahoma has waived any argument based on the saving clause. Lastly, the document briefly mentions that Medicare Part D may supersede the Any Willing Provider (AWP) Provision, particularly as it applies to Part D plans.

The Court also dug into the interpretation of Part D's preemption clause, sparking a debate between PCMA and Oklahoma. PCMA argues that the clause resembles field preemption, while Oklahoma contends that "supersede" implies a conflict-preemption standard. The Court’s opinion highlights the persuasive power of the preemption clause's plain language, emphasizing the inclusive nature of the word "any" and the encompassing phrase "with respect to." Furthermore, it draws upon legislative and regulatory histories to support a broad interpretation of the clause. While Oklahoma cites three cases in support of its argument, the Court’s decision respectfully disagreed with their interpretations. Ultimately, the Court concluded that the Part D preemption clause exhibited characteristics of field preemption, effectively prohibiting states from regulating Part D plans except in matters of licensing and plan solvency.