AG cites 1995 ruling in druggist-pay filing

A U.S. Supreme Court ruling from nearly 25 years ago makes clear that Arkansas’ attempt to regulate what healthplan middlemen pay pharmacies doesn’t conflict with an earlier federal law, the state argued to the high court in a filing Monday evening.

Attorney General Leslie Rutledge made her case in the brief for why the justices should overturn lower court decisions that have limited the state’s ability to regulate the rates paid by pharmacy-benefit managers, which pay drug claims on behalf of health plans.

Siding with the pharmacy-benefit managers, Arkansas’ U.S. District Judge Brian Miller and the 8th U.S. Circuit Court of Appeals in St. Louis have ruled that such state regulations can’t apply to claims paid for plans in which an employer, rather than an insurance company, is ultimately responsible for paying for employees’ health expenses.

Under the federal Employment Retirement Income Security Act of 1974, those plans are regulated by the U.S. Department of Labor rather than state insurance departments.

Pharmacists and officials from 32 states and the District of Columbia have argued that rulings in the case have created confusion about states’ ability to regulate pharmacy-benefit managers.

According to Rutledge’s brief, at least 40 states have laws regulating the prices such companies pay pharmacies for generic drugs.

At issue in the Arkansas case before the Supreme Court is the state’s Act 900 of 2015.

That law prohibits pharmacy-benefit managers from paying affiliated pharmacies more than what they pay other drugstores for the same drugs.

It also added requirements designed to ensure the pharmacy-benefit managers pay drugstores at least as much as what the stores pay to wholesalers to obtain drugs, and it allows pharmacists to refuse to fill prescriptions if the reimbursement is too low for them to recoup their cost.

Rutledge argued in the brief that Arkansas’ Act 900 of 2015 isn’t preempted by the federal law because it doesn’t attempt to regulate health plans themselves.

She said the law is merely a rate regulation similar to one the Supreme Court upheld in a 1995 ruling.

In that case, the Supreme Court ruled that a surcharge New York required hospitals to place on bills paid by certain health plans, including those regulated by the federal Labor Department, wasn’t unconstitutionally at odds with the 1974 law.

“Because ERISA does not preempt rate regulation, ERISA does not preempt Act 900,” Rutledge said in the brief, referring to the Employment Retirement Income Security Act.

A response by the Pharmaceutical Care Management Association, which filed the lawsuit challenging the Arkansas law, is due March 25.

In an earlier filing urging the Supreme Court not to take up the case, the industry group argued that Arkansas’ law “does far more than merely govern reimbursement rates.”

“Rather, it directly governs the structure and management of prescription drug benefits provided by ERISA plans,” the group argued.

The case is set for oral arguments before the Supreme Court on April 27.