Big-time PBM scrutiny on the way as U.S. Supreme Court agrees to hear Arkansas case

On Wednesday, January 8, the National Community Pharmacists Association (NCPA) released a statement on a case winding its way through the courts.

“A handful of PBMs that rival the most profitable corporations in the world somehow operate with very little oversight because of confusion over whether federal law preempts the states from regulating them,” said Mustafa Hersi, NCPA's vice president and general counsel. “They have failed entirely to manage the cost of prescription drugs for patients, but they are driving local pharmacies out of business. There is bipartisan agreement in the states that the PBMs must be regulated. Based on what is at stake, we are confident that the Supreme Court will take the case.”

Hersi was right. Two days later, on Friday, January 10, the U.S. Supreme Court agreed to take on Rutledge v. the Pharmaceutical Care Management Association. PCMA is the professional association that represents PBMs.

Arkansas Attorney General Leslie Rutledge began an investigation into PBM practices in the state in 2018, when pharmacists began sounding the alarm about slashed reimbursement rates after the state’s largest insurer, Arkansas Blue Cross Blue Shield, changed its network within CVS Caremark’s PBM system.

“We received numerous complaints from pharmacists about the manner in which they are paid by PBMs for the cost of prescription drugs,” Jessica Ray, a spokesperson for Rutledge’s office, told Pharmacy Today in July 2018.

In response, Rutledge’s office began investigating whether reduced reimbursement rates and disparate reimbursement across different pharmacies were forbidden under provisions of Arkansas’s Deceptive Trade Practices Act. “Depending on what we find, we will aggressively go after the PBMs that violated the law,” Ray said.

Rutledge’s investigation concluded that PBMs were in violation of Act 900, which effectively bans PBMs from reimbursing pharmacies below the pharmacies’ cost to acquire the medication. Act 900 also includes provisions that mandated the disclosure of PBMs’ hidden profit motives to consumers and health plans.

The Eighth Circuit Court of Appeals sided with the PBM lobby in an ensuing lawsuit, blocking Arkansas from enforcing Act 900. The Circuit Court ruled that ERISA, a federal law governing the administration of employee benefits, preempts the state “from restricting controversial business practices that are destroying local pharmacies,” NCPA said in its January 8 statement. The U.S. Solicitor General subsequently filed a brief with SCOTUS that disagreed with the Eighth Circuit’s decision. SCOTUS announced its decision to hear the case on Friday, January 10.

Arkansas is hardly the only state fighting back against PBM practices and drastically reduced reimbursement rates. States across the country have passed or are considering legislation allowing state regulation on how PBMs can operate.

“We’re pleased with the Supreme Court’s decision to hear this case,” said Ilisa Bernstein, PharmD, JD, FAPhA, APhA senior vice president of pharmacy practice and government affairs. “PBM business practices have been putting significant financial strain on pharmacies in the United States by pulling financial resources that were once applied to patient care into unproductive administrative layers and profits for the middlemen. This in turn impacts patient access to the services and patient care delivered by pharmacists every day in communities across the country.” State regulatory oversight plays an important role in curbing PBM’s detrimental practices.