Supreme Court Reviews ERISA Preemption of Arkansas Pharmacy Reimbursement Law (Full Transcript)

Speaker 1: Passed in 1974, the Employee Retirement Income Security Act, or ERISA, governs employee benefit plans, including health plans. The United States Supreme Court considered whether ERISA preempted an Arkansas law regulating pharmacy benefit managers' prescription drug reimbursement rates in Rutledge v. Pharmaceutical Care Management Association. Pharmacy benefit managers, or PBMs, are the go-betweens for prescription drug plans and pharmacies. Whenever someone goes to a pharmacy to fill a prescription, the pharmacy verifies that person's coverage and copayment information with a PBM. Once the prescription is filled, the PBM reimburses the pharmacy for the prescription minus the copayment, then the prescription drug plan reimburses the PBM in turn. PBMs set their reimbursement rates by making Maximum Allowable Cost, or MAC, lists for drugs, and they make their profits by reimbursing pharmacies less than the prescription drug plans reimburse the PBMs. In 2015, Arkansas passed Act 900 to address concerns that PBMs were setting their reimbursement rates too low to cover pharmacies' costs, putting many rural and independent pharmacies at risk of shutting down. Thus, Act 900 required PBMs to reimburse pharmacies at least as much as the pharmacies paid to buy the relevant drug from a wholesaler. To achieve that result, Act 900 required PBMs to promptly update their MAC lists whenever wholesale drug prices went up, and to provide pharmacies with appeal procedures to challenge reimbursement rates. Act 900 also authorized pharmacies to refuse to sell a drug if the reimbursement rate was too low to cover their costs. A group of PBMs called the Pharmaceutical Care Management Association sued Arkansas' Attorney General, Leslie Rutledge, in federal court, challenging Act 900 on the ground that ERISA preempted it. The district court agreed with the association, and so did the Eighth Circuit. Rutledge appealed to the United States Supreme Court, which granted cert.