Sending an SOS to SCOTUS: Save us from PBMs

NCPA January 9, 2020

Dear Colleague,

Doug Hoey

By the time you read this, the Supreme Court of the United States may have already decided whether to hear the biggest case in decades for community pharmacy. The justices are meeting today to consider several cases for the 2020 session. One of them is Rutledge vs Pharmaceutical Care Management Association (PCMA). The outcome of the case, which originates from 2015 legislation passed in Arkansas, will determine whether states can more thoroughly regulate PBMs, or whether the giant corporate middlemen can continue operating in the shadows, using the Employee Retirement Income Security Act of 1974 (ERISA), as its justification. I don't have to tell you how important this is for your business and our industry.

This isn't the first time we've tangled with the PBMs in court. In fact, NCPA has been involved in the last four major cases focused on whether their practices are legal. This fight, which the Arkansas Pharmacists Association has been leading on the ground, would be the first time that we would be fighting it out in the Supreme Court. The possibility is very exciting.

At the center of the case is whether Arkansas can block PBMs from reimbursing pharmacies less than they pay for drugs and require that PBMs not pay competing pharmacies less than they reimburse their PBM-owned pharmacies.

It's a reasonable law that puts a stop to the most insidious PBM practices. PCMA, the PBM lobby group, challenged the law in court. Their main argument is that states like Arkansas are preempted by ERISA. The Eighth Circuit Court of Appeals sided with PCMA despite the fact that ERISA was never intended to exempt third-party administrators from state oversight.

The U.S. Solicitor General, the federal government's top litigator, disagreed with the Eighth Circuit. He argued that the court's interpretation was wrong, and he urged the high court to take up the matter. The Court will consider that decision today, and we are guardedly optimistic that they'll hear the case.

We could know as early as today whether the Court has accepted the case. We will almost certainly know before the end of the month. Not only are the legal implications enormous, but this is a significant chance for us to focus national attention on the PBMs, which prefer to operate in secrecy.

For example, the public needs to know that the three largest PBMs control 80 percent of the prescription drug benefit market. Let's put it another way: CVS Caremark, Optum Rx, and Express Scripts together have more revenue than the combined total of other well-known companies such as Tyson Foods, Dillard's, Disney, GM, and Target. Let that sink in a moment.

As it stands, however, community pharmacies are often reimbursed by PBMs at rates that leave pharmacies underwater on the medications they dispense, leading to not only negative effects on pharmacies but also on vulnerable patients who rely on access to pharmacy services. From the summer of 2018 to the summer of 2019, 3.3 percent of all the community pharmacies and chain drugstores in the United States closed, leaving millions of patients without the pharmacy of their choice. Sadly, we learn of more closures each week, harming patient adherence and worsening health outcomes. The Arkansas law seeks to impose common-sense regulations on PBMs that will bring more transparency to the industry and ensure that patients continue to have fair access to their prescription drug benefits.

Thirty-two states and the District of Columbia support Arkansas's petition seeking Supreme Court review in the Rutledge case, writing that the "unbounded approach to ERISA preemption reflected in the (appeals) court's opinion raises serious federalism concerns, making it more difficult for states to perform their traditional role as healthcare regulators. This decision comes at a time when many states are grappling with how best to address the challenges presented by the conduct of PBMs and rising prescription drug costs."

In other words, there is strong bipartisan agreement among the states that the ERISA dodge is a threat to their residents, local businesses, and constitutional authority to regulate health care in their own interest. This is a potential watershed for community pharmacies and their patients. You can keep up with the developments by visiting our website periodically or following us on Twitter @commpharmacy. In the meantime, keep your eyes open for a special webinar on the case that we'll be organizing in the coming days.


Doug Hoey



P.S. NCPA's Legislative/Legal Defense Fund helps us fight for you in cases just like this. Your LDF investment can fuel NCPA's success on key legislation and regulation that will directly benefit you and your pharmacy. If you are not already an investor, please become one today.