Community Pharmacy Cheers SCOTUS Decision to Rule on States’ Authority to Regulate PBMs

NCPA January 9, 2020

ALEXANDRIA, Va. (Jan. 10, 2020) - The country's largest organization of independent pharmacists today cheered the U.S. Supreme Court's decision to hear an Arkansas case to decide whether ERISA preempts (supersedes) a state law that regulates pharmacy benefit managers — massive corporate middlemen who have operated in a regulatory no-man's land for decades.

"Pharmacy benefit managers have virtually no oversight, and as a result they behave like monopolies," said B. Douglas Hoey, pharmacist, MBA, CEO of the National Community Pharmacists Association. "Not only have PBMs failed to manage the cost of prescription drugs, which is why they were created, but they are inflating prices for patients and destroying local pharmacies."

NCPA has been fighting to rein in PBMs for years. NCPA pushes for state laws that would end PBM abuses such as spread pricing and gag clauses that cause patients' insurance premiums and prescription out-of-pocket costs to soar. The latest battle comes from a case in Arkansas, where the state was blocked by a lower court ruling from enforcing Act 900, a law that effectively prohibits PBMs from reimbursing pharmacies below the pharmacies' cost to acquire the medication and includes provisions that would disclose to consumers and plans the hidden profit motives of PBMs.

NCPA together with the Arkansas Pharmacists Association filed a brief supporting the state before the U.S. Court of Appeals for the Eighth Circuit, and will file a similar brief before the U.S. Supreme Court.

"This is an important moment for community pharmacies," said Hoey. "There's strong bipartisan agreement in the states that PBM behavior is out of control. The U.S. is the only country in the world that has turned over the management of prescription drugs to PBMs and the U.S. has the highest drug costs in the world. We don't think that is coincidence."

At issue is the extent to which the federal Employee Retirement Income Security Act of 1974 (ERISA), which regulates private employee benefit plans, preempts the states from regulating the amount that PBMs pay pharmacies to dispense prescription drugs that are covered by an employer-sponsored health plan. The PBMs, which are among the richest corporations in the world, say even though they are not liable as fiduciaries under ERISA, that statute shields them from state regulation when they are servicing an employer-sponsored plan.

"ERISA doesn't shelter the practices of PBMs," said Hoey. "We're very optimistic that the Supreme Court will agree that PBMs do not get to act with impunity from state and federal law."

The Court will likely hear oral arguments in early spring. It will render a decision before the end of June, which marks the end of the Court's current term.

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Founded in 1898, the National Community Pharmacists Association is the voice for the community pharmacist, representing 22,000 pharmacies that employ 250,000 individuals nationwide. Community pharmacies are rooted in the communities where they are located and are among America's most accessible health care providers. To learn more, visit