By: Jeff Elkins // The Journal Record // August 18, 2023
OKLAHOMA CITY – A federal appeals court has struck down provisions in a state law authored with the intent of ensuring access to smaller pharmacies.
The 10th Circuit U.S. Court of Appeals on Tuesday ruled that the Employee Retirement Income Security Act and Medicare preempt an Oklahoma law regulating pharmacy benefit managers, which create formulary lists and negotiate costs and payments between drug companies, pharmacies and health insurance providers. PBMs also manage drug benefits for Medicare Part D plans.
The Oklahoma Legislature passed the Patient’s Right to Pharmacy Choice Act in 2019, House Bill 2632, to protect access to pharmacy providers and define compliance standards for retail pharmacy networks.
The bill’s authors and those in favor said it leveled the playing field in allowing small-town pharmacies to compete with the likes of OptumRx and CVS Caremark.
The law then was challenged in court by the Pharmaceutical Care Management Association, a lobby for PBMs.
In April 2022, the U.S. District Court for the Western District of Oklahoma ruled favorably for Oklahoma Insurance Commissioner Glen Mulready, upholding a majority of the provisions of the Patient’s Right to Pharmacy Choice Act against a preemption challenge by the PCMA, which subsequently appealed the decision to the 10th Circuit U.S. Court of Appeals, asserting that the four remaining provisions out of 13 are preempted by Medicare Part D and ERISA.
On Tuesday, the federal court released an opinion in PCMA v. Mulready. The court cited CIGNA Healthplan of La., Inc. v. Louisiana and Ky. Ass’n of Health Plans v. Nichols as precedent to support the opinion that network restrictions in the PRPCA functionally “mandate benefit structures.” The ruling essentially asserts the state’s act is an overextension into federal regulation through interference with “nationally uniform plan administration.”
“Our role is to answer whether the Act’s four challenged provisions veer into the regulatory lanes that Congress has reserved for itself. For the reasons discussed, we conclude that they do,” the court opinion states. “Though the Act avoids mentioning ERISA plans or Medicare Part D plans by name, it encompasses these plans by striking at the heart of network and benefit design.”
The state could appeal the decision to the U.S. Supreme Court or approach Congress, the architect of ERISA and Medicare, to take up the mantle.
Oklahoma Attorney General Gentner Drummond’s office said it is reviewing the decision and “will consider the best options for the State of Oklahoma.”
The PCMA released a statement applauding the court’s decision, which they say supports the interest of employers, unions, Medicare Part D plans and those who seek to follow a common set of legal requirements for the benefits they provide to millions of U.S. residents.
Julie McKone, executive director of Oklahoma Families for Affordable Health Care, said many Oklahomans are able to afford their prescription drugs only because of pharmacy benefit plans offered through their jobs. She said the legislation passed in 2019 increased drug costs by limiting pharmacy benefit plan design and implementation.
“It also reduced access to cost saving mail-order drug services that a lot of people rely on, especially those with disabilities or in very rural areas,” McKone said in a statement.
Pharmacy organizations backing the PRPCA stated their disapproval Thursday. They say the Court of Appeals decision allows PBMs to escape certain state regulation by “hiding behind the alleged preemption of that law by federal ERISA and Medicare Part D laws.”
The National Community Pharmacists Association, the American Pharmacists Association, the National Association of Chain Drug Stores, American Pharmacies, and the Oklahoma Pharmacists Association jointly signed on as amici to defend Oklahoma’s 2019 law.
Douglas Hoey, CEO of the National Community Pharmacists Association, said the 10th Circuit decision is inconsistent with other federal courts.
“It departs from the Supreme Court’s unanimous Rutledge decision, which clearly held that PBMs can’t hide behind ERISA. It must be overturned,” Hoey said in a statement.
State Rep. Marcus McEntire, R-Duncan, was a House author of Senate Bill 1860, which updated the PRPCA in 2022. McEntire said the ruling creates a setback for Oklahomans who desire pharmacy choice, pricing transparency and lower prescription drug costs.
“No one wants to be told by a company where they must purchase their prescriptions. This ruling is devastating to customer pharmacy choice and competition,” McEntire said.