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MINNEAPOLIS — A federal lawsuit filed in Minnesota intensifies the nationwide debate over regulating pharmacy benefit managers. The lawsuit, initiated in December in the U.S. District Court of Minnesota, challenges the state's 2019 law regulating PBMs, claiming it violates federal statutes governing employee health benefits, according to The Minnesota Star Tribune. As the legal battle unfolds, its outcome could reshape the regulatory landscape for PBMs, impacting costs and access to medications nationwide.
The plaintiffs, including Cigna's Express Scripts, an employer trade group, and a labor union organization, contend that Minnesota's regulations overstep boundaries set by the Employee Retirement Income Security Act of 1974 (ERISA). ERISA preempts states from dictating the design of employee health plans, which often involve PBM services to manage pharmacy networks and drug costs.
Minnesota's law prevents PBMs from steering patients exclusively toward mail-order pharmacies or pharmacies affiliated with PBMs, aiming to safeguard independent pharmacies and consumer choice. The law also restricts PBMs from imposing mandatory mail-order provisions for maintenance medications. Plaintiffs argue these rules hinder employers' ability to manage costs and maintain quality standards in their benefit plans.
The state's Commerce Department, named as a defendant alongside Commissioner Grace Arnold, has been active in enforcing the law, including fining CVS Caremark $500,000 in 2023 for alleged violations. The department declined to comment on the litigation but has stated it will respond in court filings.
At stake is the extent of state authority in regulating PBMs versus federal protections for employer-sponsored, self-insured health plans. Self-insured plans, covered by ERISA, are predominant in Minnesota, accounting for 37.5% of residents' health coverage in 2023.
The plaintiffs seek a court declaration that Minnesota's PBM rules are preempted by ERISA and an injunction to block state enforcement for non-Minnesota residents. Critics of the PBM industry, including the American Medical Association, have called for greater oversight, citing the sector's lack of competition and high vertical integration with major insurers.
