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ALEXANDRIA, Va. – A coalition of pharmacy groups petitioned U.S. Supreme Court on Friday to once again deliberate whether states can regulate pharmacy benefit managers after the Tenth Circuit Court of Appeals struck down a lower court that upheld a law passed by Oklahoma in 2019. The coalition includes the Oklahoma Pharmacists Association, American Pharmacies, Inc., the American Pharmacists Association, and the National Association of Chain Drug Stores, and the National Community Pharmacists Association.
“PBMs engage in harmful practices that impair patient care, distort the free market, and impose serious costs on everyone in the healthcare industry—aside from themselves,” said the group in its petition. “States are ideally positioned to attack PBM misconduct; the regulation of healthcare is a traditional state function, and States routinely address market inefficiency and abuse, as Oklahoma did here. The State’s targeted regulation benefits all legitimate market participants and does so without interfering with ERISA’s regulatory scheme. The decision below injects intolerable uncertainty over all States’ efforts to combat this staggering national problem.”
The Supreme Court already ruled unanimously in 2020 that states can regulate PBMs. In that case, Rutledge v. PCMA, which upheld an Arkansas law, the Court rejected the argument by the powerful PBM lobby that state regulations violate the federal Employee Retirement Income Security Act (ERISA). That law, passed in 1974, prevents states from passing overlapping and conflicting rules on retirement and health insurance plans. But the PBMs are neither. As the pharmacy coalition points out, they are administrators that have grown vastly larger and more powerful than anyone anticipated 40 years ago, mainly because of their unchecked monopolistic practices. What were once relatively small players in the market were “replaced by market behemoths.”
The group noted in their brief that the PBM industry is dominated by three massive players, CVS Caremark, Express Scripts, and OptumRx. The three behemoths control 80 percent of all prescriptions in the US, and they have extraordinary leverage over the marketplace, which they frequently abuse.
“PBMs have become massive profit centers while (ironically) increasing patients’ out-of-pocket costs, interfering with doctor-patient relationships, impairing patient access to appropriate treatment, and driving PBM-disfavored pharmacies out of business (and out of town)—leaving countless citizens without any local access to neighborhood drugstores or expert pharmacists,” said the coalition.
The Oklahoma law was challenged immediately by the Pharmaceutical Care Management Association, the PBM lobby. But the state law was upheld in 2022 by the U.S. District Court for the Western District Court of Oklahoma. The Tenth Circuit overturned the lower court’s decision last year. That decision imperils laws enacted in almost every other state since the Supreme Court ruled five years ago.
“States cannot effectively regulate PBMs or decide to invest significant resources in enforcing new PBM-related schemes, without real confidence that their reforms will survive. The Tenth Circuit’s decision renders that confidence impossible,” said the group.
