ERISA-Eighth Circuit Rules That Arkansas State Statute Which Regulates The Activities Of Pharmacy Benefit Managers, Is Preempted By ERISA and Medicare

In Pharm. Care Mgmt. Ass’n v. Rutledge, Nos. 17-1609 and 17-1629 (8th Circ. 2018), in a dispute between a pharmacy trade association, Pharmaceutical Care Management Association (“PCMA”) and the State of Arkansas, PCMA appeals the district court’s ruling that an Arkansas state statute is not preempted by Medicare Part D, 42 U.S.C. § 1395w-26(b)(3), and the State of Arkansas appeals the district court’s ruling that the statute is preempted by ERISA, 29 U.S.C. § 1144(a).

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) ruled that Act 900, Ark. Code Ann. § 17-92-507, which regulates the prices for drugs set by pharmacy benefit managers, is preempted by ERISA, 29 U.S.C.S. § 1144(a).  This statute makes implicit reference to ERISA, through regulation of pharmacy benefit managers who administer benefits for covered entities that are necessarily subject to ERISA regulation.  While there is generally a presumption against preemption, the state law both relates to and has a connection with employee benefit plans, so that the presumption ceases to apply and the law is preempted.  Further, the Court ruled that Act 900 is preempted by Medicare Part D under 42 U.S.C.S. § 1395w-26(b)(3).  The statute acts with respect to the Negotiated Prices Standard by regulating price of retail drugs and the appeals process does not make price contingent, and the statute also acts with respect to the Pharmacy Access Standard under 42 U.S.C.S. § 1395w-104(b)(1)(C) as it would interfere with convenient access to prescription drug availability.

Since the Court ruled that the state statute in question is preempted by both ERISA and the Medicare Part D statutes, the Court affirmed the district court’s judgement in part, reverses it in part, and remands the case for entry of judgment for the plaintiff.

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