June 27, 2022

Volume XII, Number 178

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June 27, 2022

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PBM Regulatory Roundup (Spring 2022): The 8th Circuit Rules and More States Issue Regulations

As states move forward with their 2022 legislative sessions in earnest, we have been examining whether the Pharmaceutical Care Management Association (PCMA) v. Wehbi decision has had any initial effects on PBM-focused legislation. This roundup provides a brief recap of the significance of Wehbi, summarizes the Eighth Circuit’s opinion and holding, and highlights some state measures that have been proposed or passed during the flurry of PBM-focused legislation we have already seen in 2022.

Wehbi

As we noted in our last roundup, the Eighth Circuit was reconsidering arguments in Wehbi. This case challenged two North Dakota laws that regulate a variety of PBM activities on the grounds that the laws were preempted by ERISA and the Medicare statute. North Dakota argued that the laws do not have any bearing on ERISA plans or their administration – that they are substantially similar to the Arkansas statute considered in Rutledge – and are therefore allowable.

Wehbi presented the Eighth Circuit with a unique opportunity to set course for how federal courts should apply the Supreme Court’s narrowed scope of ERISA preemption set forth in Rutledge. However, Rutledge failed to provide a clear legal standard for lower courts to apply when considering ERISA preemption challenges and Wehbi was expected to provide guidance to other courts for how to navigate such murky waters. The Wehbi decision would either catalyze already growing nationwide efforts to regulate PBMs and other health plan service providers via state legislation, or serve as a contemporary safeguard against such state measures moving forward.

It appears that Wehbi will support states in their efforts to regulate PBM practices. In mid-November, while most state legislatures’ 2021 regular sessions were adjourned, the Eighth Circuit found that (i) none of the challenged provisions were preempted by ERISA because they do not have an impermissible “connection with or reference to an ERISA plan” and (ii) a handful of miscellaneous provisions were preempted by Medicare Part D standards, only as they apply to Medicare Part D plans. The Eighth Circuit found that the challenged provisions constitute “a noncentral ‘matter of plan administration’ with de minimis economic effects and impact on the uniformity of plan administration across states.”

Select State Legislation

Since states convened their 2022 legislative sessions, we have seen a marked uptick in proposed and passed PBM-specific legislation. In fact, as we approach the end of the first quarter, we found that at least 20 states have either taken initial steps to implement, or modify, state laws to increase PBM regulation. These initiatives appear to target various PBM practices; though, as we noted during Session 4 of our 6th Annual Pharmacy and Pharmaceutical Industry Summit, they most often aim to (i) increase pharmacy price transparency, (ii) regulate pharmacy reimbursement amounts, and (iii) set parameters for contracts between PBMs and plans or pharmacies.

Here is a sampling of state legislation relating to these PBM practices and that has been proposed or passed in 2022:  

STATE MEASURE STATUS
Iowa

HF 2384 proposes to regulate a number of PBM practices related to pharmacy and patient price transparency.

Passed; pending Senate action

Michigan

HB 4348 requires PBMs, among other things, to register and obtain a license.  The new law also sets out several requirements related to contracts between PBMs and pharmacies.

Passed; goes into effect on January 1, 2024

New York

S3762, SB7837/A1396, A8388 enact a number of new requirements for PBMs, including registration and licensure and limitations on certain PBM activities.

Passed; goes into effect on March 31, 2022

Vermont

SB 238 proposed comprehensive regulation requiring PBMs to obtain licensure and comply with requirements related to a number of different PBM activities.

Pending; introduced January 12, 2022

Wyoming

SB 36 proposed to regulate PBMs by requiring licensure and regulating certain PBM activities and contractual terms with pharmacies.

Failed in Committee March 8, 2022

 

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume XII, Number 88
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About this Author

Associate

Hassan’s practice focuses on advising a broad range of clients across the health care industry—including health care systems, pharmacies, and private equity firms investing in health care companies—in complex industry transactions and compliance and regulatory matters.

Hassan leverages his prior experience as a “deal team” attorney representing private equity firms through various mergers and acquisitions, restructurings, and growth equity transactions to provide reasoned and pragmatic solutions to a wide range of client needs. 

...
202.434.7375
Bridgette A. Keller, health system administration LAWYER, Mintz
Associate

Bridgette applies her experience in health system administration and ethics in health care to her health law practice. Bridgette advises health care providers, ACOs, health plans, PBMs, and laboratories on a variety of regulatory, fraud and abuse, and business planning matters.

With a background in health care operations, Bridgette is able to provide clients with practical insight that includes a focus on the business implications of health care enforcement defense activities, internal investigations, regulatory compliance, and fraud and abuse...

202-434-7435
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