October 15, 2021

Volume XI, Number 288

Advertisement
Advertisement

October 15, 2021

Subscribe to Latest Legal News and Analysis

October 14, 2021

Subscribe to Latest Legal News and Analysis

October 13, 2021

Subscribe to Latest Legal News and Analysis

U.S. Supreme Court: State Law Regulating Pharmacy Benefit Managers is Not Preempted by ERISA

An Arkansas law regulating pharmacy benefit managers’ (PBMs) generic drug reimbursement rates, and affecting the cost of prescription drugs provided under ERISA-governed benefit plans and the administration of those plans, is not preempted by ERISA, the U.S. Supreme Court has held unanimously. Rutledge v. Pharmaceutical Care Management Association, No. 18-540, 2020 U.S. LEXIS 5988 (Dec. 10, 2020).

With Justice Sonia Sotomayor writing for the unanimous court, the Court held that Arkansas’s law is simple rate regulation and “ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.” The Court explained that the law only sets a floor for pharmacy reimbursements by PBMs. It is not directed at ERISA plans, and the fact that PBMs may pass their increased costs on to ERISA plans is not ERISA’s concern.

Additionally, with respect to a focal point at oral argument and in briefing on whether the proscribed appeal procedures improperly infringed on central matters of plan administration, the Court found that administrative burdens and operational inefficiencies do not meet that standard. The bottom line: nothing in Arkansas’s law required ERISA plan administrators to structure their plans in a certain way, so the law survives.

Arkansas’s law was at issue in Rutledge, but the reach of the Court’s decision goes further. Many states’ statutes that are similar to Arkansas’s law are the subject of suits pending or recently decided in the lower courts, and the Supreme Court’s seal of approval may prompt additional states to draft similar legislation or amend current laws.

Finally, while some had speculated that the Court may have used this opportunity to modify the preemption framework, that did not come to fruition in the majority opinion. Only Justice Clarence Thomas, in a concurring opinion, continued his calls for reformation of ERISA preemption standards because they create an amorphous test that is results-driven and veers too far from ERISA’s statutory text.

Jackson Lewis P.C. © 2021National Law Review, Volume X, Number 349
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Principal

Stacey C.S. Cerrone is a Principal in the New Orleans, Louisiana, office of Jackson Lewis P.C. Her practice focuses on representing employers in workplace law matters, including preventive advice and counseling.

Practices

  • Employee Benefits

Admitted to Practice

  • 5th Circuit Court of Appeals, 1998
  • 6th Circuit Court of Appeals, 2014
  • Louisiana - E.D. La., 1999
  • Louisiana - M.D. La., 1998
  • Louisiana - W.D. La., 1998
  • Louisiana, 1998
504-208-1755
Associate

Lindsey H. Chopin is an Associate in the New Orleans, Louisiana, office of Jackson Lewis P.C. and a member of the firm’s ERISA Complex Class Action, Employee Benefits and Class Action groups.

Ms. Chopin focuses her practice on the defense of complex ERISA class-actions filed against public and private single employer ERISA plan sponsors and fiduciaries, as well as multi-employer plans and fiduciaries and ERISA plan services providers.  She has litigated a wide variety of class action claims, including 401(k) fee claims,...

504-208-1755
Advertisement
Advertisement
Advertisement