Eighth Circuit Holds that State’s PBM Regulation Is Not Preempted by ERISA

The US Court of Appeals for the Eighth Circuit recently held, in Pharmaceutical Care Management Association v. Wehbi , that ERISA does not preempt a set of North Dakota laws that impose certain requirements on pharmacy benefit managers (PBMs). This case was before the Eighth Circuit again after the Supreme Court vacated the Circuit’s previous finding that ERISA preempted the North Dakota laws and remanded the case for the Circuit to reconsider the case considering the Supreme Court’s ruling in Rutledge v. Pharmaceutical Care Management Association. (We discussed the Rutledge case in an article in the December 24, 2020, edition of Compliance Corner.)

The North Dakota PBM laws impose several requirements on PBMs, including provisions that limit fees and copayments PBMs may charge, require the use of electronic quality improvement platforms, prohibit gag orders, allow mail and delivery drugs, and require certain disclosures. After North Dakota enacted these laws, the Pharmaceutical Care Management Association (PCMA) filed suit against North Dakota state officials.

In Rutledge, the Supreme Court held that ERISA “supersede[s] any and all State laws insofar as they may now or hereafter relate to any” ERISA plan. Additionally, a law “relate[s] to” an ERISA plan if and only if it “has a connection with or reference to such a plan.” The Eighth Circuit applied that precedent in their analysis of the North Dakota PBM laws. They found that the laws did not have a connection with ERISA plans because they regulate non-central matters of plan administration, do not interfere with uniform plan administration, and do not require plans to adopt specific structures or terms. They also found that the laws did not have an impermissible reference to ERISA plans because the laws regulate PBMs, regardless of whether the plans they service are covered by ERISA.

This decision represents another case finding that ERISA does not preempt a state’s PBM laws. Therefore, employers should be aware of these cases and the effect they may have on prescription drug offerings and costs.

Pharmaceutical Care Management Association v. Wehbi »