State Insurance Regulator Can Enforce Statute Regulating PBMs

On April 4, 2022, in PCMA v. Mulready, the US District Court for the Western District of Oklahoma ruled that the state’s Patient’s Right to Pharmacy Choice Act (the Act) was not preempted by ERISA and that the state’s Insurance Commissioner could enforce it.

In 2019, the state legislature passed the Act to regulate PBMs. The PCMA, a trade organization for PBMs, filed suit against the state the same year, claiming that ERISA preempted the Act because it regulated the nature and scope of a plan’s provider network and the programs an employee benefit plan may adopt to ensure network quality and integrity. In addition, the PCMA asserted that Medicare Part D preempted the Act because Medicare Part D had already established standards for retail pharmacies and price negotiations.

The court ruled that the Act was not preempted by ERISA because the Act does not force ERISA plans to make specific choices. However, the court ruled that Medicare Part D preempted those portions of the Act that placed geographic restrictions on retail pharmacies and regulated price negotiations. Accordingly, the state’s Insurance Department can enforce those portions of the Act not preempted by Medicare Part D.

Employers with plans that contract with PBMs should be aware of the impact of the Act and this case.

Oklahoma Insurance Department Press Release »
PCMA v. Mulready »