The U.S. Court of Appeals for the Tenth Circuit recently issued a decision in Pharmaceutical Care Management Association (PCMA) v. Mulready, which many see as a significant win for pharmacy benefit managers (PBMs) and self-funded health plans. In its decision, the Tenth Circuit held that PBMs are subject to ERISA, thus preempting state law restrictions on PBMs.

PCMA filed suit to challenge certain provisions of Oklahoma’s 2019 Patient’s Right to Pharmacy Choice Act (Act). The Act aimed to provide consumers, especially those in rural areas, with more pharmacy choices. The PCMA sought to overturn limitations that the Act placed on using mail-order pharmacies, the participation of all pharmacies in preferred networks, prohibiting cost-sharing discounts, and PBMs limiting or denying contracts with pharmacists on probation with the state board. In its suit, the PCMA argued that PBMs are subject to ERISA, which preempts state laws such as Oklahoma’s Act.

The U.S. District Court for the Western District of Oklahoma ruled that ERISA did not preempt the challenged provisions of Oklahoma’s Act. Therefore, Oklahoma had the right to restrict PBM structures and partnerships with self-funded plans, as it did in its Act.

However, the Tenth Circuit disagreed, finding that Oklahoma’s Act fell within the purview of ERISA. The Act would eliminate any cost-containment strategies that PBMs regularly use and require them to allow every pharmacy in their networks. The Act mandates benefits structures, leaving PBMs with little capacity to create individually tailored solutions for plans.

Pharmacy associations, including the Oklahoma Pharmacists Association, criticized the ruling as inconsistent with other federal court decisions and the U.S. Supreme Court decision in Rutledge. However, other employee benefits experts lauded the ruling as protective of self-insured businesses desiring to hold down pharmacy expenses through cost-saving measures.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.