50 State Map Of MAC Laws ' Can PBMs No Longer Rely On ERISA Preemption To Avoid Certain State Laws?

• Published date: 21 June 2021
• Subject Matter: Employment and HR, Food, Drugs, Healthcare, Life Sciences, Retirement, Superannuation & Pensions
• Law Firm: Foley & Lardner
• Author: Mr Nick Welle, Michael H. Woolever, Marian E. Dodson and Hannah R. Demsien

Summary

Recent court trends suggest that preemption under the Employee Retirement Income Security Act (ERISA) may not apply to certain state laws that regulate pharmacy benefit managers (PBMs), including state laws governing Maximum Allowable Cost (MAC), which is essentially the process used by a PBM to determine in-network pharmacy reimbursement rates for generic drugs and multi-source brands. If this trend continues, this may mean that ERISA plan administrators and PBMs will need to pay very close attention to state MAC laws, as well as certain other state laws regulating PBMs. See our interactive map below that summarizes which states currently have a MAC law in place. See further details in our legal analysis below.

Analysis

In December 2020, the Supreme Court in Rutledge v. Pharmaceutical Care Management Assn. (Rutledge) unanimously reversed a decision by the Eighth Circuit Court of Appeals holding that the Arkansas MAC law was preempted by ERISA. More recently, the Court ordered the Eighth Circuit to reconsider its holding in Pharmaceutical Care Management Assn. v. Tufte, that a broad-based North Dakota PBM law that did not include a MAC provision was preempted by ERISA, based on its holding in Rutledge.

The Eighth Circuit's opinion in Rutledge and its earlier opinion in Pharmaceutical Care Management Assn. v. Gerhart, 852 F.3d 722 (8^th Cir. 2017), regarding an Iowa MAC law had raised issues both about the viability of the more than thirty similar state MAC laws, as well as the continued viability of the more than 45 state laws that regulate other aspects of the business relationship between PBMs and the pharmacies participating in their retail pharmacy networks.

Both opinions on the surface seemed in conflict with the Court's holding in New York State Conference of Blue Cross Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995), that state...