Pharm. Care Mgmt. Ass'n v. Tufte, Case No.: 1:17–cv–141

• Decision Date: 07 November 2017
• Docket Number: Case No.: 1:17–cv–141
• Citation: 297 F.Supp.3d 964
• Parties: PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION, Plaintiff, v. Mylynn TUFTE, in her official capacity as the State Health Officer of North Dakota, Mark J. Hardy, in his official capacity as the Executive Director of the North Dakota Board of Pharmacy, Fran Gronberg, in her official capacity as the President of the North Dakota Board of Pharmacy, and Wayne Stenehjem, in his official capacity as the Attorney General of North Dakota, Defendants.
• Court: U.S. District Court — District of North Dakota

297 F.Supp.3d 964

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION, Plaintiff,

v.Mylynn TUFTE, in her official capacity as the State Health Officer of North Dakota, Mark J. Hardy, in his official capacity as the Executive Director of the North Dakota Board of Pharmacy, Fran Gronberg, in her official capacity as the President of the North Dakota Board of Pharmacy, and Wayne Stenehjem, in his official capacity as the Attorney General of North Dakota, Defendants.

Case No.: 1:17–cv–141

United States District Court, D. North Dakota.

Signed November 7, 2017

M. Miller Baker, Pro Hac Vice, Sarah P. Hogarth, Pro Hac Vice, Charles Quigg, Pro Hac Vice, McDermott Will & Emery LLP, Washington, DC, M. Daniel Vogel, Neil Roesler, Robert B. Stock, Vogel Law Firm, Fargo, ND, Alexander J. Kritikos, Pro Hac Vice, McDermott Will & Emery LLP (Boston) Boston, MA, for Plaintiff.

Matthew A. Sagsveen, Attorney General's Office, Bismarck, ND, Robert Thomas Smith, Daniel E. Lipton, Howard Robert Rubin, Katten Muchin Rosenman LLP, Washington, DC, for Defendants.

ORDER DENYING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION

Daniel L. Hovland, Chief Judge

Before the Court is the Plaintiff's "Emergency Motion for a Temporary Restraining Order and Preliminary Injunction" filed on July 20, 2017. See Docket No. 10. In its motion, the Plaintiff requested the Court temporarily restrain and preliminarily enjoin Defendants from enforcing North Dakota Senate Bills 2258 and 2301. On July 27, 2017, the parties submitted a joint stipulation in which the Plaintiff withdrew its request for a temporary restraining order, in order to give the Court additional time to address the merits of the request for preliminary injunctive relief. See Docket No. 18. On July 28, 2017, the Court found as moot the Plaintiff's motion for a temporary restraining order. See Docket No. 19. On August 22, 2017, a hearing was held regarding the preliminary injunction. See Docket No. 24. For the reasons set forth below, the Court denies the Plaintiff's motion for a preliminary injunction.

I. BACKGROUND

The Plaintiff, Pharmaceutical Care Management Association (PCMA), is a national trade association representing pharmacy benefit managers (PBMs), with its principal place of business in Washington, D.C. See Docket No. 1. PBMs are third-party health plan administrators which manage and administer prescription drug benefits on behalf of health insurance plans. Retail pharmacies purchase prescription drugs from wholesalers or manufacturers to fill health plan participants' prescriptions. When a plan participant (a patient or consumer) fills a prescription, the pharmacy contacts the PBM to obtain the participant's coverage and copayment information. After the prescription is filled, the PBM reimburses the pharmacy at a contractually-agreed upon rate. The PBM then bills the health plan, which provides the participant's insurance, at a rate negotiated between the PBM and the health plan. This role renders the PBM a third-party health plan administrator.

In April 2017, North Dakota State Governor Doug Burgum signed into law S.B. 2258 and S.B. 2301, which were to become effective August 1, 2017.¹ See S.B. 2258, 2017 Leg., 65th Sess. (ND 2017); S.B. 2301, 2017 Leg., 65th Sess. (ND 2017). Among other things, these laws will regulate how PBMs categorize prescription drugs and also require PBMs to make certain cost disclosures to network pharmacies and plan participants. PCMA highlights the following provisions² as concerning:

• S.B. 2258 § 1(2) prohibits PBMs and third-party payers from charging pharmacies certain fees, including fees that are imposed after the point of sale, not reported on the remittance advice for a claim, or are not apparent at the time of claim processing.

• S.B. 2258 § 1(3) limits the fees PBMs and third-party payers may impose based on pharmacy performance standards.

• S.B. 2258 § 1(4) bars PBMs and third-party payers from "redac[ting] the adjudicated cost," or the amount the PBM or third-party payer reimburses a pharmacy for a prescription.

• S.B. 2258 § 1(6) allows pharmacists or pharmacies belonging to a pharmacy service administration organization to receive a copy of contracts the pharmacy service administration organization entered into with a pharmacy benefits manager or third-party payer on their behalf.

• S.B. 2258 § 1(7) allows pharmacies to disclose "relevant" information to patients, including reimbursement information, and prohibits contracts between PBMs and pharmacies that prevent such disclosure.

• S.B. 2258 § 1(8) authorizes pharmacies to "mail or deliver drugs to a patient as an ancillary service of a pharmacy."

• S.B. 2258 § 1(9) prohibits contracts which provide that a pharmacy may not charge a shipping and handling fee to a patient.

• S.B. 2258 § 1(10) prohibits PBM or third-party payers from imposing accreditation and recertification standards beyond preexisting federal and state licensing requirements.

• S.B. 2301 § 1(2) obligates PBMs and third-party payers having ownership interest in a pharmacy to disclose the difference between the amount paid to the pharmacy and the amount charged to the plan sponsor on request.

• S.B. 2301 § 1(3) prohibits PBMs from having an ownership interest in patient assistance programs or mail-order specialty pharmacy unless the PBM agrees "not to participate in a transaction that benefits the PBM instead of another person owed a fiduciary duty."

• S.B. 2301 § 1(5) authorizes pharmacies to dispense "any and all drugs allowed" under its license.

• S.B. 2301 § 1(11) prohibits a PBM or third-party payer from imposing accreditation standards beyond preexisting federal and state licensing requirements.

See Docket No. 1, pp. 6–8; see also S.B. 2258 and 2301.

On July 11, 2017, PCMA filed a complaint against State Health Officer Mylynn Tufte; Executive Director of the North Dakota Board of Pharmacy, Mark J. Hardy; President of the North Dakota Board of Pharmacy, Fran Gronberg; and Attorney General Wayne Stenehjem. See Docket No. 1. PCMA argues the new laws, which were scheduled to go into effect on August 1, 2017, place restrictions and requirements on PBMs that impermissibly reference or are connected with health plans under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. , and Medicare Prescription Drug Improvement and Modernization Act of 2003 ("Medicare Part D"), 42 U.S.C. § 1395w–101 et seq. As a result, PCMA seeks this Court's declaration that the North Dakota state laws are expressly preempted by federal legislation. The parties stipulated not to effectuate S.B. 2258 and S.B. 2301 as to ERISA and Medicare Part D plans, pending the resolution of this matter. See Docket No. 19.

II. STANDARD OF REVIEW

PCMA seeks to obtain a preliminary injunction pursuant to Rule 65(b) of the Federal Rules of Civil Procedure. Rule 65(b) directs the court to look to the specific facts shown by an affidavit to determine whether immediate and irreparable injury, loss, or damage will result to the applicant. It is well-established in the Eighth Circuit Court of Appeals that a court is required to consider the factors set forth in Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109, 114 (8th Cir. 1981), in determining whether a preliminary injunction should be granted. The Dataphase factors include: "(1) the threat of irreparable harm to the movant; (2) the state of balance between this harm and injury that granting the injunction will inflict on other parties; (3) the probability the movant will succeed on the merits; and (4) the public interest." Id.

Preliminary injunctive relief is an "extraordinary and drastic remedy." Munaf v. Geren, 553 U.S. 674, 689–90, 128 S.Ct. 2207, 171 L.Ed.2d 1 (2008). Accordingly, the party seeking such relief bears the burden of establishing its propriety with "clear proof." Frejlach v. Butler, 573 F.2d 1026, 1027 (8th Cir. 1978). It is well-established that the movant has the burden of establishing the necessity of a preliminary injunction. Baker Elec. Coop., Inc. v. Chaske, 28 F.3d 1466, 1472 (8th Cir. 1994). "No single factor in itself is dispositive; in each case all of the factors must be considered to determine whether on balance they weigh towards granting the injunction." Id. at 1472.

III. LEGAL DISCUSSION

PCMA argues S.B. 2258 and S.B. 2301 are preempted by ERISA and Medicare Part D, as those federal laws each contain provisions providing that any state laws relating to them will be superseded by each of them respectively. PCMA argues S.B. 2258 and S.B. 2301 impermissibly regulate ERISA and Medicare Part D health plans by regulating third-party payers and PBMs. According to PCMA, North Dakota's statutory definitions of third-party payers and PBMs are broad enough to encompass ERISA and Medicare Part D health plans. Therefore, PCMA argues, any laws regulating third-party payers and PBMs, as they are statutorily defined, necessarily include ERISA and Medicare Part D health plans, and are therefore preempted by federal law.

A. ERISA PREEMPTION

ERISA comprehensively regulates, among other things, employee welfare benefit plans that "through the purchase of insurance or otherwise," provide medical, surgical, or hospital care, or benefits in the event of sickness, accident, disability, or death. 29 U.S.C. § 1001(b). ERISA was intended to:

protect ... participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.

29 U.S.C. § 1001(b).

"To meet the goals of a comprehensive and pervasive Federal interest and the interests of uniformity with respect to interstate [health] plans, Congress included an express preemption clause in ERISA for the displacement of...