Pharm. Care Mgmt. Ass'n v. Tufte

Decision Date05 September 2018
Docket NumberCase No.: 1:17-cv-141
Citation326 F.Supp.3d 873
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.
CourtU.S. District Court — District of North Dakota

M. Miller Baker, Pro Hac Vice, Sarah P. Hogarth, 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, MA, for Plaintiff.

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

ORDER GRANTING IN PART AND DENYING IN PART THE PARTIES' CROSS MOTIONS FOR SUMMARY JUDGMENT

Daniel L. Hovland, Chief Judge, United States District Court

Before the Court are cross motions for summary judgment. The Plaintiff, Pharmaceutical Care Management Association ("PCMA") filed its motion for summary judgment on January 19, 2018. See Docket No. 33. The Defendants, Mylynn Tufte, Mark Hardy, Fran Gronberg, and Wayne Stenehjem, in their official capacities (collectively "North Dakota"), filed a response in opposition and a cross-motion for summary judgment on March 9, 2018. See Docket Nos. 38 and 39. PCMA filed a response on April 9, 2018. See Docket No. 40. North Dakota filed a reply on April 23, 2018. See Docket No. 42. With the Court's permission, PCMA filed supplemental authority on July 9, 2018. See Docket No. 44. North Dakota filed a response to PCMA's supplemental authority on July 20, 2018. See Docket No. 50. In light of recent case law, both parties also filed supplemental briefing on July 20, 2018. See Docket Nos. 48 and 49. For the reasons set forth below, the Court grants, in part, each motion for summary judgment and denies, in part, each motion for summary judgment.

I. BACKGROUND

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 that manage and administer prescription drug benefits on behalf of health insurance plans. See Docket No. 10-3, p. 3. PBMs negotiate prescription drug prices with drug manufacturers and pharmacies, create networks of pharmacies to fill prescriptions, and process and pay insurance claims. See Docket No. 1, p. 4. When an insured patient fills a prescription, the pharmacy generally contacts a PBM to obtain insurance coverage and copayment information. See Docket No. 39-2, p. 6. After the pharmacy fills the prescription, the PBM reimburses the pharmacy based on a rate set out in a contract between the PBM and the pharmacy. See Docket No. 1, p. 6. The PBM then bills the health insurance plan at a rate negotiated between the PBM and the health insurance plan. See Docket No. 39-2, p. 6. In sum, PBMs are intermediaries between patients' and health insurance plans' demand for prescription drugs and manufacturers' and pharmacies' supply of prescription drugs.

In April 2017, North Dakota's governor, Doug Burgum, signed Senate Bills 2258 and 2301 into law. See S.B. 2258, 2017 Leg., 65th Sess. (ND 2017); S.B. 2301, 2017 Leg., 65th Sess. (ND 2017). The laws regulate PBMs and pharmacies. According to North Dakota, the legislation "sought to define the rights of pharmacist in relation to [PBMs], and to regulate certain practices by PBMs." See Docket No. 39-1, p. 2. The legislation contains provisions concerning (1) the practice of pharmacy; (2) pharmacy accreditation and credentialing; and (3) perceived self-dealing and abusive practices on the part of PBMs. The parties contest the validity of various provisions, all of which are summarized below.

A. PROVISIONS CONCERNING THE PRACTICE OF PHARMACY

The legislation contains the following provisions concerning the practice of pharmacy:

S.B. 2258 § 1(7) allows pharmacies to disclose "relevant" information to patients, including "the cost and clinical efficacy of a more affordable alternative drug if one is available," and it prohibits gag orders on such disclosure.
S.B. 2258 § 1(5) allows pharmacies to disclose to patients or plan sponsors information regarding the amount of reimbursement the pharmacy receives after a prescription drug is dispensed.
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) bars contracts that prohibit pharmacies from charging patients shipping and handling fees.
S.B. 2301 § 1(5) authorizes pharmacies to dispense "any and all drugs allowed" under their license.
B. PROVISIONS CONCERNING PHARMACY ACCREDITATION AND CREDENTIALING

The legislation contains the following provisions concerning pharmacy accreditation and credentialing:

S.B. 2258 § 1(11) prohibits PBMs from requiring "pharmacy accreditation standards or recertification requirements inconsistent with, more stringent than, or in addition to federal and state requirements for licensure as a pharmacy in this state."
S.B. 2301 § 1(4) similarly prohibits PBMs from requiring, for participation in a PBM's pharmacy network, "accreditation standards or recertification requirements ... which are inconsistent with, more stringent than, or in addition to the federal and state requirements for licensure as a pharmacy in this state."
S.B. 2258 § 1(3) requires PBMS to utilize pharmacy performance standards set by unbiased, nationally recognize entities, and it regulates the fees PBMs may impose based on pharmacy performance standards.
C. PROVISIONS CONCERNING PERCEIVED SELF-DEALING AND ABUSIVE PRACTICES ON THE PART OF PBMS

The legislation contains the following provisions concerning perceived self-dealing and abusive practices on the part of PBMs:

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(4) prohibits copayments that exceed the cost of the medication being purchased, and it bars PBMs from "redact[ing] the adjudicated cost," i.e., the amount the PBM or third-party payer reimburses a pharmacy for a prescription.
S.B. 2258 § 1(10) requires PBMs to disclose certain information about their pharmacy networks "to enable the pharmacy to make an informed contracting decision."
S.B. 2301 § 1(2) obligates PBMs and third-party payers having ownership interest in a pharmacy to disclose, to plan sponsors, on request, the difference between the amount paid to the pharmacy and the amount charged to the plan sponsor.
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 "to not participate in a transaction that benefits the [PBM] ... instead of another person owed a fiduciary duty."

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 North Dakota's Attorney General, Wayne Stenehjem. See Docket No. 1. PCMA then filed a motion for a preliminary injunction on July 20, 2017. See Docket No. 10. The Court held a hearing regarding PCMA's motion for preliminary injunction on August 22, 2017. See Docket No. 24. On November 7, 2017, the Court denied PCMA's motion for a preliminary injunction. See Docket No. 27. Now the Court considers the parties' cross-motions for summary judgment. See Docket Nos. 33 and 38.

II. LEGAL DISCUSSION

PCMA argues the legislation places restrictions and requirements on PBMs that are preempted by 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. PCMA seeks this Court's declaration that the legislation is expressly preempted by federal law. In opposition, North Dakota contends the legislation regulates areas of concern that have been excepted from federal regulation. As detailed below, the Court concludes the legislation is not preempted by federal law, save one provision requiring PBMs to disclose certain information to health insurance plans, which the Court finds preempted by an overlapping Medicare Part D standard.

A. STANDARD OF REVIEW

Summary judgment is appropriate when the evidence, viewed in a light most favorable to the non-moving party, indicates no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Davison v. City of Minneapolis, 490 F.3d 648, 654 (8th Cir. 2007) ; see also Fed. R. Civ. P. 56(a). Summary judgment is not appropriate if there are factual disputes that may affect the outcome of the case under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact is not the "mere existence of some alleged factual dispute between the parties." State Automobile Ins. Co. v. Lawrence, 358 F.3d 982, 985 (8th Cir. 2004). Rather, an issue of material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The moving party always bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The non-moving party may not rely merely on allegations or denials; it must...

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2 cases
  • Pharm. Care Mgmt. Ass'n v. Wehbi
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • 17 de novembro de 2021
    ...held that Medicare Part D preempted section 16.2(2) as applied to Medicare Part D plans but otherwise rejected PCMA's challenges. Tufte, 326 F.Supp.3d 873. PCMA and we reversed on the issue of ERISA preemption. Tufte, 968 F.3d 901. The defendants petitioned the Supreme Court for a writ of c......
  • Pharm. Care Mgmt. Ass'n v. Wehbi
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • 17 de novembro de 2021
    ...concluded that ERISA preempted none of the challenged provisions and that Medicare Part D preempted only one. Pharm. Care Mgmt. Ass'n v. Tufte , 326 F. Supp. 3d 873 (D.N.D. 2018), aff'd in part, rev'd in part , 968 F.3d 901 (8th Cir. 2020), vacated sub nom. Wilke v. Pharm. Care Mgmt. Ass'n ......

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