Rutledge v. Pharm. Care Mgmt. Ass'n

• Decision Date: 10 December 2020
• Docket Number: No. 18-540,18-540
• Citation: 208 L.Ed.2d 327,141 S.Ct. 474
• Parties: Leslie RUTLEDGE, Attorney General of Arkansas, Petitioner v. PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION
• Court: U.S. Supreme Court

141 S.Ct. 474

208 L.Ed.2d 327

Leslie RUTLEDGE, Attorney General of Arkansas, Petitioner

v.PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION

No. 18-540

Supreme Court of the United States.

Argued October 6, 2020

Decided December 10, 2020

Leslie Rutledge, Arkansas Attorney General, Nicholas J. Bronni, Solicitor General, Counsel of Record, Vincent M. Wagner, Deputy Solicitor General, Asher Steinberg, Dylan L. Jacobs, Assistant Solicitors General, Shawn J. Johnson, Senior Assistant, Attorney General, Office of the Arkansas Attorney General, Little Rock, AR, for petitioner.

Michael B. Kimberly, Matthew A. Waring, Sarah P. Hogarth, McDermott Will & Emery LLP, Washington, DC, Seth P. Waxman, Counsel of Record, Catherine M.A. Carroll, Paul R.Q. Wolfson, Justin Baxenberg, Claire H. Chung, Hillary S. Smith, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for respondent.

Justice SOTOMAYOR delivered the opinion of the Court.

Arkansas’ Act 900 regulates the price at which pharmacy benefit managers reimburse pharmacies for the cost of drugs covered by prescription-drug plans. The question presented in this case is whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq ., pre-empts Act 900. The Court holds that the Act has neither an impermissible connection with nor reference to ERISA and is therefore not pre-empted.

I

A

Pharmacy benefit managers (PBMs) are a little-known but important part of the process by which many Americans get their prescription drugs. Generally speaking, PBMs serve as intermediaries between prescription-drug plans and the pharmacies that beneficiaries use. When a beneficiary of a prescription-drug plan goes to a pharmacy to fill a prescription, the pharmacy checks with a PBM to determine that person's coverage and copayment information. After the beneficiary leaves with his or her prescription, the PBM reimburses the pharmacy for the prescription, less the amount of the beneficiary's copayment. The prescription-drug plan, in turn, reimburses the PBM.

The amount a PBM "reimburses" a pharmacy for a drug is not necessarily tied to how much the pharmacy paid to purchase that drug from a wholesaler. Instead, PBMs’ contracts with pharmacies typically set reimbursement rates according to a list specifying the maximum allowable cost (MAC) for each drug. PBMs normally develop and administer their own unique MAC lists. Likewise, the amount that prescription-drug plans reimburse PBMs is a matter of contract between a given plan and a PBM. A PBM's reimbursement from a plan often differs from and exceeds a PBM's reimbursement to a pharmacy. That difference generates a profit for PBMs.

In 2015, Arkansas adopted Act 900 in response to concerns that the reimbursement rates set by PBMs were often too low to cover pharmacies’ costs, and that many pharmacies, particularly rural and independent ones, were at risk of losing money and closing. 2015 Ark. Acts no. 900. In effect, Act 900 requires PBMs to reimburse Arkansas pharmacies at a price equal to or higher than that which the pharmacy paid to buy the drug from a wholesaler.

Act 900 accomplishes this result through three key enforcement mechanisms. First, the Act requires PBMs to tether reimbursement rates to pharmacies’ acquisition costs by timely updating their MAC lists when drug wholesale prices increase. Ark. Code Ann. § 17–92–507(c)(2) (Supp. 2019). Second, PBMs must provide administrative appeal procedures for pharmacies to challenge MAC reimbursement prices that are below the pharmacies’ acquisition costs. § 17–92–507(c)(4)(A)(i)(b ). If a pharmacy could not have acquired the drug at a lower price from its typical wholesaler, a PBM must increase its reimbursement rate to cover the pharmacy's acquisition cost. § 17–92–507(c)(4)(C)(i)(b ). PBMs must also allow pharmacies to "reverse and rebill" each reimbursement claim affected by the pharmacy's inability to procure the drug from its typical wholesaler at a price equal to or less than the MAC reimbursement price. § 17–92–507(c)(4)(C)(iii). Third, and finally, the Act permits a pharmacy to decline to sell a drug to a beneficiary if the relevant PBM will reimburse the pharmacy at less than its acquisition cost. § 17–92–507(e).

B

Respondent Pharmaceutical Care Management Association (PCMA) is a national trade association representing the 11 largest PBMs in the country. After the enactment of Act 900, PCMA filed suit in the Eastern District of Arkansas, alleging, as relevant here, that Act 900 is pre-empted by ERISA. See 29 U.S.C. § 1144(a) (ERISA pre-empts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan").

Before the District Court issued its opinion in response to the parties’ cross-motions for summary judgment, the Court of Appeals for the Eighth Circuit decided, in a different case, that ERISA pre-empts a similar Iowa statute. Pharmaceutical Care Mgmt. Assn. v. Gerhart , 852 F.3d 722 (2017). The Eighth Circuit concluded that the Iowa statute was pre-empted for two reasons. First, it made "implicit reference" to ERISA by regulating PBMs that administer benefits for ERISA plans. Id., at 729. Second, it was impermissibly "connected with" an ERISA plan because, by requiring an appeal process for pharmacies to challenge PBM reimbursement rates and restricting the sources from which PBMs could determine pricing, the law limited a plan administrator's ability to control the calculation of drug benefits. Id., at 726, 731. Concluding that Arkansas’ Act 900 contains similar features, the District Court held that ERISA likewise pre-empts Act 900. 240 F.Supp.3d 951, 958 (ED Ark. 2017). The Eighth Circuit affirmed. 891 F.3d 1109, 1113 (2018). This Court granted certiorari. 589 U. S. ––––, 140 S.Ct. 812, 205 L.Ed.2d 449 (2020).

II

ERISA pre-empts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. 29 U.S.C. § 1144(a). "[A] state law relates to an ERISA plan if it has a connection with or reference to such a plan." Egelhoff v. Egelhoff , 532 U.S. 141, 147, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001) (internal quotation marks omitted). Because Act 900 has neither of those impermissible relationships with an ERISA plan, ERISA does not pre-empt it.

A

To determine whether a state law has an "impermissible connection" with an ERISA plan, this Court considers ERISA's objectives "as a guide to the scope of the state law that Congress understood would survive." California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc. , 519 U.S. 316, 325, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997) (internal quotation marks omitted). ERISA was enacted "to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures." Gobeille v. Liberty Mut. Ins. Co. , 577 U. S. 312, 320–321, 136 S.Ct. 936, 194 L.Ed.2d 20 (2016). In pursuit of that goal, Congress sought "to ensure that plans and plan sponsors would be subject to a uniform body of benefits law," thereby "minimiz[ing] the administrative and financial burden of complying with conflicting directives" and ensuring that plans do not have to tailor substantive benefits to the particularities of multiple jurisdictions. Ingersoll-Rand Co. v. McClendon , 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990).

ERISA is therefore primarily concerned with pre-empting laws that require providers to structure benefit plans in particular ways, such as by requiring payment of specific benefits, Shaw v. Delta Air Lines, Inc. , 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), or by binding plan administrators to specific rules for determining beneficiary status, Egelhoff , 532 U.S. 141, 121 S.Ct. 1322, 149 L.Ed.2d 264. A state law may also be subject to pre-emption if "acute, albeit indirect, economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage." Gobeille , 577 U.S. at 320, 136 S.Ct. 936 (internal quotation marks omitted). As a shorthand for these considerations, this Court asks whether a state law "governs a central matter of plan administration or interferes with nationally uniform plan administration." Ibid. (internal quotation marks and ellipsis omitted). If it does, it is pre-empted.

Crucially, not every state law that affects an ERISA plan or causes some disuniformity in plan administration has an impermissible connection with an ERISA plan. That is especially so if a law merely affects costs. In New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. , 514 U.S. 645, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995), this Court addressed a New York law that imposed surcharges of up to 13% on hospital billing rates for patients covered by insurers other than Blue Cross/Blue Shield (Blues). Plans that bought insurance from the Blues therefore paid less for New York hospital services than plans that did not. This Court presumed that the surcharges would be passed on to insurance buyers, including ERISA plans, which in turn would incentivize ERISA plans to choose the Blues over other alternatives in New York. Id., at 659, 115 S.Ct. 1671. Nevertheless, the Court held that such an "indirect economic influence" did not create an impermissible connection between the New York law and ERISA plans because it did not "bind plan administrators to any particular choice." Ibid . The law might "affect a plan's shopping decisions, but it [did] not affect the fact that any plan will shop for the best deal it can get." Id. , at 660, 115 S.Ct. 1671. If a plan wished, it could still provide a uniform interstate benefit package. Ibid .

In short, ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage. Id., at 668, 115 S.Ct. 1671 ; cf. De Buono v. NYSA–ILA Medical and Clinical Services Fund , 520...