326 F. Supp. 3d 873
United States District Court2018Background
- In April 2017 North Dakota enacted S.B. 2258 and S.B. 2301 regulating PBMs and pharmacies, addressing pharmacy practice, accreditation/credentialing, and alleged PBM self-dealing.
- Key statutory provisions: pharmacy disclosure rights (cost/effectiveness, reimbursement), authorization to mail/deliver drugs, bans on gag clauses and certain contract terms, limits on PBM accreditation requirements, performance‑measurement rules, bans on certain post‑point‑of‑sale fees, copayment rules, PBM disclosure duties, and restrictions on PBM ownership of mail/specialty pharmacies.
- PCMA (plaintiff) sued state officials challenging the laws as preempted by ERISA and Medicare Part D; sought summary judgment and a preliminary injunction (denied). Court conducted cross‑motions for summary judgment.
- Court applied ERISA preemption two‑part inquiry (reference to ERISA; impermissible connection) and Medicare Part D preemption test (CMS/ statutory "standards" + state law acts "with respect to" those standards), mindful of Medicare’s savings clause for practice of medicine and state licensing.
- Holding summary: most provisions survive ERISA and Medicare Part D preemption challenges, except one—S.B. 2301 § 1(2) (PBM disclosure to plan sponsors of the difference between amounts paid to pharmacies and amounts charged to plan sponsors) —which is preempted as overlapping an existing Medicare Part D standard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the statutes "reference" ERISA plans | PCMA: broad definitions (PBM, third‑party payer, plan sponsor) implicitly refer to ERISA plans, so statutes are preempted | North Dakota: definitions cover many non‑ERISA entities; statutes do not act immediately/exclusively on ERISA plans | No impermissible reference; statutes do not specifically target ERISA plans |
| Whether statutes have an impermissible "connection" with ERISA plan administration | PCMA: requirements on PBMs will affect ERISA plan administration, MACs, reimbursements, uniform administration | ND: laws regulate state pharmacy practice, accreditation, disclosures and fees, not core plan administration | No impermissible connection; statutes do not govern central plan administration or impede national uniformity |
| Whether Medicare Part D generally preempts state regulation of PBM‑pharmacy contracting (non‑interference & access standards) | PCMA: Part D non‑interference and access/contract standards displace state regulation of PBM‑pharmacy contracts | ND: those federal standards address beneficiary access and CMS‑plan contracts, not state regulation of pharmacy practice or PBM conduct | Non‑interference/access clauses do not categorically preempt the challenged state provisions; must compare to specific Part D standards |
| Preemption of pharmacy practice provisions (dispensing any drugs, disclosures to patients, mail/delivery) | PCMA: may conflict with formulary, Part D rules, mail‑order distinctions | ND: laws regulate practice of pharmacy and patient communications; fall within Medicare savings clause (practice of medicine) | Not preempted; regulate pharmacy practice or fall within Medicare savings clause |
| Preemption of accreditation/performance provisions (ban on extra accreditation; use of national benchmarks; limits on fees) | PCMA: CMS sets quality/assurance standards and may occupy field; Part D contemplates performance measures | ND: CMS leaves pharmacy practice/accreditation to states; statutes set permissible benchmarks and limit PBM fees | Not preempted; no overlapping CMS standard and licensing exception supports state role |
| Preemption of fee‑and‑copay rules and post‑point‑of‑sale fee bans | PCMA: federal DIR/ DIR‑type reporting and DIR reconciliation implicate retroactive fees and remuneration definitions | ND: statutes regulate PBM fees charged to pharmacies/patients, not Part D reconciliation or CMS payment formulas | Not preempted; statutes regulate PBM conduct toward pharmacies/patients and do not alter federal reconciliation math |
| Preemption of PBM disclosure provisions | PCMA: federal rules require PBM reporting to CMS/plan sponsors; state disclosure requirements conflict | ND: some state disclosure duties (to pharmacies) are distinct from federal reporting; but S.B.2301 §1(2) duplicates federal requirement | Disclosure to pharmacies: not preempted. S.B.2301 §1(2) (disclosure to plan sponsors of spread) — preempted as duplicative/overlapping with Medicare Part D reporting rules |
| Preemption of PBM‑ownership/self‑dealing restriction | PCMA: CMS addresses related‑entity conflicts and guidance on conflicts of interest | ND: statute targets conflicts of interest in PBM ownership to protect consumers, not overlapping a Part D standard | Not preempted; no applicable Part D regulation displacing this state rule |
Key Cases Cited
- Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016) (sets the ERISA two‑part test: "reference to" and "connection with" ERISA plans)
- Pharmaceutical Care Mgmt. Ass'n v. Gerhart, 852 F.3d 722 (8th Cir. 2017) (Eighth Circuit found an Iowa PBM law impermissibly referenced ERISA and regulated MAC pricing)
- Pharmaceutical Care Mgmt. Ass'n v. Rutledge, 891 F.3d 1109 (8th Cir. 2018) (interpreted Gerhart and analyzed Part D preemption by comparing state law to specific Medicare standards)
- Dillingham Constr., N.A., Inc. v. California Div. of Labor Standards Enforcement, 519 U.S. 316 (1997) (caution against overbroad readings of ERISA preemption; guides the "reference to" inquiry)