852 F.3d 722
8th Cir.2017Background
- PCMA, a national trade association for pharmacy benefits managers (PBMs), sued Iowa officials seeking a declaratory judgment that Iowa Code § 510B.8 is expressly preempted by ERISA and also raised a dormant Commerce Clause claim.
- § 510B.8 requires PBMs to disclose MAC pricing methodology to the Iowa insurance commissioner and to network pharmacies, limits which drugs can be subject to MAC pricing, restricts permissible pricing data sources, and requires contract provisions allowing pharmacies to contest/appeal MAC rates with potential retroactive payments.
- The district court dismissed PCMA’s express-preemption claim under Rule 12(b)(6), finding the statute did not impermissibly reference or connect with ERISA because it left PBMs sufficient choice and control and did not act exclusively on ERISA plans.
- On de novo review, the Eighth Circuit considered the statute together with Chapter 510B definitions, which exclude certain self-funded ERISA plans from the statute’s definition of “covered entity.”
- The court held § 510B.8 both (1) expressly references ERISA by exempting certain ERISA plans from its scope and by applying only to PBMs administering benefits for “covered entities,” and (2) has an impermissible connection with ERISA because it governs central matters of plan administration (reporting, benefit calculation, disbursement, contract terms, retroactive payments).
- The Eighth Circuit reversed and directed entry of judgment for PCMA on express preemption, declining to reach the dormant Commerce Clause claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Iowa Code § 510B.8 is expressly preempted by ERISA | § 510B.8 impermissibly references and connects with ERISA because it regulates PBMs who administer ERISA plans and therefore is preempted | § 510B.8 regulates PBM–pharmacy interactions, not ERISA plans; it does not unduly restrict plan administration or require particular benefits or pricing | Reversed: § 510B.8 is expressly preempted — it references ERISA (exempts certain ERISA plans) and interferes with uniform plan administration (reporting, pricing, appeals, retroactive payments) |
Key Cases Cited
- Express Scripts, Inc. v. Wenzel, 262 F.3d 829 (8th Cir.) (preemption analysis — state law with connection to ERISA)
- Prudential Ins. Co. of Am. v. Nat’l Park Med. Ctr., Inc., 154 F.3d 812 (8th Cir.) (state law that exempts ERISA plans constitutes a prohibited reference)
- Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016) (reporting/disclosure requirements implicate ERISA’s core administrative scheme)
- Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990) (state law need not act directly on ERISA plans to be preempted)
- Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987) (examples of plan-administration functions relevant to preemption)
- New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) (ERISA preemption standard: connection with or reference to ERISA plans)