891 F.3d 1109
8th Cir.2018Background
- Arkansas enacted Act 900 (Ark. Code Ann. § 17-92-507) in 2015 to regulate PBM conduct and MAC pricing, requiring pharmacies be reimbursed at or above their wholesaler invoice cost in certain circumstances.
- Act 900 mandates MAC-list update timing, establishes an appeals/rebilling procedure to eliminate “negative reimbursements,” and includes a "decline-to-dispense" option for loss-making transactions.
- PCMA (representing PBMs) sued, arguing Act 900 is preempted by ERISA and by Medicare Part D, and raised constitutional claims (the latter not appealed).
- The district court held Act 900 was preempted by ERISA but not by Medicare Part D; the State cross-appealed the ERISA ruling.
- The Eighth Circuit panel affirmed ERISA preemption, reversed the Part D holding, and remanded for judgment for PCMA on Part D preemption as well.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| ERISA preemption: Does Act 900 "relate to" or reference ERISA plans so as to be preempted under 29 U.S.C. § 1144(a)? | Act 900 governs PBM conduct and therefore interferes with ERISA plan administration; it is preempted. | State contended Gerhart should be limited and that Act 900 does not improperly reference ERISA or disrupt national plan administration. | Court: Act 900 is preempted by ERISA (Gerhart controls; law references and connects with ERISA plans). |
| Medicare Part D preemption — Negotiated Prices: Does Act 900 act "with respect to" Part D's negotiated-prices standard (42 U.S.C. § 1395w-102)? | Act 900 alters pricing mechanics (replaces negotiated MAC with invoice price in some cases) and thus acts with respect to negotiated prices; preemption follows. | State argued negotiated-prices rules are not a substantive standard controlling price and exclusion for ‘‘contingent amounts’’ means Act 900 does not affect Part D negotiated prices. | Court: Act 900 acts with respect to negotiated-prices standard (appeal mechanism does not make resultant price "contingent"); preempted by Part D. |
| Medicare Part D preemption — Pharmacy Access: Does Act 900 interfere with Part D pharmacy access requirements (42 U.S.C. § 1395w-104 and 42 C.F.R. § 423.120)? | Act 900's decline-to-dispense provision can effectively render pharmacies unavailable/in effect out-of-network, impairing beneficiary access and thus acts with respect to access standards. | State argued decline-to-dispense does not make a pharmacy out-of-network and so does not affect Part D access standards. | Court: Act 900 acts with respect to pharmacy access standards (could reduce convenient access); preempted by Part D. |
Key Cases Cited
- Pharm. Care Mgmt. Ass'n v. Gerhart, 852 F.3d 722 (8th Cir. 2017) (similar statute regulating PBMs preempted by ERISA)
- Travelers Ins. Co. v. New York State Conference of Blue Cross & Blue Shield Plans, 514 U.S. 645 (1995) (scope of ERISA preemption and presumption against preemption principles)
- De Buono v. NYSA-ILA Medical & Clinical Servs. Fund, 520 U.S. 806 (1997) (presumption against preemption; analysis when state law affects ERISA plans)
- Cal. Div. of Labor Standards Enf't v. Dillingham Constr., N.A., Inc., 519 U.S. 316 (1997) (when presumption against preemption is displaced)
- Do Sung Uhm v. Humana, Inc., 620 F.3d 1134 (9th Cir. 2010) (treating duly promulgated regulations as "standards" for Part D preemption analysis)