18 F.4th 956
8th Cir.2021Background
- In 2017 North Dakota enacted statutes (N.D. Cent. Code §§ 19-02.1-16.1, -16.2) imposing various limits and disclosure duties on pharmacy benefits managers (PBMs) — e.g., restrictions on retroactive fees, limits on performance-based fees, requirements to disclose network identifiers, prohibitions on gag clauses, and restrictions on PBM ownership interests.
- Pharmaceutical Care Management Association (PCMA), a national PBM trade association, sued North Dakota officials seeking to enjoin enforcement of the provisions as preempted by ERISA and by Medicare Part D; cross-motions for summary judgment were decided below.
- The district court held ERISA did not preempt any challenged provisions and held Medicare Part D preempted only §16.2(2) as applied to Part D plans; the Eighth Circuit initially reversed on ERISA preemption, but the Supreme Court vacated and remanded in light of Rutledge v. PCMA.
- On remand the Eighth Circuit (this opinion) applied Rutledge and Franklin, holding none of the challenged provisions are preempted as applied to ERISA plans but that several provisions are preempted as applied to Medicare Part D plans.
- The court also noted intervening statutory/regulatory developments and concessions: Congress enacted the Know the Lowest Price Act (42 U.S.C. §1395w-104(m)), and defendants conceded that statute preempts §16.1(7) and parts of §16.1(5) as applied to Part D; defendants also conceded §16.1(2)(c) is preempted as applied to Part D.
Issues
| Issue | Plaintiff's Argument (PCMA) | Defendant's Argument (North Dakota) | Held |
|---|---|---|---|
| 1. Does Rutledge/Gobeille "connection with or reference to" test mean the ND PBM rules "relate to" ERISA plans? | Rules regulating PBMs that administer ERISA plans are effectively regulations of ERISA plans and thus preempted. | Many provisions regulate only pharmacy practice or PBM conduct generally and thus do not "relate to" ERISA plans under Rutledge. | Held: None of the challenged provisions "relate to" ERISA plans; ERISA preemption rejected. |
| 2. Do state rules escape preemption because they regulate PBMs rather than plans? | PCMA: Regulating PBMs still governs ERISA plans because PBMs administer plan benefits. | ND: The statutes regulate PBMs regardless of whether they service ERISA or non-ERISA plans; they are not ERISA-specific. | Held: Regulation of PBMs does not automatically trigger ERISA preemption; statutes apply to PBMs generally and are not preempted. |
| 3. Should courts apply a presumption against federal preemption here (ERISA/Part D express clauses)? | PCMA: After Franklin, do not apply a presumption; follow plain text of express preemption clauses. | ND: Traditional presumption applies to ERISA express preemption and similar contexts. | Held: Court follows Franklin — no presumption against preemption when an express clause governs; analyze plain text and scope. |
| 4. Do Medicare Part D statutes/regulations preempt the ND provisions (expressly or impliedly)? | PCMA: Various Part D standards (network participation, formularies, copayment/regulatory schemes, retroactive fees, quality measures, disclosure rules) either occupy the field or conflict with ND rules so preemption applies. | ND: Many federal provisions are general or address different subject-matter (e.g., disclosures to agencies vs. pharmacies), and CMS defers to states for pharmacy practice; only limited provisions are preempted. | Held: Framework: Part D preempts state laws that (a) regulate the same subject matter as a federal Part D "standard" (express preemption), or (b) otherwise frustrate Part D purposes (implied). Applying that framework, the court affirmed preemption of §16.2(2) (as applied to Part D), and held §§16.1(2), 16.1(3), parts of 16.1(5), and §16.1(7) are preempted as applied to Part D; other challenged provisions survive as applied to Part D. |
Key Cases Cited
- Rutledge v. Pharm. Care Mgmt. Ass'n, 141 S. Ct. 474 (2020) (clarified ERISA preemption: law "relates to" an ERISA plan only if it has a connection with or reference to such a plan)
- Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (2016) (ERISA connection-with test; detailed when state reporting laws are preempted)
- Puerto Rico v. Franklin Cal. Tax-Free Trust, 136 S. Ct. 1938 (2016) (when statute contains an express preemption clause, courts focus on clause text and do not apply a presumption against preemption)
- PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011) (discussed conflict/impossibility preemption)
- Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363 (2000) (federal purpose can require state law to yield where state law frustrates federal objectives)
- United States v. Locke, 529 U.S. 89 (2000) (field preemption: federal scheme may displace state regulation when Congress occupies the field)
- Freightliner Corp. v. Myrick, 514 U.S. 280 (1995) (express preemption does not necessarily preclude implied preemption theories)