Rutledge v. Pharmaceutical Care Management Assn.
592 U.S. 80
| SCOTUS | 2020Background
- Pharmacy benefit managers (PBMs) contract with pharmacies and prescription-drug plans and set pharmacy reimbursement via proprietary maximum allowable cost (MAC) lists.
- Arkansas enacted Act 900 (2015), which: (1) requires timely MAC updates to reflect wholesale price increases; (2) mandates an administrative appeal procedure and "reverse and rebill" when pharmacy acquisition cost exceeds MAC reimbursement; and (3) allows pharmacies to refuse to dispense when reimbursement is below acquisition cost.
- Pharmaceutical Care Management Association (PCMA), representing major PBMs, sued asserting Act 900 is pre-empted by ERISA §514 because it "relates to" employee benefit plans.
- The district court and the Eighth Circuit held Act 900 pre-empted; Supreme Court granted certiorari.
- The Supreme Court reversed, holding Act 900 is not pre-empted because it neither has an impermissible connection with nor refers to ERISA plans; it is cost regulation that does not dictate plan design.
Issues
| Issue | Plaintiff's Argument (PCMA) | Defendant's Argument (Arkansas) | Held |
|---|---|---|---|
| Whether Act 900 is pre-empted under ERISA §514 as a law that "relates to" ERISA plans | Act 900 "relates to" ERISA because it regulates PBMs that administer ERISA plans and thus affects plan administration | Act 900 is ordinary cost regulation that incidentally affects ERISA plans but does not bind plan design or administration | Not pre-empted — Act 900 does not "relate to" ERISA in the impermissible sense |
| Impermissible-connection prong: Does the Act govern a central matter of plan administration or frustrate uniform administration? | Enforcement mechanisms (appeals, MAC methodology) force plan administrators to follow state-prescribed processes and thereby interfere with nationally uniform administration | The Act sets reimbursement floors and processes for PBMs but does not require plans to provide particular benefits or structure plans in a specific way | No impermissible connection — Act 900 merely regulates costs and does not dictate plan structure or central administration |
| Reference prong: Does Act 900 "refer to" ERISA (act immediately/exclusively on ERISA plans or require ERISA plans for operation)? | By targeting PBMs that administer pharmacy benefits (including those for ERISA plans), the Act implicitly references ERISA plans | The statute applies to PBMs regardless of whether the plans they service are subject to ERISA; ERISA plans are not essential to the law’s operation | No reference — Act 900 applies broadly and does not act immediately and exclusively on ERISA plans |
| Do Act 900’s specific enforcement features (appeal, reverse & rebill, refusal-to-dispense) unlawfully interfere with plan administration? | These features may require reprocessing, alter benefit delivery, and could deny beneficiaries access to drugs, thus burdening plan administration | These mechanisms regulate PBM–pharmacy relations; operational inefficiencies do not translate into pre-emption, and responsibility initially lies with the PBM | Not pre-empted — procedural or operational burdens alone are insufficient to trigger ERISA pre-emption |
Key Cases Cited
- Egelhoff v. Egelhoff, 532 U.S. 141 (state law "relates to" ERISA if it has a connection with or reference to an ERISA plan)
- Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312 (state law refers to ERISA only when it acts immediately/exclusively on ERISA plans or requires ERISA plans for operation)
- New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (state rate regulation that changes costs/incentives but does not bind plan choice is not pre-empted)
- De Buono v. NYSA–ILA Medical & Clinical Servs. Fund, 520 U.S. 806 (state tax increasing benefit costs does not necessarily trigger ERISA pre-emption)
- California Div. of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316 (ERISA pre-emption analysis guided by ERISA’s objectives; laws not aimed at ERISA plans may survive)
- Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825 (state mechanisms for executing judgments against ERISA plans are not categorically pre-empted)
- Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (ERISA pre-emption when state law requires structuring benefits in particular ways)
- Aetna Health Inc. v. Davila, 542 U.S. 200 (ERISA’s civil enforcement scheme can pre-empt state causes of action that conflict with §502(a))
- Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (ERISA’s uniformity objective supports pre-emption to avoid conflicting directives)