Lanton Law Quoted in Law360 Article on Rutledge v. PCMA
Lanton Law was quoted in Law360’s article titled “High Court to Weight States’ Ability to Rein in Drug Middlemen,” which was written in response to current developments around the Rutledge v. PCMA case. This case was heard this morning in the U.S. Supreme Court. The article can be accessed here.
We have included Emily Brill’s article from Law360 below in case you have trouble accessing it.
Analysis High Court To Weigh States' Ability To Rein In Drug Middlemen
By Emily Brill
Law360 (October 5, 2020, 7:45 PM EDT) -- The U.S. Supreme Court will hear arguments Tuesday over whether states can control the rates at which local pharmacies get reimbursed for drugs by health insurance plans, a case that could determine whether states can regulate pharmacy benefit managers without getting waylaid by federal benefits law.
Local pharmacists call the case the most significant health care suit the high court will hear this term aside from the one that threatens the Affordable Care Act. The pharmacists say a loss for their side would give pharmacy benefit managers — the middlemen who reimburse pharmacies for drugs on insurers' behalf — a green light to put pharmacies that lack PBM ties out of business.
"The outcome of the Rutledge case will be the tipping point of whether Americans will continue to have access to their local pharmacist or whether that access will go away," said Michael Hogue, the president of the American Pharmacists Association.
The outcome could also affect how far companies can stretch the Employee Retirement Income Security Act's preemption provision, which is often used in court to strike down state and local laws regulating employee benefit plans and related entities.
Here, Law360 breaks down what's at stake and what's being argued in Rutledge v. Pharmaceutical Care Management Association .
What Are the Arguments?
The Rutledge case concerns the viability of a 2015 Arkansas law that attempted to regulate PBMs. The law arrived after lobbying from local pharmacies, which said they would be forced to close if PBMs' allegedly predatory business practices weren't reined in.
Chief among those practices was PBMs' refusal to pay local pharmacies for drugs at the same rates that they paid their affiliated pharmacies, local pharmacists said. This practice led to local pharmacies consistently getting shortchanged on prescription reimbursements, making it difficult to stay in business, the pharmacists said.
In response to these concerns, Arkansas passed Act 900, which required PBMs to reimburse local pharmacies at the same rates as their affiliated pharmacies. But shortly after the bill became law, the PBM industry slapped the state with a lawsuit alleging that Act 900 was preempted by ERISA.
The suit, filed by the PBM industry lobbying group the Pharmaceutical Care Management Association, argued that Act 900 regulated business dealings that were central to administering benefit plans and that only ERISA is allowed to do that.
An Arkansas federal judge agreed, striking down the law in 2017. The Eighth Circuit upheld the ruling the following year, at which point Arkansas asked the Supreme Court to step in. The justices agreed to take the case in January.
Arkansas has argued that ERISA doesn't stretch as far as PCMA is claiming it does and that the courts are stepping into dangerous territory by accepting the PBM lobby's argument.
"Its approach would ... exempt ERISA plans from any number of generally applicable health-and-safety regulations. And that cannot be the case," Arkansas' attorney general, Leslie Rutledge, wrote in the state's opening brief to the high court.
What's at Stake?
Rutledge v. PCMA has attracted significant attention, drawing amicus briefs from 46 attorneys general and the U.S. solicitor general in support of Arkansas and from a number of employer interest groups in support of PCMA.
The state and federal governments argue that ERISA only preempts health care regulations that have an impermissible reference to employee benefit plans, which the Arkansas law does not.
Allowing PCMA to succeed in its argument could endanger states' ability to regulate health care, which could have dire consequences, the officials argued.
A ruling in favor of PCMA would also allow PBMs to operate essentially free of oversight, continuing business practices that have already bankrupted far too many local pharmacies, the pharmacists' groups argued.
If the Supreme Court upholds the Eighth Circuit ruling, "there's really nothing stopping a PBM from doing whatever it wants," said Ron Lanton, an attorney and lobbyist who specializes in health care law.
"It would be great if the Supreme Court ruled for Rutledge because then we won't have chaos," Lanton said.
But PCMA argues that a ruling in Rutledge's favor would create chaos for the PBM industry, subjecting it to a patchwork of state laws that would complicate the process of working with employee benefit plans that operate across state lines.
This argument gained PCMA the support of groups that represent employers and their benefit plans, such as America's Health Insurance Plans, the Society for Human Resource Management and the American Benefits Council.
"It was delicate for us to weigh in on because oftentimes there's no love lost between employers and PBMs," said Ben Conley, a partner at Seyfarth Shaw LLP who helped author SHRM's amicus brief. "But at the end of the day, employers want to pay less. They want the flexibility to design their plans in a manner that allows them to do so."
A win for Rutledge "could be seen as chipping away at ERISA preemption, which large, multistate employers view as of the utmost importance because it impacts their ability to design a uniform, nationwide plan," Conley said.
PCMA also argued that it has been unfairly vilified by local pharmacists, saying they have overstated the damage PBMs have done.
"The fact is the current state of independent pharmacies in the U.S. is secure," PCMA spokesperson Greg Lopes said in an emailed statement to Law360. He added that by attacking PBMs, local pharmacies are going after "the only entity in the prescription drug supply chain that is fighting to reduce drug costs for patients."
Counsel
Arkansas is represented by Leslie Rutledge, Nicholas Jacob Bronni and Shawn J. Johnson of the Arkansas Attorney General's Office.
The Pharmaceutical Care Management Association is represented by Michael B. Kimberly, Sarah P. Hogarth and Matthew Waring of McDermott Will & Emery LLP and Seth P. Waxman, Catherine M.A. Carroll, Paul R.Q. Wolfson, Justin Baxenberg, Claire H. Chung and Hillary S. Smith of WilmerHale.
The case is Rutledge v. Pharmaceutical Care Management Association, case number 18-540, in the Supreme Court of the United States.
--Additional reporting by Danielle Nichole Smith. Editing by Jill Coffey.