Tuesday, December 19, 2023 • 7
By Mike W. Ray Southwest Ledger
WASHINGTON, D.C. – An array of health care associations and 31 states submitted amicus briefs to the Supreme Court of the United States in support of Oklahoma and its law to regulate pharmacy benefit managers.
The nation’s highest court on May 10, 2024, accepted State Insurance Commissioner Glen Mulready’s appeal of a 10th Circuit decision from 2023 that shredded Oklahoma’s law, the Patient’s Right to Pharmacy Choice Act enacted in 2019.
The Denver appellate court “preempted a suite” of Oklahoma laws that regulate pharmacy benefit managers “to ensure that rural patients have meaningful access to pharmacies,” Mulready’s legal team wrote. Additionally, pharmacy regulation is “an area of traditional state concern…” The 10th Circuit “read ERISA [the Employee Retirement Income Security Act of 1974] so broadly,” and SCOTUS’ decision in Rutledge v PCMA (2020) “so narrowly as to effectively grant PBMs” a “get-out-of-State-regulation- free card,” Mulready said.
The 10th Circuit Court of Appeals ruling disagreed with an opinion issued by the 8th Circuit Court of Appeals but aligned with one from the 1st Circuit Court of Appeals. Issues on which the circuit courts are split “are both timely and of critical importance,” Mulready declared.
States, federal regulators, and consumers “have all observed, with alarm, the increasing retail prices, decreasing consumer choice, and disappearance of rural pharmacies associated with the rise of PBMs.”
If states “really are powerless under current law to take sensible Southwest Ledger actions to counteract the rising power of PBMs and preserve the shrinking universe of rural pharmacies … then Congress deserves to learn that news, so it can fix what ‘no sensible person could have intended,’” Mulready’s legal team wrote, citing the late Justice Antonin Scalia in a 1997 case.
The Pharmaceutical Care Management Association (PCMA), though, in its response to Mulready’s appeal, told SCOTUS that, “Further review” of the appellate decision “is unwarranted.”
Oklahoma’s law “limits the ways in which sponsors of health plans may design the networks of pharmacies within their prescription-drug benefit plans,” PCMA argued. “Among other things, it requires plan sponsors to allow any willing pharmacy to participate in a preferred provider network.” Simultaneously, the law “effectively forbids plans from using preferred networks by barring them from offering participants discounts or preferential cost-sharing terms at preferred pharmacies.”
The Supreme Court “has said time and again that any state law that ‘prohibits employers from structuring their employee benefit plans in a [particular] manner’ is ‘clearly’ preempted,” PCMA wrote.
10th Circuit ruling ‘raises concerns’ The American Dental Association and Eight Health-Care Provider Associations wrote in an amicus brief that the 10th Circuit decision “preempts broad categories of generally applicable health-care regulations.” It also “raises federalism and constitutional concerns by usurping” the “traditional authority” of states “to regulate health care and insurance.”
Besides the dental association, the eight other groups included the American Optometric Association, the American Association of Orthodontists, the American Academy of Pediatric Dentistry, the Association of Dental Support Organizations, the American Association of Oral and Maxillofacial Surgeons, the American Academy of Oral & Maxillofacial Pathology, the American Association of Endodontists, and the American Academy of Periodontology.
“The Court’s decision in this case will impact nationwide efforts by States to regulate the manner in which pharmacy benefit managers conduct themselves toward specialty pharmacies, which are serving the most vulnerable residents” of the states, the National Association of Specialty Pharmacy reported.
Specialty pharmacies provide medications for individuals afflicted with serious health conditions that require complex therapies, such as cancer, hepatitis C, rheumatoid arthritis, HIV/AIDS, multiple sclerosis, cystic fibrosis, organ transplantation, human growth hormone deficiencies, hemophilia and other bleeding disorders.
Today, some PBMs “often impose costly requirements upon specialty pharmacies in order to become part of their networks. And, once pharmacies become participants in PBM networks and provide their patient data to the PBMs, some of these large PBMs … go to great lengths to divert such specialty patients to their own affiliated pharmacies.”
The consequence of “these anticompetitive practices” has been to “line the offending PBMs’ pockets with billions of dollars in profits” and to “subject specialty pharmacies to enormous financial pressures, forcing many of them to stop dispensing certain specialty medications or to have no choice but to be acquired – commonly by one of the largest PBMs.”
States “have historically regulated the kind of anticompetitive conduct PBMs engage in,” the National Association of Specialty Pharmacy noted.
31 states support Oklahoma Also filing an amicus brief in support of Oklahoma’s law were 31 states, including Texas, California, New York, Michigan, New Jersey, Ohio, Pennsylvania, and Washington, plus the District of Columbia.
An amicus brief is a legal document filed with an appellate court by a third party that is not involved in a case but has a special interest or expertise in the legal issue at hand. The term “amicus curiae” means “friend of the court” and refers to someone who provides input, historical context, and outside information to the jurists.
“While PBMs ostensibly control drug prices to benefit consumers, consumers have instead borne the brunt of PBM practices, facing increasing difficulties” in affording their medications “and accessing prescription drugs,” the states told SCOTUS Justices.
Prescription drugs are “an inescapable and increasingly prevalent facet of modern healthcare,” the states point out. Between 2015 and 2018, almost half of all people in the United States took a prescription drug in the preceding 30 days, and the need for prescription drugs “is even greater among those over age 65, with 88.5% having taken a prescription drug in the last 30 days.” Both of those statistics came from the Centers for Disease Control and Prevention, U.S. Department of Health and Human Services.
In 2022, annual American prescription-drug spending grew to $405.9 billion, the DHHS reported.
PBMs’ “central position” as intermediaries between pharmacies and prescription-drug plans “has enabled them to foster a complex and interdependent web of relationships” in the healthcare industry.
PBMs “have then used this complex system to impose self-serving protections that have reduced reimbursement rates to pharmacies, maximized rebates to PBMs, and imposed various confidentiality requirements to hide PBMs’ business practices.”
The top three PBMs “control 80% of the PBM market,” resulting in “dominant gatekeepers who have outsized power…” Yet efforts by states to “regulate PBMs to protect the public … have been met with significant resistance from the PBM industry.”
In the absence of federal regulation of PBMs, states “have stepped in to address” the “concerning business practices and outsized influence” of PBMs in the prescription- drug field.
State laws, AGs try to rein in PBMs States had enacted at least 156 laws regulating PBMs as of 2023. The regulations vary “but typically aim to limit patient cost-sharing, prohibit gag clauses on pharmacies, prohibit discrimination against non-affiliated pharmacies, require certain reports, and establish requirements for maximum allowable costs and reimbursements.”
They further noted that 39 state attorneys general, including Oklahoma’s, are “seeking PBM reform.” But without federal regulation, “states are left to navigate this area by exercising their traditional regulatory authority.”
The PBM industry “has fought state regulation … consistently asserting that federal law – specifically ERISA and Medicare Part D – preempt state action.” Before suing Oklahoma, PCMA “challenged PBM regulations” in North Dakota, Arkansas, Iowa, Maine, and Washington, D.C.
The states maintain that their regulations are “critical to protect the public from PBM business practices that adversely affect consumers and independent pharmacies.
One of those business practices is “spread pricing.” PBMs profit from the “spread” between the amount they charge health plans for a drug and the amount they reimburse pharmacies.
Another way PBM business practices harm consumers and independent pharmacies is “by steering business to PBM-owned or -affiliated pharmacies. This limits consumer choice, creates potential conflicts of interest, and reduces non-affiliated pharmacies’ business, the states complained.
Oklahoma, for example, prohibits PBMs from steering patients to favored pharmacies by offering discounts only at those pharmacies, the state amici related.
Altogether, seven legal briefs totaling 37,335 words have been filed with SCOTUS in the PBM case, and the Solicitor General was invited on Oct. 7 to submit a brief “expressing the views of the United States.” No activity has been logged in the case since that date.