Last week, the Supreme Court announced that it would review the verdict from Rutledge v. PCMA, a case from Arkansas dealing with the state’s legal right to regulate reimbursements from pharmacy benefit managers (PBMs). Their ruling could significantly impact prescription drug costs and PBM business models. The initial briefing and oral arguments should take place between March and April.

The case under review is from the 8th U.S. Circuit Court of Appeals where the court ruled in favor of PBMs and denied Arkansas the regulatory authority (Arkansas Act 900) to raise reimbursement rates for prescription drugs. According to the court, the Employee Retirement Income Security Act of 1974 (ERISA) prevents states’ from regulating PBM’s reimbursement rates.

The Supreme Court’s agreement to review the case comes at a time when skyrocketing health care costs are a key issue for states and PBMs have been criticized for contributing to the problem. Critics argue that PBMs are profiting from spread pricing by keeping the difference between what they charge plans for medications and what they reimburse to pharmacies. According to the petition to the Supreme Court, below-cost reimbursement rates have “driven more than 16% of independent rural pharmacies from the healthcare marketplace, and in many communities, nothing has replaced them”.

The National Community Pharmacists Association’s (NCPA) vice president, Mustafa Hersi is hopeful about the ruling. He stated, “We feel that this matter has national implications. PBMs have been relying on ERISA preemption to avoid meaningful oversight by states, and states like Arkansas have taken it upon themselves to draft well-tailored legislation—that does not implicate or involve ERISA—to regulate PBMs that operate within their state. The implications are that, if the court were to not only grant the request but rule in the favor of Arkansas, that states would be empowered to make more decisions to regulate PBMs and the role that they have in our health care system so that their citizens can make informed decisions with the respect to the choices that they have in health care.”

The Pharmaceutical Care Management Association (PCMA) opposes the petition. In response to the Supreme Court’s decision, the lobbying group stated, “The Employee Retirement Income Security Act (ERISA) has long enabled employers to provide consistent, nationwide health care benefits due to its preemption of state laws. We are committed to federal preemption, which is a vitally important issue to ensuring high quality health care for patients. Unique state laws governing the administration of pharmacy benefits are proliferating across the country, establishing vastly different standards. These inconsistent and often conflicting state policies eliminate flexibility for plan sponsors and create significant administrative inefficiencies. These inefficiencies divert funds from where they should be spent: providing access to the health care services on which employees of plans across the country rely. We are confident in the merits of our arguments in this case and look forward to presenting them before the U.S. Supreme Court.”