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Pharmaceutical Care Management Association Plaintiff - Appellant v. Leslie Rutledge, in her official capacity as Attorney General of

U.S. Court of Appeals, Eighth Circuit

JUNE 8, 2018

No. 17-1609  , No. 17-1629

Opinion

No. 17-1609  , No. 17-1629.

U.S. Court of Appeals, Eighth Circuit. Submitted: Filed: . 

BEAM, Circuit Judge. 

In this dispute between a pharmacy trade association, Pharmaceutical Care Management Association (PCMA) and the State of Arkansas, PCMA appeals the district court's ruling that an Arkansas state statute is not preempted by Medicare Part D, 42 U.S.C. § 1395w-26(b)(3), and the State of Arkansas appeals the district court's ruling that the statute is preempted by ERISA, 29 U.S.C. § 1144(a). Because the state statute in question is preempted by both ERISA and the Medicare Part D statutes, we affirm in part, reverse in part, and remand. 

 I. BACKGROUND 

In 2015, the Arkansas General Assembly passed a state law which attempted to govern the conduct of pharmacy benefits managers ("PBMs") - the entities that verify benefits and manage financial transactions among pharmacies, healthcare payors, and patients. PBMs are intermediaries between health plans and pharmacies, and provide services such as claims processing, managing data, mail-order drug sales, calculating benefit levels and making disbursements. Pharmacies acquire their drug inventories from wholesalers. The patient buys the drug from the pharmacy, but often at a lower price due to participation in a health plan that covers part of the price. Further, the PBMs create a maximum allowable cost ("MAC") list which sets reimbursement rates to pharmacies dispensing generic drugs. Contracts between PBMs and pharmacies create pharmacy networks. Based upon these contracts and in order to participate in a preferred network, some pharmacies choose to accept lower reimbursements for dispensed prescriptions. Thus, unfortunately, a pharmacy might actually lose money on a given prescription transaction. 

In an attempt to address the trend in Arkansas of significantly fewer independent and rural-serving pharmacies in the state, the state legislature adopted Act 900, Arkansas Code Annotated § 17-92-507, an amendment to the state's then-existing MAC law, to "Amend the Laws Regarding Maximum Allowable Cost Lists; to Create Accountability in the Establishment of Prescription Drug Pricing." 2015 Ark. Laws Act 900, S.B. 688 (Ark. 2015). The Act mandates that pharmacies be reimbursed for generic drugs at a price equal to or higher than the pharmacies' cost for the drug based on the invoice from the wholesaler. It did this by defining "pharmacy acquisition cost" as the amount charged by the wholesaler as evidenced by the invoice. Ark. Code Ann. § 17-92-507(a)(6). The Act further imposes requirements on PBMs in their use of the MAC lists by making them update the lists within at least seven days from the time there has been a certain increase in acquisition costs. Id. § 17-92-507(c)(2). The Act also contains administrative appeal procedures, id. § 17-92-507(c)(4)(A)(i), and allows the pharmacies to reverse and re-bill each claim affected by the pharmacies' inability to procure the drug at a cost that is equal to or less than the cost on the relevant MAC list where the drug is not available "below the pharmacy acquisition cost from the pharmaceutical wholesaler from whom the pharmacy or pharmacist purchases the majority of prescription drugs for resale." Id. § 17-92-507(c)(4)(C)(iii). Finally, the Act contains a "decline-to-dispense" option for pharmacies that will lose money on a transaction. Id. § 17-92-507(e). 

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CCH Pens. Plan Guide (CCH) P 339,540

Pharmaceutical Care Management Association Plaintiff - Appellant v. Leslie Rutledge, in her official capacity as Attorney General of

Other History: Appeals from United States District Court for the Eastern District of Arkansas - Little Rock

CORE TERMS

pharmacy, preempt, negotiate, state law, network, prescription drug, district court, wholesaler, contingent, dispense, entity