January 11, 2017

(Washington, D.C.) — The Eighth Circuit Court of Appeals today struck down an Iowa law that restricted tools used by pharmacy benefit managers (PBMs) to lower prescription drug costs for the state’s employers and consumers.

The law, backed by the independent pharmacy lobby, would have forced employers and consumers to overpay for generic drugs by severely hampering the use of Maximum Allowable Cost (MAC) lists that keep generic drug costs reasonable.

The court’s opinion states that the law has an “impermissible reference to ERISA or ERISA plans” and hence is completely preempted by Federal law.

MAC lists are widely used by health plans and PBMs to reduce costs for private-sector clients, as well as union health and welfare funds, Medicaid, and Medicare Part D. Forty-five state Medicaid programs now use MAC lists, up from 26 states in 1999.

“PBMs are part of the solution to high drug prices and use many tools to reduce prescription drug costs,” said PCMA President and CEO Mark Merritt. “This federal appeals court decision sends an important signal that states can’t impose a patchwork of costly mandates on employers and unions that offer pharmacy benefits.”

PBMs are projected to save employers, unions, government programs, and consumers $654 billion on drug benefit costs over the next decade.

PBMs reduce drug costs by:

·         Offering home delivery of medications and creating select networks of more affordable pharmacies;

·         Encouraging the use of generics and more affordable brand medications;

·         Negotiating rebates from drug manufacturers and discounts from drugstores;

·         Managing high-cost specialty medications; and

·         Reducing waste and improving adherence.