Federal Circuit Court Unanimously Strikes Down Arkansas Mandate Restricting PBM Tools

(Washington, D.C.) — The Eighth Circuit Court of Appeals, in a unanimous three judge decision, today ruled in favor of the Pharmaceutical Care Management Association’s (PCMA) challenge (PCMA vs. Rutledge) to Arkansas law, Act 900, which restricted pharmacy benefit management (PBM) tools, and required employers and consumers to pay higher rates to independent drugstores for prescription drugs.

The federal Court of Appeals’ decision strikes down Act 900 for Medicare Part D drug plans by reversing a lower court’s decision that the law was not preempted by Medicare Part D. The appeals court also upheld the lower court’s earlier decision, in favor of PCMA, which held that the law was preempted by the Employee Retirement Income Security Act (ERISA).

“This is a landmark ruling on behalf of the PBM industry. 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 costly mandates that raise costs on employers, unions, public programs as well as consumers.”

The law attempted to mandate that employers reimburse drugstores higher rates for prescription drugs, removing incentives for drugstores to dispense lower-priced options.

PBMs are projected to save Arkansas employers, unions, government programs, and consumers $6.6 billion over 10 years. 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.