AMA and AMS Submit Brief to U.S. Supreme Court Supporting Regulation of PBMs

On March 3, 2020, the American Medical Association, along with the Arkansas Medical Society, filed an amicus brief with the United States Supreme Court in support of Arkansas Attorney General Leslie Rutledge’s effort to uphold an Arkansas statute regulating Pharmacy Benefits Managers (PBM). The U.S. Supreme Court is set to hear oral arguments in the lawsuit on April 27 in Washington D.C.

In 2015, the Arkansas Legislature passed Act 900 requiring PBMs, who act as “middlemen” between health insurance companies and pharmacists, to reimburse pharmacies at or above their wholesale cost paid for generic drugs and prevent them from paying their own drugstores more than they pay others. If the PBM fails to raise its price to the wholesale price, then they would violate the Arkansas Deceptive Trade Practices Act, the Arkansas Pharmacy Benefits Manager Licensure Act, and the Arkansas Trade Practices Act. There are three main PBMs in the market – CVS Caremark, OptumRX, and Express Scripts.

In a 2017 ruling, U.S. District Judge Brian Miller said Act 900 was preempted in health plans regulated by the federal Employee Retirement Income Security Act (ERISA). But according to the AMA/AMS brief the statute does not dictate an ERISA plan’s choice of coverage or insurer, does not affect the processing of health care claims by ERISA plans, nor does it even mention ERISA plans. Instead, the statute regulates the prices at which PBMs reimburse pharmacies for generic prescription drugs—without regard to whether the payor is an ERISA plan.

The American Medical Association and Arkansas Medical Society said laws such as Act 900 are needed to provide transparency into which treatments are preferred by a particular payer, what level of costs-sharing their patients will bear, and whether medications are subject to sometimes unreasonable utilization management requirements. According to the brief, “This lack of transparency in patients’ drug coverage can interfere with sound medical practice and may lead to delays in and other disruptions to necessary medication treatment.”

David Wroten, executive vice president of the AMS addressed one of the reasons they joined in filing this brief. “Our goal, along with the AMA, is in recognition that states, like Arkansas, must be able to regulate entities that interfere with a physician’s ability to deliver medical care to patients. For too long, these types of organizations have hidden behind the federal ERISA statute, whose main purpose was to regulate retirement plans.”

For pharmacists, the impact has been greater. Over the past 15 years, 16% of independently owned rural pharmacists have closed, affecting patients in the rural areas around the state. “Pharmacy benefit managers need to be held accountable for the alarming number of small-town pharmacies they have closed due to unfair business practices,” said Rutledge.

In addition to the AMA/AMS brief, over a dozen other health industry organizations and lawmakers also filed briefs urging the Supreme Court to revive the Arkansas law. Stay tuned to for more information regarding the brief becomes available.