December 18, 2023 - Locke Lord LLP
Daniel Barry
On December 12, the United States Court of Appeals for the Tenth Circuit (“Tenth Circuit”) denied en banc hearing to the Attorney General of the State of Oklahoma in Pharmacy Care Management Association v. Mulready.[1] The Oklahoma Attorney General’s office is likely to appeal to the Supreme Court.[2] Arguably, there may now be a circuit split as the Eighth Circuit had previously ruled that ERISA did not preempt regulation of pharmacy benefit managers (“PBMs”) by the North Dakota Insurance Department while the Tenth Circuit ruled that similar regulation is preempted by ERISA.
In the immediate term, the status of state insurance regulation of PBMs is very much in doubt in the states that make up the Tenth Circuit[3] which over the summer ruled that ERISA preempts states seeking to regulate pricing and network structures as attempting to regulate central matters of plan administration. This situation is further complicated by the neighboring Eighth Circuit’s 2021 ruling[4] affirming state regulation of PBMs.[5] As things now stand, PBMs, insurers, etc., operating in Kansas City, Missouri, and Kansas City, Kansas, may be subject to different legal standards as ERISA preempts state regulation of PBMs in Kansas but not in Missouri. PBMs, insurers, etc., operating in neighboring states should carefully analyze each circuit court’s opinion to determine which activities may or may not be federally preempted under ERISA within their respective federal circuits.
It was only three years ago that the Supreme Court unanimously[6] upheld state regulation of PBMs in Rutledge[7] thus ushering in new statutes and regulations in states nationwide. In light of the split among neighboring circuits, the Supreme Court may choose to grant certiorari to Oklahoma to address the discrepancy. If the Supreme Court declines certiorari, additional litigation is likely as PBMs and their trade associations seek to possibly obtain similar rulings in other circuits. In the meantime, PBMs, insurers, etc., will need to reevaluate their activities in light of the current different regulatory regimes in neighboring states.
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[1] Pharm. Care Mgmt. Ass’n .v Mulready, 78 F.4th 1183, 1196 (10th Cir. 2023) en banc hearing denied Dec. 12, 2023
[2] Back in August when the Tenth Circuit initially ruled, Oklahoma Insurance Commissioner Glen Mulready released a press statement stating that Oklahoma would appeal. See, https://www.oid.ok.gov/release_082123/
[3] The Tenth Circuit covers Colorado, Kansas, Oklahoma, New Mexico, Utah, and Wyoming
[4] Pharm. Care Mgmt. Ass’n v. Wehbi, 18 F.4th 956 (8th Cir. 2021)
[5] The Eighth Circuit covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota
[6] The Supreme Court was unanimous 8-0, Justice Barrett did not partake
[7] Rutledge v. Pharm. Care Mgmt. Ass’n, 141 S. Ct. 474 (2020)