Thirty five state attorneys general signed an amicus brief claiming that Oklahoma state law should trump federal law in a case involving the question of who can regulate pharmacy benefit managers (PBMs), the middlemen in the prescription drug industry.
After a national trade association for PBMs known as Pharmaceutical Care Management Association (PCMA) sued the state of Oklahoma claiming the state’s PBM regulations violated federal law, a district court ruled in favor of the state. PCMA appealed the case. Now, the state attorneys generals are asking the appellate court to reject PCMA’s claims and uphold the district court’s decision saying that Oklahoma can regulate PBMs.
“PBMs’ market abuses have caused numerous harms, which states are attempting to curtail by placing reasonable restrictions on PBM-pharmacy contracts that increase transparency, discourage rent-seeking behavior, and reduce selfdealing,” said Attorney General Keith Ellison of Minnesota who led the amicus brief.
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The issue of whether states can regulate PBMs has come up in other states before and in 2020 reached the U.S. Supreme Court. In that case, the court rejected PCMA’s challenge to Arkansas pharmacy-reimbursement regulations.
Without federal guidance regulating PBMs, states have come up with laws to protect pharmacies and consumers, Ellison said in a news release. His decision to advocate on behalf of Oklahoma stems from knowing that state laws he’s helped enact in his own state of Minnesota could be affected by the court decision in the Oklahoma case.
“One of the biggest drivers of the high cost of pharmaceutical drugs is the abusive practices of pharmacy benefit managers,” Ellison said. “That’s why many states like Minnesota and Oklahoma have taken common-sense first steps to regulate them. I led this broad, bipartisan coalition in support of Oklahoma, as I did before for North Dakota, because I won’t stand by and let the PBM industry undo the progress we’ve made so far when so much needs to be done to make lifesaving drugs affordable to all Americans.”
In the case in Oklahoma, PCMA specifically claimed that the Employee Retirement Income Security Act (ERISA),which protects certain aspects of employee-sponsored benefits, should broadly be applied and preempt state law. They similarly claimed that Medicare regulations should preempt the state law of Oklahoma. But the state attorneys general said that, “because the challenged Oklahoma laws do not dictate plan benefits or conflict with a Medicare standard, they are not preempted,” according to the amicus brief.
The issue of PBMs affecting competition and the impact for consumers has been hotly debated for years and recent research continues to build on that debate.
A report from the American Medical Association released this month found a widespread lack of competition at the state and metropolitan level in places where PBMs provide services.
At the national level, the analysis found that a handful of PBMs have a large collective market share for the three PBM services most used by commercial insurers, including rebate negotiation, retail network management and claims adjudication.
The 10 largest PBMs had a collective share of 97%. The four largest PBMs had a collective share of roughly 66% and six PBMs are used exclusively by one insurer or a set of Blue Cross Blue Shield affiliates, according to the report.
The report also looked at market concentration and found that about 78% of states had highly concentrated PBM markets and about 85% of metropolitan areas had highly concentrated PBM markets.
In a news release regarding the report on October 13, AMA president Jack Resneck Jr, M.D. said, “The American Medical Association already has serious concerns about PBM business practices that can have a detrimental impact on patients’ access to and cost of prescription drugs.”
The goal of the report is to inform legislation.
“The novel data presented by the AMA analysis is intended to help regulators, lawmakers, researchers, and policymakers better evaluate merger proposals in the future that may harm patients by raising prices, lowering quality, reducing choice and stifling innovation,” Resneck said.
Representatives from PCMA did not immediately respond to a request for comment.
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