PBM State Fights Will Live On After High Court’s Petition Denial

Litigation over state power to regulate pharmacy benefit managers is far from over, even after the US Supreme Court bolstered PBMs and employers that work with them by declining review of an Oklahoma statute.

The high court recently chose not to grant a petition to review Oklahoma’s Patient’s Right to Pharmacy Choice Act, which imposed a series of requirements on PBMs that the US Court of Appeals for the Tenth Circuit in 2023 said violated the Employee Retirement Income Security Act for self-insured plans. The overturned language included distance thresholds for in-network pharmacy access and a ban on patient discounts for using PBM-owned pharmacies.

The June 30 certiorari denial dealt a blow to states and pharmacy groups hoping to expand on Arkansas’ win at the high court in 2020 that sanctioned more authority for insurance commissioners to regulate PBMs’ payments to pharmacies.

Backlash against PBMs—which manage the drug benefit for health plans—has grown in recent years, resulting in state-level crackdowns. Critics across the political spectrum blame PBMs for anticompetitive tactics they say drive up drug prices and force independent pharmacies to close. Express Scripts, CVS Caremark, and UnitedHealth Group’s OptumRx dominate around 80% of the market.

Many health care lawyers view the court’s refusal to consider Oklahoma’s appeal in Mulready v. Pharmaceutical Care Management Association as a reinforcement of ERISA’s broad preemption authority, and Arkansas’ win in Rutledge v. Pharmaceutical Care Management Association as a narrow exception.

The Supreme Court only granted states power to regulate PBMs’ payments to pharmacies in Rutledge, whereas Oklahoma was seeking clearance on a number of broader restrictions the courts said intruded on core health plan operations.

“This is an implicit endorsement of the Tenth Circuit’s holding,” said Madison Connor, senior vice president of regulatory compliance and external affairs at consulting firm Employers Health. “And it sets an important post-Rutledge boundary that can be persuasive authority for other circuits.”

Cost Control

Pharmacy groups say ERISA only protects health plans themselves, not their third-party PBMs. National Community Pharmacists Association General Counsel Matthew Seiler said the Mulready decision incorrectly shielded PBMs as if they were plans.

“The structure of third-party networks is simply not the same as the structure of a plan,” he said.

PBMs argue they offer essential administrative services to plans and negotiate with drug manufacturers to help keep drug prices from increasing further. Jack Linehan, general counsel for PBM lobbying group the Pharmaceutical Care Management Association, said the wave of state PBM laws is escalating employers’ health-care costs.

“A lot of times they have no option but to spread those costs to the worker beneficiaries,” he said.

That dynamic is prompting employers and unions to challenge state laws directly, he said.

Dillon Clair, director of state advocacy for The ERISA Industry Committee, a lobbying group of self-insured employers, agreed. While the group supports the intention behind many state laws on costs and transparency, he said, changes need to happen at the federal level to ensure uniformity.

“The more and more states try to push enforcement against employers and plan sponsors, the more their interest in legal challenge and opposition has grown,” he said.

Remaining Cases

All 50 states have laws regulating PBMs in some fashion. The Tenth Circuit’s decision only applies to the six states in its jurisdiction,but will likely have spillover effects, Seiler said. He pointed to Iowa Association of Business and Industry v. Iowa Insurance Commissioner, where a district court cited the Tenth Circuit in its decision to implement a temporary restraining order against Iowa’s PBM law.

The Iowa business group and four employers sued Insurance Commissioner Doug Ommen over a law requiring PBMs to file cost transparency reports and banning them from steering patients to certain pharmacies. The case is one of several the industry is watching since a circuit split would likely propel the issue back to the Supreme Court.

Oklahoma Insurance Commissioner Glen Mulready tried to convince the Supreme Court that the Tenth Circuit’s decision conflicted with the Eighth Circuit’s 2021 ruling in Pharmaceutical Care Management v. Nizar Wehbi, which challenged North Dakota’s PBM law. But the Trump administration said the Eighth Circuit’s decision only affected information disclosure and pharmacy accreditation requirements that fall outside a plan’s core operations.

In Tennessee, McKee Foods Corp. is suing Insurance Commissioner Carter Lawrence and Thrifty Med Plus Pharmacy over a law preventing PBMs from using discounts to steer patients to preferred pharmacies. Thrifty Med had filed a complaint with the state, saying McKee was blocking it from participating in its network under the law’s provision requiring plan sponsors to partner with “any willing pharmacy.” The case is now before the US Court of Appeals for the Sixth Circuit after a lower court ruled the law had an “impermissible connection” to ERISA plans.

“Any willing provider” laws have been on the books for years without any threat of legal challenge, said Rachel Alexander, who represents plans as a member of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC. But that could be changing, especially now that the Tenth Circuit struck down Oklahoma’s version.

“It would be interesting to see if there’s suddenly a rollback in those laws,” she said.

Other state laws are further testing the ERISA waters. Minnesota is facing a lawsuit from ERIC over its PBM law, which ERIC says attempts to regulate plans in other states. Florida is seeking to gather cost data from self-insured employers through their PBMs. And Arkansas is attempting to ban PBMs from owning pharmacies, in a move that could shutter CVS pharmacies across the state.

States are understandably seeking to fill a vacuum left by Congress’ inaction at the federal level, Alexander said. It’s unclear who will ultimately fill the void.

“Is it going to be the Supreme Court or is it going to be Congress?” she said. “They’re going to be loath to pick this up and hopeful that Congress will resolve it.”

The case is Pharm. Care Mgmt. Ass’n v. Mulready, U.S., No. 23-1213, certiorari denied 6/30/25.