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Oklahoma Drug Pricing Law Latest to Face Legal Challenge (1)

Oct. 28, 2019, 3:34 PMUpdated: Oct. 28, 2019, 5:20 PM

Oklahoma is the latest state to face an ERISA challenge to a law regulating pharmacy benefit managers, according to a complaint filed in the Western District of Oklahoma by the Pharmaceutical Care Management Association.

Oklahoma’s Patient’s Right to Pharmacy Choice Act, which is aimed at curbing controversial practices by PBMs like Express Scripts and CVS Health, is preempted by the federal Employee Retirement Income Security Act and Medicare Part D regulations, the PCMA argued in an Oct. 25 lawsuit.

“Contrary to its name,” the Oklahoma law doesn’t focus on patient rights, but instead “operates primarily to weaken competition among pharmacies by limiting the ability of PBMs to offer their cost-saving and quality assurance initiatives within the State of Oklahoma,” the PCMA said.

At least 38 states have passed laws regulating how PBMs make money off prescription drugs. States say the laws are needed to tamp down on ever-increasing prescription drug costs by making the relationships between pharmacies, pharmacy benefit managers, and consumers more transparent.

The PCMA, a trade group representing PBMs, has challenged several of these laws by arguing that they interfere with federal law and impose costly mandates on PBMs that raise costs for employers and patients alike. The U.S. Court of Appeals for the Eighth Circuit has twice agreed with the PCMA, striking down state laws in both Arkansas and Iowa. Earlier this month, the court heard arguments in a similar case against insurance regulators in North Dakota.

The U.S. Supreme Court recently expressed interest in these questions. In April, the court asked the U.S. solicitor general to file a brief explaining the federal government’s position on preemption of state PBM regulations.

Causes of Action: ERISA and Medicare Part D preemption; ultra vires agency action.

Relief: Declaration of federal preemption of state law; injunctive relief blocking enforcement of law.

Response: “We are reviewing the complaint and will be working with the Oklahoma Attorney General’s office as this lawsuit moves forward,” Liz Heigle, communications director for the Oklahoma Insurance Department, told Bloomberg Law.

Attorneys: Crowe & Dunlevy and Foley Hoag LLP represent the PCMA.

The case is Pharm. Care Mgmt. Assoc. v. Mulready, W.D. Okla., No. 5:19-cv-00977-SLP, complaint 10/25/19.

(Updated with response from state insurance department.)

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com