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Supreme Court agrees to hear case against Arkansas Act 900

LITTLE ROCK – The Arkansas Pharmacists Association joined pharmacists across the state and country in collective hope and optimism as the United States Supreme Court announced Friday, January 10 that it will hear a landmark case regarding whether the Employee Retirement Income Security Act of 1974 (ERISA) preempts Arkansas Act 900, a state law regulating pharmacy benefit managers (PBM). PBMs are massive, shadowy corporations that act as middlemen between patients, pharmacists, and prescribers by determining prescription prices, formularies (approved drugs for an insurance plan), and reimbursements, all while operating behind a curtain of secrecy, manipulation, and self-dealing.

“For countless years, PBMs have tightened the noose on Arkansas pharmacists and their ability to serve their communities and provide access to life-saving medications and essential counseling,” said APA CEO and Executive Vice President John Vinson, Pharm.D. “Instead, PBMs have prioritized profits and stockholders by using anti-competitive practices, self-dealing, and monopoly-like business practices to create an environment where patients, pharmacists, and employers suffer the consequences – patients lose their choice, pharmacists lose their jobs, and employers lose their money. I applaud the US Supreme Court’s decision to hear this case and eagerly anticipate how a favorable ruling could change the pharmacy landscape to an even playing field for  all parties.”

The Arkansas state legislature passed Act 900 in 2015 in an attempt to rein in the PBM industry’s manipulation of Arkansas patients and stranglehold on Arkansas pharmacies by compelling PBMs to provide transparency in their practices, specifically as it relates to self-dealing and a PBM’s Maximum Allowable Cost list (MAC) – a list of drugs on a health plan and the upper limit or maximum amount that a PBM would reimburse a pharmacist to fill a prescription for each drug on the list. Act 900 requires PBMs:

  • to stop paying themselves (PBM-owned mail order and retail pharmacies) higher rates of pay than their competition (all other pharmacies);
  • to provide access of their MAC list to pharmacies and update this list in a timely manner;
  • to allow a pharmacy or its representative to appeal a low reimbursement to the PBM;
  • and to allow a pharmacy to decline filling a prescription that pays below their cost to purchase.

In 2017, the Pharmaceutical Care Management Association (PCMA), a trade organization representing PBMs, challenged Act 900 in US District Court claiming the law was unconstitutional. Judge Brian Miller ruled in favor of Arkansas on four of the five claims in the suit, but also ruled that ERISA did preempt Act 900. PCMA appealed part of the ruling to the 8th US Circuit Court of Appeals where a three-judge panel agreed in 2018 with the District Court regarding ERISA preemption and ruled in favor of the PBMs.

Also in 2018, Arkansas patients and pharmacists saw many examples of a large PBM self-deal by paying their own pharmacies an average of $63 more per prescription vs. independent pharmacies, while also paying their competition below cost to purchase the medications.  This PBM also sent letters to those same pharmacies, under PBM-inflicted financial duress, asking to purchase them.  The 2018 market practices appear to be violations of ACT 900 of 2015 and it led to an ongoing deceptive trade practices investigation by the Arkansas Attorney General’s office.  That same year, Governor Hutchinson called a special legislative session that resulted in the 2018 PBM Licensure Acts 1 and 3, sponsored by Representative Michelle Gray and Senator Ron Caldwell respectively.

In 2019, Arkansas Attorney General Leslie Rutledge submitted a request for the US Supreme Court to hear the case and on January 10, 2020 the Court agreed.

“Pharmacy benefit managers have virtually no oversight, and as a result they behave like monopolies,” said B. Douglas Hoey, pharmacist, MBA, CEO of the National Community Pharmacists Association. “Not only have PBMs failed to manage the cost of prescription drugs, which is why they were created, but they are inflating prices for patients and destroying local pharmacies. The U.S. is the only country in the world that has turned over the management of prescription drugs to PBMs and the U.S. has the highest drug costs in the world. We don’t think that is a coincidence.”

This case marks a historic first for the state of Arkansas, according to Cory Cox, Chief of Staff for Arkansas Attorney General Leslie Rutledge.

“In our research, in modern times, the state of Arkansas has never been granted cert to appear before the US Supreme Court to defend a statute,” Mr. Cox said during testimony before the Arkansas Joint Insurance & Commerce Committee. “We can’t find another instance where an (Arkansas) attorney general has fought all the way to the US Supreme Court by filing a writ of cert and actually been granted cert.”

It is likely the Supreme Court will hear oral arguments in the case in April 2020 and will announce a decision before the end of June.

The Arkansas Pharmacists Association, founded in 1882, is the statewide professional association representing approximately 2,200 pharmacists in Arkansas. APA strives to further the professional advancement of pharmacists, advocate the value of pharmacy, and safeguard the health and well-being of every Arkansan. Its mission is to advance a professional and business environment for Arkansas pharmacists to be successful and fulfilled in serving patients.

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