State laws seeking to regulate pharmacy benefit managers (PBMs) have increased significantly over the past few years. As it stands, all 50 states have laws that regulate PBMs in some way, but all are unique. However, most of these laws have the same primary goals of reducing governmental waste and addressing the rising cost of drugs.
Generally, these laws have only been enforceable against fully insured plans. However, since the 2020 U.S. Supreme Court’s decision in Rutledge v. PCMA, which held that an Arkansas PBM reform law was not pre-empted, we have seen many new strategies emerge from state legislators trying to regulate PBMs and their contracts with self-insured plans. Following the decision in Rutledge and a slew of other cases challenging state law, many states have started implementing laws that have either a direct reference to self-insured plans or, even when silent on whether they apply to self-insured plans, still have a direct effect on the actions of the plan administrators.
In states like Arkansas, Florida, North Carolina, Texas, Iowa, and Oklahoma, the laws create reporting obligations for PBMs and the plans with which they contract. In some states, it has been clear that it is intended for the law to pick up self-insured plans, but in others, the interpretation remains unclear. For example, in Arkansas, a Bulletin released by the Department of Insurance directly requires self-insured group benefit plans to submit certain pharmacy compensation information to the state. Additionally, in Florida, the Prescription Drug Reform Act includes “self-insured employer health plans” in its definition of “pharmacy benefits plan or program” in a direct attempt to regulate these plans. In states where there is a reporting component for plans, this lack of clarity, coupled with a myriad of federal lawsuits challenging these laws, leaves many plan sponsors unsure if they must comply.
We have seen an uptick in requests to plan sponsors from the large PBMs due to requests for information coming from state insurance departments. Many of these PBMs appear to be deferring to the plan administrator to determine how to report. Plan administrators with participants in multiple states will need to continue to work with their PBM to ensure they remain compliant with state-specific laws. Without a federal court ruling pre-empting the state law, there are risks that these states may attempt to enforce penalties against plans and their PBMs for non-compliance. If you receive a request to provide information or are unsure of your reporting obligations, please reach out to a member of our employee benefits team for assistance.
* Braylon Dennis is a SWEL intern and is not licensed to practice law.
