Amici come out for N.D. law regulating 'abusive' PBMs

(Reuters) - Thirty state attorneys general and several pharmacy groups are urging the 8th U.S. Circuit Court of Appeals to uphold a North Dakota law regulating pharmacy benefit managers (PBMs).

The states, led by Minnesota Attorney General Keith Ellison and also including New York, California, Mississippi and Nebraska, said in an amicus brief Thursday that striking down the law could hamper their ability to regulate PBMs.

The National Community Pharmacists Association, American Pharmacists Association and several state pharmacist associations, represented by William Copley of Weisbrod Matteis & Copley, argued in their own brief that "abusive" PBM practices drove independent pharmacies out of business.

The Pharmaceutical Care Management Association (PCMA), a national PBM group challenging the North Dakota law, and its attorney Michael Kimberly of McDermott Will & Emery did not immediately respond to requests for comment.

PBMs serve as intermediaries between drugmakers, pharmacies and insurance companies, negotiating prescription drug prices, maintaining networks of pharmacies for health plan members and processing claims.

In 2017, North Dakota passed a law regulating PBMs doing business in the state. The law included restrictions on co-payments and barred PBMs from having an ownership interest in patient assistant programs or mail-order specialty pharmacies.

The PCMA sued the state, arguing that the law was preempted by ERISA because it necessarily affected ERISA plans. The 8th Circuit agreed and struck down the law last August.

In December, however, the Supreme Court reversed the 8th Circuit's decision in a different case striking down an Arkansas PBM law as preempted by ERISA. It found that the law - which required PBMs to reimburse pharmacies at or above their acquisition costs for drugs - did not regulate ERISA plans because it did not "require plans to provide any particular benefit to any particular beneficiary in any particular way".

The Supreme Court subsequently vacated the 8th Circuit's decision in the North Dakota case and ordered the circuit to reconsider it in light of the Arkansas ruling.

The PCMA argued on remand that the North Dakota law is still preempted because it does more than simply control costs, like the Arkansas law.

The states and the pharmacies in their amicus briefs rejected that argument, arguing that, like Arkansas's law, North Dakota's did not directly regulate the administration of ERISA plans. They also said that forbidding states from regulating PBMs led to concrete harms.

"State regulation is necessary to curb PBM practices that harm pharmacies, consumers and states," the states said.

The pharmacy groups cited, as an example of abusive practices, PBMs' treatment of the anti-opioid overdose drug naloxone. From 2016 to 2018, they said, drugmakers dropped the price of naloxone, but Massachusetts' Medicaid paid more for it, thanks to increased PBM profits.

The outcome of the case could have national implications, as most states have sought to regulate PBMs to some degree.

The case is Pharmaceutical Care Management Association v. Tufte et al, 8th U.S. Circuit Court of Appeals, No. 18-2926.

For North Dakota: Robert Smith of Katten Muchin Rosenman

For the states: Assistant Attorney General Angela Behrens of Minnesota and others

For the pharmacy groups: William Copley of Weisbrod Matteis & Copley and others

For the PCMA: Michael Kimberly of McDermott Will & Emery

Read more:

North Dakota pharmacy benefit manager law preempted by ERISA - 8th Circ

Supreme Court rules Arkansas can regulate pharmacy benefit managers

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