Oklahoma law aimed at helping small pharmacies intrudes on Congress' power, court says

Key parts of an Oklahoma law aimed at helping small pharmacies draw more customers covered by health plans were struck down on Tuesday by a federal appeals court.

The 10th U.S. Circuit Court of Appeals ruled that regulations imposed by the 2019 law on pharmacy benefit managers were preempted by the federal law known as ERISA that governs health care plans and by the Medicare prescription drug law.

The court said the challenged provisions in the Oklahoma law “home in on PBM pharmacy networks — the structures through which plan beneficiaries access their drug benefits. And they impede PBMs from offering (insurance) plans with some of the most fundamental network designs, such as preferred pharmacies, mail-order pharmacies, and specialty pharmacies.”

The Pharmaceutical Care Management Association, which sued the state to block the law, objected to Oklahoma’s attempt to “interfere with nationally uniform plan administration” with state stipulations about geographic standards for network drug plans, discounts for cost-sharing and what pharmacies had access to health plan networks.

The court agreed with the association, rejecting Oklahoma’s arguments that regulating third-party administrators — pharmacy benefit managers — was not the same as exerting state control over multi-state health care plans regulated by the federal government.

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Role of Pharmaceutical Care Management Association point of contention in Oklahoma, other states

More than 30 states and the District of Columbia sided with Oklahoma in the lawsuit. Many states have chafed at the power exerted by the pharmacy benefit managers and have sought to regulate some aspect of their involvement in health insurance, arguing that consumers need more choice in where to have prescriptions filled and small pharmacies need more opportunities to be included in networks.

“By passing laws like Oklahoma’s, States have repeatedly expressed their overwhelmingly bipartisan displeasure with the power of PBMs over their citizens’ healthcare decisions,” the appeals court said in its opinion this week.

“Our role is to answer whether the (Oklahoma) Act’s four challenged provisions veer into the regulatory lanes that Congress has reserved for itself … we conclude that they do.”

The court said states "have an avenue by which to meaningfully seek redress. They may approach Congress, the architect of ERISA and Medicare, to take up the mantle."

What's next for the case

Oklahoma could also appeal the decision to the U.S. Supreme Court.

A spokesman for Oklahoma Attorney General Gentner Drummond said Wednesday, “The office is reviewing the decision and will consider the best options for the State of Oklahoma." Drummond has been adding staff to enforce state laws targeting pharmacy benefit manager corporations.

The Pharmaceutical Care Management Association called the decision “a clear defeat of proposals that would result in a cumbersome, inefficient, and costly patchwork of potentially conflicting state-by-state benefit requirements.”

Jack Linehan, general counsel for the group, said the decision protects “employer-sponsored health coverage by promoting employers’ choice and flexibility over benefit design.”

Gov. Kevin Stitt vetoed the first version of the 2019 law, citing some of the reasoning as the appeals court ― that ERISA preempts state regulation of health care plans. He signed a compromise version later that year.

The state law was first challenged in federal court in Oklahoma City, where a judge ruled against provisions preempted by Medicare Part D but upheld others. The Pharmaceutical Care Management Association asked the 10th Circuit Court to strike down more of the law.

The Oklahoma Pharmacists Association, independent pharmacists and multiple local chambers of commerce across the state supported the bill, but pharmacy networks, big business and The State Chamber urged Stitt to veto it.

The president of Blue Cross/Blue Shield of Oklahoma warned at the time that the law “will raise health care costs for Oklahomans by hundreds of millions of dollars a year.”

Opponents of the law said that pharmacy benefit managers negotiate deep discounts based on scale and that those discounts wouldn’t be possible if all pharmacies were part of the network.

This article originally appeared on Oklahoman: Oklahoma pharmacy law struck down by appeals court