On August 15, 2023, the Tenth Circuit issued its much-anticipated decision in PCMA v. Mulready, rejecting Oklahoma's position that its pharmacy network requirements were not preempted by ERISA.1 See our prior alert here. Mulready has been closely watched by plan sponsors, pharmacy benefit managers, health insurance issuers, and third-party administrators because its outcome touches on not only state regulation of pharmacy benefit managers but also preemption under the Employee Retirement Income Security Act ("ERISA") more broadly. Below, we provide an overview of Mulready and discuss what may happen next.
ERISA Preemption
ERISA's broad preemption language has historically prevented states from regulating ERISA-covered plans if the state law included an impermissible reference to or had an impermissible connection with the ERISA-covered plan. The courts have found that an impermissible reference to an ERISA plan arises when the state law directly regulates the plan by its terms or where the existence of the ERISA plan is necessary for the operation of the state law. On the other hand, an impermissible connection with a plan can arise when the state law dictates the benefit design of the plan, upsets nationally uniform plan administration, or imposes parallel or additional requirements on central matters of plan administration governed by ERISA. The Supreme Court most recently refined its preemption jurisprudence in Rutledge2in holding that a state law that regulated PBM costs, thereby imposing indirect economic burdens on ERISA-covered plans, was not preempted because the added economic burden did not bind plan sponsors to a certain benefit design.
Background
In Mulready, PCMA (the Pharmaceutical Care Management Association) challenged an Oklahoma law that regulated PBMs in various ways, arguing that the law was preempted by ERISA.3 In its decision, the federal district court in Oklahoma found that none of the Oklahoma law provisions were preempted by ERISA. The district court's opinion, which lacked significant detail, characterized each of the provisions of the Oklahoma law as either unrelated to an ERISA plan because the law is directed at PBMs or as simply altering the incentives ERISA plans face without dictating plan design, analogizing the Oklahoma law's pharmacy network provisions to the cost regulation at issue in Rutledge.
PCMA appealed the district court's decision to the Tenth Circuit. The appeal focused on four provisions of the Oklahoma law...
