Pharm. Care Mgmt. Ass'n v. Mulready

598 F.Supp.3d 1200

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION, Plaintiff,

v.Glen MULREADY, in his official capacity as Insurance Commissioner of Oklahoma, and the Oklahoma Insurance Department, Defendants.

Case No. CIV-19-977-J

United States District Court, W.D. Oklahoma.

Signed April 4, 2022

Joe E. Edwards, Joel W. Harmon, Crowe & Dunlevy, Oklahoma City, OK, Andrew M. London, Dean Richlin, Kristyn M. DeFilipp, Foley Hoag LLP, Boston, MA, for Plaintiff.

Randall J. Yates, Crowe & Dunlevy, P.C., Tulsa, OK, Zachary P. West, Attorney General's Ofc., Oklahoma City, OK, for Defendants.

ORDER

BERNARD M. JONES, UNITED STATES DISTRICT JUDGE

Before the Court are the parties’ cross motions for summary judgment [Doc. Nos. 96 and 97].¹ The motions have been fully briefed. Based upon the parties’ submissions, the Court makes its determination.²

I. Background

In simple terms, health insurance plans design pharmacy benefits by determining, among other factors, what drugs are covered, where beneficiaries can obtain these drugs using their plan benefits, and any cost-sharing the plan member will be required to pay for the covered drug. The vast majority of health insurance plans providing drug benefits use a pharmacy benefit manager (PBM) to act as an intermediary in ensuring beneficiaries can use their drug benefits to obtain prescriptions. PBMs create pharmacy networks and then contract with pharmacies in those networks to provide prescriptions to beneficiaries. When a pharmacy dispenses the prescription, it then files a claim with the PBM. The PBM processes that claim and notifies the pharmacy how much the plan will pay and how much the beneficiary must pay. Afterwards, the PBM reimburses the pharmacy according to the contract between the PBM and the pharmacy. The contract between the PBM and the pharmacy determines the reimbursement rate, not the insurance plan. The PBM then bills the insurance plan according to its contract with the insurance plan, and the insurance plan pays the prescription benefit to the PBM.

Several states, including Oklahoma, have sought to regulate PBMs. In 2019, the Oklahoma Legislature passed the Oklahoma's Patient's Right to Pharmacy Choice Act (Act), Okla. Stat. tit. 36, § 6958, et seq. To compliment the Act, the Oklahoma Insurance Department enacted various regulations.

PCMA is the national trade association for PBMs, representing sixteen PBMs. In this case, PCMA challenges the Act and the related regulations.³ Specifically, PCMA alleges the Employment Retirement Income Security Act (ERISA) and Medicare Part D preempt the Act and related regulations and claims that the regulations were adopted in violation of the Oklahoma Administrative Procedures Act (OAPA). On July 9, 2020, the Court granted in part and denied in part PCMA's motion for preliminary injunction and enjoined enforcement of Okla. Stat. tit. 36, §§ 6961(A),(D) and Okla. Admin. Code 365:25-29-7.1(a)(3). PCMA and Defendants now each move for judgment as a matter of law.

II. Analysis

A. ERISA preemption

ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. 29 U.S.C. § 1144(a). "[A] state law relates to an ERISA plan if it has a connection with or reference to such a plan." Rutledge v. Pharm. Care Mgmt. Ass'n , ––– U.S. ––––, 141 S. Ct. 474, 479, 208 L.Ed.2d 327 (2020) (internal quotations and citation omitted).⁴ Regarding "connection with" preemption, laws that require providers to structure benefit plans in certain ways or bind plan administrators to specific rules for beneficiary status are preempted. See id. at 480. Further, "[a] state law may also be subject to pre-emption if acute, albeit indirect, economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage." Id. (internal quotations and citation omitted). However, "not every state law that affects an ERISA plan or causes some disuniformity in plan administration has an impermissible connection with an ERISA plan." Id. "[S]tate rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage" are not preempted. Id.

PCMA asserts the Act impermissibly dictates the design of ERISA plans by regulating the nature and scope of the plan's provider network and the programs an employee benefit plan may adopt to ensure network quality and integrity. Specifically, PCMA contends the Act's Any Willing Provider Provision, Okla. Stat. tit. 36, § 6962(B)(4) ; Retail-Only Pharmacy Access Standards, Okla. Stat. tit. 36, § 6961(A),(B) ; Affiliated Pharmacy Prohibition, Okla. Stat. tit. 36, § 6961(C) ; Probation-Based Pharmacy Limitation Prohibition, Okla. Stat. tit. 36, § 6962(B)(5) ; Network Provider Restriction Prohibition, Okla. Stat. tit. 36, § 6963(D) ; Cost Sharing Discount Provision, Okla. Stat. tit. 36, § 6963(E) ; and Promotional Materials Provision; Okla. Stat. tit. 36, § 6961(D),⁵ dictate network composition, cost-sharing differentials, and communications with beneficiaries and thereby directly affect the benefits a plan offers to plan members. PCMA contends that as a result these provisions have an impermissible connection with ERISA plans and are thereby preempted.

Upon review of the specific language of these provisions, the Court concludes that they do not have a "connection with" an ERISA plan. The Any Willing Provider Provision applies only to preferred network participation status of pharmacies that are already in the plan's pharmacy network and does not require a plan to accept any willing pharmacy into its pharmacy network. The Retail-Only Pharmacy Access Standards and Cost Sharing Discount Provision do not prohibit using mail-order pharmacies; the use of these pharmacies just does not count toward meeting the access standards, and the plan cannot restrict an individual's choice of an in-network pharmacy. The Affiliated Pharmacy Prohibition does not prohibit including affiliated pharmacies in the plan pharmacy network; the plan is just prohibited from requiring patients to use the affiliated pharmacies. The Probation-Based Pharmacy Limitation Prohibition addresses a pharmacy's contract, which is with the PBM and not the plan. The Network Provider Restriction Prohibition relates to pharmacies that are in-network providers and thus leaves the plan with options as to the composition of its in-network providers. While these provisions may alter the incentives and limit some of the options that an ERISA plan can use, none of the provisions forces ERISA plans to make any specific choices.

Regarding the Promotional Materials Provision, PCMA asserts the Act impermissibly prohibits plans from communicating their benefit design to beneficiaries by not allowing them to mention certain pharmacies without mentioning all pharmacies. The Act's Promotional Materials Provision, however, does not regulate benefit design disclosures to beneficiaries but regulates how PBMs can advertise its providers. This provision therefore does not relate to a central matter of plan administration nor undermine the uniform regulation of ERISA plans.

PCMA also asserts the Post-Sale Price Reduction Prohibition, Okla. Stat. tit. 36, § 6962(B)(6), and the Affiliated Pharmacy Price Match, Okla. Stat. tit. 36, § 6962(B)(3), impermissibly dictate the design of ERISA plans by regulating the programs an employee benefit plan may adopt to ensure network quality and integrity. While the Post-Sale Price Reduction Prohibition and the Affiliated Pharmacy Price Match will have some effect on the way PBMs pay and/or reimburse pharmacies, these provisions do not impermissibly dictate the design of ERISA plans by forcing the plans into making a specific choice.

Finally, PCMA contends the Act's Health Insurer Monitoring Requirement, Okla. Stat. tit. 36, § 6963(A),(B), is preempted by ERISA. Defendants assert PCMA lacks standing to challenge this provision because it imposes obligations exclusively upon a health insurer,⁶ and PCMA is made up exclusively of PBMs and does not contain any health insurers. PCMA asserts it has standing because complying with the insurers’ monitoring activities required by this provision causes harm to PBMs by creating an administrative burden on them. An administrative burden can constitute an injury in fact for standing purposes. See Okla. ex rel. Pruitt v. Sebelius , No. CIV-11-30-RAW, 2013 WL 4052610 at *8 (E.D. Okla. Aug. 12, 2013). However, PCMA only makes a conclusory allegation of administrative burden in relation to the Health Insurer Monitoring Requirement. Having reviewed the parties’ submissions, the Court finds that PCMA has not made a sufficient showing of injury and that PCMA lacks standing to raise an ERISA challenge to this provision.

Accordingly, the Court concludes the Act is not preempted by ERISA and Defendants are, therefore, entitled to summary judgment as to this claim.

B. Medicare Part D Preemption⁷

Medicare Part D incorporates the express preemption provision contained in Medicare Part C. See 42 U.S.C. § 1395w-112(g). Part C's preemption provision provides:

The standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations under this part.

42 U.S.C. § 1395w-26(b)(3). The Tenth Circuit has not addressed the scope of Medicare Part D, but other appellate courts have found preemption where "(1) Congress or the Centers for Medicare and Medicaid Services (CMS) has established ‘standards’ in the area regulated by state law; and (2) the state law acts ‘with respect to those standards.’ " Pharm. Care Mgmt. Ass'n v. Rutledge , 891 F.3d 1109, 1113 (8th Cir. 2018) ;⁸ see also Do Sung Uhm v. Humana , 620 F.3d 1134, 1148 n.20, 1157-58 (9th Cir. 2010). The standards need not conflict for preemption to occur. Rutledge , 891 F.3d at...