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Kansas loses in pharmacy benefit manager case

Kansas last week came out on the short end of a federal appeals court decision that found regulations on pharmacy benefit managers in Oklahoma were preempted by federal law.

The 10th U.S. Circuit Court of Appeals last week found in favor of the Pharmaceutical Care Management Association, which sued the state to block the law.

The lawsuit raised questions of whether federal law preempts the states’ authority to regulate the business practices of pharmacy benefit managers, also known as PBMs.

The court blocked four parts of the Oklahoma law, which was passed with the intention of helping small pharmacies draw more customers covered by health plans.

“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.

“Our role is to answer whether the act’s four challenged provisions veer into the regulatory lanes that Congress has reserved for itself.

“We conclude that they do,” the court said.

The appeals court said the states could go to Congress to address any concerns about how pharmacy benefit managers are regulated.

Pharmacy benefit managers are intermediaries in the prescription pharmaceutical industry between prescription drug plans, pharmacies and drug manufacturers.

Attorneys general from 34 states, including former Kansas Attorney General Derek Schmidt, joined together to defend the Oklahoma law in a brief filed with the appeals court.

The attorneys general argued that pharmacy benefit managers are “abusive” because they “profit from fees charged to market participants and by reimbursing pharmacies less than the PBM is paid by plans for dispensing medications.”

They contend that PBMs “have imposed self-serving protections that reduce competition, limit prescription medication access, and impose various confidentiality requirements.”

“States have an interest in preserving states’ authority to regulate companies doing business in their states, protecting their residents’ access to healthcare, and curbing abusive business practices,” the attorneys general told the appellate court.

The attorneys general said PBMs have tried to force consumers to use PBM-affiliated pharmacies at the “expense of independent, often more convenient, pharmacies, by giving consumers preferential rates if they use a PBM-affiliated pharmacy, or by denying coverage at non-affiliated pharmacies altogether.”

Kansas Employers for Affordable Healthcare, a coalition of employers that seeks to protect employer-sponsored health benefits, said the court’s decision would benefit employees.

“We believe this decision helps protect employer-sponsored healthcare by safeguarding employers’ ability to design prescription drug benefits that best meet the needs of their employees and families,” said Andrew Wiens, the group’s executive director.

The Pharmaceutical Care Management Association applauded the court ruling as well.

“The court’s decision supports the interests of employers, as well as unions and Medicare Part D plans, who seek to follow a common set of legal requirements for the benefits they provide to millions of Americans — a clear defeat of proposals that would result in a cumbersome, inefficient, and costly patchwork of potentially conflicting state-by-state benefit requirements,” the association said in a statement.

Meanwhile, pharmacy organizations criticized the ruling, saying it did not adhere to a Supreme Court decision that they say cleared a path for regulating pharmacy benefit managers.

Here’s more coverage from the Journal Record, a business news publication in Oklahoma City.


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