Attorney General Ellison leads bipartisan coalition to regulate abusive practices of pharmacy benefit managers

Leads bipartisan coalition of 35 AGs in amicus brief in support of Oklahoma’s laws, similar to Minnesota’s, regulating abusive behavior of PBMs

October 18, 2022 (SAINT PAUL) — Minnesota Attorney General Keith Ellison today joined a bipartisan coalition of 35 attorneys general from across the country in an amicus brief to the Tenth Circuit Court of Appeals supporting Oklahoma’s laws that regulate abusive behavior of pharmacy benefit managers (PBMs). Oklahoma’s laws regulating PBMs are similar to Minnesota’s. Oklahoma’s laws are being challenged in the latest of a string of lawsuits by the PBM industry’s national lobbying association, Pharmaceutical Care Management Association(PCMA). 

Attorney General Ellison and the bipartisan coalition he led seek to protect Minnesota consumers by assuring that Minnesotaand all states can regulate PBMs. As Attorney General Ellison and the coalition write in their amicus brief to the Tenth Circuit, “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. To advance these interests, nearly all states regulate pharmacy benefit managers.” PCMA’s broad approach to federal preemption, however, would “severely impede states’ abilities to protect their residents and potentially upend licensing and regulatory structures in nearly every state.” 

Today marks the second bipartisan, multistate coalition Attorney General Ellison has led to defend Minnesota’s and other states’ ability to regulate PBMs in the face of the industry’s lawsuits.  

“My job as Attorney General is to help people afford their lives and to protect them from abuse. But because of the high cost of prescription drugs, too many Americans are having to choose between affording their lives and affording to live,” Attorney General Ellison said. “One of the biggest drivers of the high cost of pharmaceutical drugs is the abusive practices of pharmacy benefit managers. That’s why many states like Minnesota and Oklahoma have taken common-sense first steps to regulate them. I led this broad, bipartisan coalition in support of Oklahoma, as I did before for North Dakota, because I won’t stand by and let the PBM industry undo the progress we’ve made so far when so much needs to be done to make lifesaving drugs affordable to all Americans.” 

“The fact that a bipartisan coalition of 34 Republican and Democratic attorneys general came together to support Oklahoma in this fight is another sign that there is broad support across the country for regulating PBMs and bringing down the unconscionably high price of prescription drugs. We know what needs to be done: we need the political will to do it,” Attorney General Ellison concluded. 

The case in which Attorney General Ellison filed the brief today, PCMA v. Mulready, is the second case to reach a federal court of appeals since the U.S. Supreme Court made clear in PCMA v. Rutledge in 2020 that PBMs cannot evade state consumer protection regulations under the cloak of ERISA preemption. In Rutledge, the Supreme Court held that ERISA preemption is limited to the questions of who receives benefits and what benefits they receive, rejecting PCMA’s challenge to Arkansas’s pharmacy-reimbursement regulations. Attorney General Ellison was part of a bipartisan coalition of 46 attorneys general who supported Arkansas in an amicus brief to the Supreme Court.  

Following Rutledge, in 2021 Attorney General led another bipartisan coalition of 34 attorneys general in an amicus brief to the Eighth Circuit Court of Appeals in support of North Dakota’s laws regulating PBMs. In that case, PCMA v. Wehbi, the Eighth Circuit agreed with the states that ERISA did not prohibit states from generally regulating PBMs to protect consumers, such as by prohibiting PBMs from imposing conditions on pharmacies that reduced consumer choice and pharmacy access. The court also rejected PCMA’s sweeping approach to Medicare preemption and upheld several of North Dakota’s laws as applied to Part D health plans. 

Abusive business practices of PBMs  

PBMs are intermediaries in the prescription pharmaceutical industry between prescription-drug plans, pharmacies, and drug manufacturers. PBMs profit from fees charged to market participants and by reimbursing pharmacies less than the PBM is paid by plans for dispensing medications. PBMs have imposed self-serving protections that reduce competition, limit prescription medication access, and impose various confidentiality requirements. For example, 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. 

These business practices have harmed consumers, pharmacies, and states. Rural and independent pharmacies have especially struggled to survive when PBMs impose financially unsustainable conditions. The PBM industry, however, reaps hundreds of billions of dollars annually. 

PBMs have been largely unregulated for decades. States like Minnesota, Oklahoma, North Dakota, and others have stepped up and paved the way for PBM regulation to protect consumers and pharmacies. 

Regulating PBMs in Minnesota 

In 2019, the Minnesota Legislature passed the Minnesota Pharmacy Benefit Manager Licensure and Regulation Act. Its provisions are similar to Oklahoma’s laws regulating PBMs that Attorney General Ellison and the bipartisan coalition are supporting in this case. Since the law’s passage in 2019, the Minnesota Department of Commerce has reached settlements with four PBMs to protect consumers, and, with the assistance of the Attorney General’s Office, is currently pursuing enforcement action against the nation’s largest PBM based on allegations that it is illegally offering incentives to fill prescriptions at PBM-affiliated pharmacies. 

Regulating the abusive practices of pharmacy benefit managers was a key recommendation of Attorney General Ellison’s 2019-20 Advisory Task Force on Lowering Pharmaceutical Drug Prices. The task force’s February 2020 report identified the opacity of and conflicts of interest present in the business models of pharmacy benefit managers (PBMs) as one of the top factors driving the high cost of pharmaceutical drugs. Among the report’s 14 recommendations are building on the 2019 legislation to robustly regulate PBMs and their business practices.  

Background to Oklahoma case 

In the absence of meaningful federal regulations, Oklahoma — like many states — passed laws regulating PBM-pharmacy interactions. The Oklahoma laws at issue address two key components of PBM business practices: ensuring pharmacy-network adequacy and curtailing PBM’s self-dealing. More specifically, Oklahoma requires PBM’s pharmacy networks to have sufficient geographic coverage, allow all in-network pharmacies to receive preferred-participation status if they meet the PBM’s criteria for that status, prohibit network exclusion solely because a pharmacy employee may be on probationary status, and prohibit PBMs from incentivizing the use of particular (typically PBM-affiliated) in-network pharmacies. 

In Mulready, PCMA sued various Oklahoma officials, alleging that federal law (ERISA and Medicare Part D) preempts Oklahoma’s laws. The district court held that federal law did not preempt the state laws. PCMA appealed to the Tenth Circuit, which will decide whether ERISA or Medicare preempts Oklahoma’s laws.  

Joining Attorney General Ellison in the bipartisan brief are the attorneys general of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia, and Washington.