AHF Cheers Supreme Court ‘Rutledge’ Ruling Allowing States to Regulate PBMs

In Featured, News, Pharmaceutical by Ged Kenslea

The Supreme Court of the United States issued a decision today that allows state legislatures to regulate abuses of corporate healthcare middlemen, called Pharmacy Benefit Managers (PBMs)

WASHINGTON (December 10, 2020) AIDS Healthcare Foundation (AHF) welcomed a unanimous decision of the Supreme Court of the United States (SCOTUS) today.  in Rutledge v. Pharmaceutical Care Management Association, the Court recognized that state legislatures have important powers to regulate abuses of corporate healthcare middlemen, called Pharmacy Benefit Managers (PBMs).  (See SCOTUS ‘Rutledge’ ruling)  PBMs sit between healthcare plans and pharmacies – They are the bridge that connects pharmacies to health plans, adjudicates pharmacy claims and administers the pharmacy network for the plans.

“The court in a unanimous decision said federal law doesn’t block states from responding to PBM abuses that harm patients and independent community pharmacies. PBMs force patients into closed networks and mandatory mail order, and steer patients into PBMs’ own pharmacy constructs,” said Tom Myers, Chief of Public Affairs and General Counsel for AHF. “PBMs can exercise enormous economic leverage over pharmacies. In this case, the court upheld an Arkansas law that prevents PBMs from forcing pharmacies to lose money on individual prescriptions.”


“In the last decade, many PBMs have merged with other PBMs, as well as health plans and pharmacy chains, creating megafirms that are rife with self-dealing and anticompetitive conduct,” said Laura Boudreau, Chief of Operations/Risk Management and Quality Improvement for AHF.  “In Rutledge, the Court shined a light on one abusive practice – PBMs’ use of secret, arbitrary ‘MAC lists’ (maximum allowable costs) that PBMs use to pay pharmacies – a practice that can force pharmacies to accept payments below the pharmacies’ actual costs of the drugs they dispense.  This predatory practice has driven independent pharmacies out of business, to the harm of the patients they serve.”


In Rutledge, a unanimous Court brought some degree of sanity to this situation by recognizing that a simple state law that merely “requires PBMs to reimburse pharmacies for prescription drugs at a rate equal to or higher than the pharmacy’s acquisition cost” is permissible under federal laws that govern employee-sponsored health plans.


Attorneys general from 45 states filed briefs opposing the PBM industry.  AHF filed a friend of the court brief in the case supporting the states and is delighted in the outcome of the case. (See: AHF March 4, 2020 press release on its amicus brief).


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