The Supreme Court will take a look at another challenge of the constitutionality of the Affordable Care Act, or Obamacare, in the fall.
WASHINGTON – The Supreme Court appeared skeptical Tuesday that states should be allowed to regulate prescription drug “middlemen,” even though their role affects more than 250 million Americans.
A majority of the court’s eight justices expressed concern that such interference in the prescription drug marketplace would subject pharmacy benefit managers to dozens of state laws – something a 1974 federal law was meant to preclude.
The case, which pits 45 states and independent pharmacies against the trade organization representing pharmacy benefit managers, has received little attention compared to another health care dispute the justices will consider in November: the third major challenge to the Affordable Care Act in eight years.
The states and pharmacies contend that pharmacy benefit managers – which process prescription drug claims and then reimburse pharmacies – should be subject to state regulations. Led by Arkansas, they say low reimbursement rates for generic drugs have caused thousands of independent pharmacies to close, particularly in rural areas.
On the other side is the Pharmaceutical Care Management Association, the trade group for benefit managers such as CVS/Caremark, OptumRX and Express Scripts. They say the Employee Retirement Income Security Act of 1974 preempts state laws such as the one Arkansas passed in 2015. The U.S. Court of Appeals for the 8th Circuit agreed with the trade group two years ago.
Ohio independent pharmacists accuse CVS Caremark of under-reimbursing them in the Ohio Medicaid program. (Photo: Chris Hatch/ASSOCIATED PRESS)
During Tuesday’s oral argument, held by telephone during the COVID-19 pandemic, Chief Justice John Roberts acknowledged that Arkansas seeks to regulate drug prices, not the insurance plans themselves. But he said the law appears to interfere with federal jurisdiction.
“At the end of the day, all this might have an impact on drug prices,” Roberts said. “But it seems to me that it’s very different, and those differences really do go to what ERISA is trying to regulate.”
Associate Justice Elena Kagan noted there are “45 different states that have passed all kinds of laws” regarding pharmacy benefit managers.
“I’m wondering why that doesn’t raise exactly the specter that the drafters of ERISA were concerned about,” she said.
The case has flown under the radar as the Supreme Court prepares to hear a challenge to the Affordable Care Act next month. A coalition of states led by Texas contends that the law is unconstitutional because Congress in 2017 eliminated the tax penalty that enforced the law’s mandate to buy health insurance.
By the time that case is heard the week after Election Day, President Donald Trump’s nominee to fill the late Associate Justice Ruth Bader Ginsburg’s seat – federal appeals court Judge Amy Coney Barrett – may be on the bench.
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The Trump administration has sided with Arkansas in the prescription drug dispute. It says states should be able to regulate the rates that pharmacy benefits managers reimburse pharmacies.
The case comes to the court at a time when drug prices are an issue in the presidential and congressional elections. Over the past 20 years, spending on drugs has risen by 330%, compared with a 208% increase in health care costs.
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