Pension & Benefits News Oklahoma will enforce PBM law despite pending litigation
Friday, September 11, 2020

Oklahoma will enforce PBM law despite pending litigation

By Pension and Benefits Editorial Staff

The Oklahoma Insurance Department (OID) has announced that it will proceed with enforcement of the Patient’s Right to Pharmacy Choice Act, excluding Medicare Advantage and Medicare Part D plans per a federal district court’s order in Pharmaceutical Care Management Association v. Glen Mulready and Oklahoma Insurance Department. The OID Commissioner has determined that enforcement will begin for violations occurring on and after September 1, 2020.

2019 legislation. The Patient’s Right to Pharmacy Choice Act, which was enacted in May 2019, establishes minimum and uniform access by patients to pharmacy providers. Among other things, the Act provides for network adequacy, transparency and uniformity. A pharmacy benefit manager (PBM) is prohibited from requiring patients to use pharmacies that are directly or indirectly owned by the PBM and cannot include a list of providers unless the PBM lists all providers in its service area. In addition, a PBM or representative of a PBM is prohibited from providing a smaller reimbursement to pharmacies under common ownership, denying a pharmacy the opportunity to participate in a network if the pharmacy accepts the terms and conditions of the network, or imposing a monetary disadvantage to out-of-network pharmacies. The OID Commissioner is tasked with the responsibility to enforce the Act. The law directs the Commissioner to establish the Prescription Access and Affordability Advisory Committee to review complaints, hold hearings, and penalize violations, including license suspension, license revocation, or a fine not to exceed $10,000.

Lawsuit placed on hold. In October 2019, the Pharmaceutical Care Management Association (PCMA), an association of pharmacy benefits managers, filed suit in the federal district court for the Western District of Oklahoma just before the Act’s November 1 effective date, arguing ERISA preempts portions of the state law. Due to a pending U.S. Supreme Court case that involves similar ERISA preemption issues, the parties had agreed to hold the Oklahoma case in abeyance and the district court issued a stay until a ruling in Pharmaceutical Care Management Association v. Rutledge. In January 2020, the Supreme Court granted certiorari in that case to decide whether the Eighth Circuit erred in holding that Arkansas’s statute regulating PBMs’ drug-reimbursement rates, which is similar to laws enacted by a substantial majority of states, is preempted by ERISA, in contravention of the Court’s precedent that ERISA does not preempt rate regulation. In its response brief, PCMA argues that “Act 900 ‘relates to’ ERISA plans, and is preempted, because it regulates central matters of plan administration, interferes with nationally uniform plan administration, and impermissibly refers to ERISA plans. In doing so, it contravenes ERISA’s fundamental purpose of minimizing administrative costs to encourage the formation of benefit plans.”

Because of the COVID-19 pandemic, the Supreme Court postponed its April calendar, which included Rutledge (oral arguments are now set for October). Soon after the postponement, the Oklahoma Attorney General filed a motion to lift the stay in the Oklahoma case, arguing that “we no longer have certainty that a Supreme Court decision in Rutledge will issue by June, risking an indefinite abeyance of this action.” The motion also indicated that the need to begin enforcing the statute had changed because the state had received reports from constituents that certain PBMs were abusing their market power while the Act was not yet in force. In July 2020, the district court ruled the Commissioner could proceed with enforcement of a majority of the provisions of the Act. The PCMA appealed that ruling to the Tenth Circuit Court of Appeals and filed an emergency motion to stay enforcement of the Act. On August 17, 2020, the Tenth Circuit denied PCMA’s emergency motion. After consultation with the Oklahoma attorney general, the Commissioner determined that enforcement would proceed.


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