Attorney General Ellison leads bipartisan coalition in support of regulating pharmacy benefit managers

Leads 34 AGs in amicus brief in support of North Dakota laws, similar to Minnesota’s, regulating abusive behavior of PBMs

July 1, 2021 (SAINT PAUL) — Minnesota Attorney General Keith Ellison today led a bipartisan coalition of 34 attorneys general from across the country in an amicus brief to the Eighth Circuit Court of Appeals in support of North Dakota laws that regulate abusive behavior of pharmacy benefit managers (PBMs), which have been challenged by the PBM industry’s national lobbying association. 

The case, Pharmaceutical Care Management Association (PCMA) v. Wehbi, was sent back to the Eighth Circuit by the U.S. Supreme Court, which vacated the Eighth Circuit’s previous decision that ERISA preempts North Dakota’s laws regulating PBMs. The Supreme Court directed the Eighth Circuit to reconsider the case in light of its December 2020 decision in Pharmaceutical Care Management Association v. Rutledge. In Rutledge, the Supreme Court rejected a prior Eighth Circuit decision that ERISA preempted Arkansas’ regulation of PBMs and held that Arkansas did have authority to impose various cost regulations on PBMs: for example, Arkansas could require PBMs to reimburse pharmacies for at least the amount that pharmacies pay to acquire a drug, as other states do. Attorney General Ellison was one of 46 attorneys general who previously supported Arkansas in Rutledge in an amicus brief to the Supreme Court. 

Attorney General Ellison and the bipartisancoalition write in today’s amicus in defense of North Dakota’s laws that they “have an interest in preserving states’ authority to regulate companies doing business in their states and in protecting their residents’ access to healthcare and shielding them from 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.” 

“My job as Attorney General is to help people afford their lives and live with dignity and respect. 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 North Dakota have taken common-sense first steps to regulate them. I led this coalition in support of 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 33 Republican and Democratic attorneys general came together to support North Dakota 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. I’m proud to have pulled together this coalition and look forward to continuing to work with all willing attorneys general to help all Americans afford their lives and afford to live,” Attorney General Ellison concluded. 

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 reimbursement rates to pharmacies, maximize rebates to PBMs, and impose various confidentiality requirements. For example, PBMs have tried to prevent pharmacies from even telling consumers the actual cost of drugs.  

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 and are still largely unregulated at the federal level. States like 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 North Dakota’s laws regulating PBMs that Attorney General Ellison and the bipartisan coalition are supporting in this case against the challenge from the PBM industry association. 

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 North Dakota case

In the absence of meaningful federal regulations, North Dakota — like many states — passed laws regulating PBM-pharmacy interactions. The North Dakota laws at issue address several PBM business practices, including regulating certain fees that PBMs can charge pharmacies, what pharmacists may discuss with patients, and which drugs pharmacists are authorized to dispense.  

In Wehbi, PCMA sued various North Dakota officials, alleging that federal law (ERISA and Medicare Part D) preempt these laws. On cross-motions for summary judgment, the district court rejected nearly all of PCMA’s arguments and ruled in North Dakota’s favor. PCMA appealed to the Eighth Circuit, which held that ERISA preempted North Dakota’s laws. The U.S. Supreme Court has vacated that decision in light of its decision in Rutledge. On remand, the Eighth Circuit will decide whether ERISA or Medicare preempts North Dakota’s laws. 

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

A copy of the amicus brief is available on Attorney General Ellison’s website.