Attorney General Bonta Urges Supreme Court to Uphold States’ Authority to Regulate Abusive Behavior of PBMs

OAKLAND - California Attorney General Rob Bonta today joined a bipartisan coalition of 32 attorneys general in asking the U.S. Supreme Court to rule on states’ authority to regulate pharmacy benefit managers (PBMs). In an amicus brief to the court, the coalition asks the court to grant Oklahoma’s request to review a decision from the U.S. Court of Appeals for the Tenth Circuit, which held that federal laws preempt Oklahoma laws that regulate PBMs.

“It is simply unacceptable that Americans cannot afford lifesaving drugs due to pharmaceutical prices that are soaring at an alarming rate,” said Attorney General Bonta. “States have the responsibility to regulate these deliberate, unfair, and deceptive pricing tactics set by PBMs that allow them to line their own pockets at the expense of consumers.”

PBMs are intermediaries in the prescription pharmaceutical industry between prescription-drug plans, pharmacies, and drug manufacturers. Among the ways PBMs profit are through 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 that limit transparency.

PBMs have been largely unregulated for decades. In the absence of federal regulation, states have stepped up to protect consumers and pharmacies. Like many states, Oklahoma regulates PBM-pharmacy interactions. The Oklahoma laws at issue aim to ensure adequate pharmacy networks and curtail self-dealing among PBMs. Oklahoma requires PBM pharmacy networks to have sufficient geographic coverage and prevents PBMs from denying preferred participation status to any pharmacy willing to accept the terms and conditions the PBM established for having that status. PBMs further cannot exclude a pharmacy from a network solely because of a pharmacy employee’s probationary status. Nor can PBMs steer consumers to particular (typically PBM-affiliated) in-network pharmacies. In Pharmaceutical Care Management Association (PCMA) v. Mulready, PCMA sued Oklahoma officials, alleging that federal laws (ERISA and Medicare Part D) preempt Oklahoma’s laws. The district court rejected PCMA’s claims, but last summer the Tenth Circuit reversed, holding that ERISA and Medicare preempt Oklahoma’s laws. Oklahoma has now asked the U.S. Supreme Court to review the case.

In the brief, the coalition argue that the case presents important questions of federal law that need clarity from the court, noting that the Tenth Circuit’s decision conflicts with the Supreme Court’s decision in PCMA v. Rutledge and with decisions in similar cases from the Eighth Circuit. In 2021, a bipartisan coalition of 34 attorneys general filed an amicus brief to the Eighth Circuit to support North Dakota’s PBM regulations. In that case, the Eighth Circuit ultimately agreed with the states that ERISA did not prohibit states from generally regulating PBMs to protect consumers, and the court rejected PCMA’s sweeping approach to Medicare preemption.

Attorney General Bonta continues to advocate for state regulation of PBMs and other aspects of the healthcare industry. In January 2023, Attorney General Bonta filed a lawsuit against the nation's largest insulin makers for driving up the cost of the lifesaving drug through unlawful, unfair, and deceptive business practices in violation of California's Unfair Competition Law. In October 2022, Attorney General Bonta joined a coalition of 35 attorneys general in filing an amicus brief in the U.S. Court of Appeals for the Tenth Circuit in support of Oklahoma’s authority to regulate PBMs in PMCA v. Mulready. 

Joining Attorney General Bonta in today’s bipartisan brief are the attorneys general of Arizona, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Virginia, Washington, and the District of Columbia.

A copy of the brief can be found here.