SCPC Applauds Supreme Court Ruling in Favor of State Regulation of Pharmacy Benefit Managers

DATE: December 15, 2020

Rutledge v. PCMA is an Important Step Toward Limiting PBM Oligopolistic Business Practices

Washington, DC – The Senior Care Pharmacy Coalition (SCPC) today praised the recent Supreme Court decision, Rutledge v. Pharmaceutical Care Management Association, which upheld an Arkansas law that regulates pharmacy benefit managers (PBMs) to protect long-term care (LTC) and other independent pharmacies from unreasonably low reimbursement rates.

“This decision is an important win – not just for LTC pharmacies – but also for patients and for free and fair competition,” said Alan Rosenbloom, President and CEO of SCPC. “Predatory PBM business practices undermine and exploit independent LTC pharmacies and ultimately hurt patients.”

Health insurers and their affiliated PBMs frequently use unfair market power to pay LTC pharmacies less than acquisition costs for prescription drugs. SCPC has long decried the opaque, oligopolistic, and predatory business practices of PBMs. In 2015, SCPC commissioned a study demonstrating that PBM reimbursement using “Maximum Allowable Cost” (MAC) pricing – the same methodology at issue in Rutledge – resulted in PBMs reimbursing LTC pharmacies less than acquisition costs for more than 60% of prescriptions.

The Supreme Court ruled that the Employee Retirement Security Act (ERISA) does not pre-empt state laws that regulate PBMs to assure that reimbursement rates are equal to or greater than a pharmacy’s wholesale cost to acquire a drug, to assure effective appeal rights for pharmacies, and to recognize that pharmacies do not have to dispense medications at a loss.

Rosenbloom noted that the decision “is an important step – but only a step – toward fair treatment of independent LTC pharmacies.” The decision concerns commercial insurance plans but does not extend to Medicare Part D Plans (PDPs). The same practices that warranted the Arkansas law are rife in PDPs, which are administered by the same PBMs active in the commercial market. “The federal government should rein in the same practices in Medicare Part D that compelled Arkansas to act,” Rosenbloom said.

The Supreme Court did not mention the oligopolistic nature of the prescription drug market or the degree to which PBMs act as the spiders at the center of anticompetitive webs. Health care conglomerates dominate the field, with integrated corporations offering health and prescription drug insurance plans, managing those plans through affiliated PBMs, selling prescription drugs through affiliated retail, mail order, and specialty pharmacies, and operating their own health care clinics.  With PBMs at the hub, these conglomerates undermine competition, deprive consumers of reasonable options, and force unaffiliated competitors out of business.

“The health care conglomerates that control an overwhelming majority of the PBM market have a long history of limiting competition and exploiting consumers,” added Rosenbloom. “The largest PBMs – Caremark, Optum and ExpressScripts – all have parent companies that are major players in the insurance, retail pharmacy, mail-order pharmacy and specialty pharmacy spaces. They use their PBM market practices, combined with the purchasing power of their pharmacies, to competitively disadvantage others.”

“It is our hope that the Supreme Court’s decision prompts the federal government – both Congress and antitrust regulators – to take a closer look at PBM practices in the Part D program and act as Arkansas has acted to protect competition, support independent LTC pharmacies, and assure that patients have choices in the pharmacy marketplace,” concluded Rosenbloom.

# # #

The Senior Care Pharmacy Coalition (SCPC) is the only national organization exclusively representing the interests of LTC pharmacies. Its members operate in all 50 states and serve 850,000 patients daily in skilled nursing and assisted living facilities across the country. Visit seniorcarepharmacies.org  to learn more.