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Rutledge v. Pharmaceutical Care Management Association

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Supreme Court of the United States
Rutledge v. Pharmaceutical Care Management Association
Term: 2020-2021
(Originally 2019-2020)
Important Dates
Argument: October 6, 2020
(Postponed from April 27, 2020)
Decided: December 10, 2020
Outcome
Reversed and remanded
Vote
8-0
Majority
Chief Justice John G. Roberts • Clarence Thomas • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan • Neil Gorsuch • Brett Kavanaugh
Concurring
Clarence Thomas


Rutledge v. Pharmaceutical Care Management Association is a case argued before the Supreme Court of the United States on October 6, 2020, during the court's October 2020-2021 term. The case came on a writ of certiorari to the United States Court of Appeals for the 8th Circuit.[1]

In a unanimous decision, the court reversed the judgment of the 8th Circuit and remanded the case back to the lower court for further proceedings, holding that Arkansas’ Act 900 is not preempted by ERISA.[2] Justice Sonia Sotomayor delivered the majority opinion of the court. Justice Clarence Thomas filed a concurring opinion. Justice Amy Coney Barrett took no part in the consideration or decision of the case. Click here for more information about the ruling.

Oral argument for Rutledge v. Pharmaceutical Care Management Association was initially scheduled for April 27, 2020, during the court's October 2019-2020 term. However, the U.S. Supreme Court announced on April 3 that it was postponing the eight oral arguments originally scheduled during its April sitting. In a press release, the court said the delay was "in keeping with public health guidance in response to COVID-19."[3] COVID-19 is the abbreviation for coronavirus disease 2019, caused by SARS-CoV-2.

HIGHLIGHTS
  • The case: In 2015, the Arkansas General Assembly passed a state law including mandates for pharmacy reimbursement for drug costs, new requirements for pharmacy benefits managers' updates to maximum allowable cost lists, and administrative appeal procedures. The Pharmaceutical Care Management Association brought action on behalf of its pharmacy benefits manager members, claiming that the law was preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and Medicare Part D, and was unconstitutional. The district court held that the law was preempted by ERISA, was not preempted by Medicare Part D, and was not unconstitutional. On appeal, the 8th Circuit affirmed in part and reversed in part the district court's decision, and remanded the case for entry of judgment in favor of the Pharmaceutical Care Management Association.
  • The issue: Whether the 8th Circuit erred in holding that Arkansas’ statute regulating pharmacy benefit managers’ drug-reimbursement rates, which is similar to laws enacted by a substantial majority of states, is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), in contravention of the Supreme Court’s precedent that ERISA does not preempt rate regulation.[1]
  • The outcome: The court reversed the 8th Circuit's ruling and remanded the case back for further proceedings, holding that Arkansas’ Act 900 is not pre-empted by ERISA.[2]


    • You can review the lower court's opinion here.[4]

    Timeline

    The following timeline details key events in this case:

    Background

    In 2015, the Arkansas General Assembly passed a state law, Ark. Code § 17-92-507, attempting to govern the conduct of pharmacy benefits managers and to address the state-wide trend of fewer independent and rural area-serving pharmacies, amending the state's then-existing law on maximum allowable cost lists.[4] The law included mandates regarding pharmacy reimbursement for drug costs, new requirements for pharmacy benefits managers' updates to maximum allowable cost lists, and administrative appeal procedures.[5]

    The Pharmaceutical Care Management Association brought action on behalf of its pharmacy benefits manager members, claiming that the Arkansas state law was unconstitutional and was preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and Medicare Part D.[6][7] The district court agreed that relevant portions of the law were preempted by ERISA. The district court found that Medicare Part D did not preempt the law, and found that the law was not unconstitutional based on any of the Pharmaceutical Care Management Association's claims. The Pharmaceutical Care Management Association appealed the Medicare Part D ruling and the State of Arkansas cross-appealed the ERISA ruling.[4]

    The United States Court of Appeals for the 8th Circuit affirmed the district court's ruling regarding the Employee Retirement Income Security Act of 1974, reversed the Medicare Part D ruling, and remanded the case for entry of judgment in favor of the Pharmaceutical Care Management Association.[4]

    Definitions

    ERISA

    The following quotation is sourced from the U.S. Department of Labor's definition of ERISA:

    “ The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.[8][9] ”

    Ark. Code § 17-92-507

    The following quotation is sourced from the Arkansas Code:

    “ The Act mandates that pharmacies be reimbursed for generic drugs at a price equal to or higher than the pharmacies' cost for the drug based on the invoice from the wholesaler. It did this by defining "pharmacy acquisition cost" as the amount charged by the wholesaler as evidenced by the invoice. Ark. Code Ann. § 17–92–507(a)(6). The Act further imposes requirements on pharmacy benefits managers in their use of the maximum allowable cost lists by making them update the lists within at least seven days from the time there has been a certain increase in acquisition costs. Id. § 17–92–507(c)(2). The Act also contains administrative appeal procedures, id. § 17–92–507(c)(4)(A)(i), and allows the pharmacies to reverse and re-bill each claim affected by the pharmacies' inability to procure the drug at a cost that is equal to or less than the cost on the relevant maximum allowable cost list where the drug is not available "below the pharmacy acquisition cost from the pharmaceutical wholesaler from whom the pharmacy or pharmacist purchases the majority of prescription drugs for resale." Id. § 17–92–507(c)(4)(C)(iii). Finally, the Act contains a "decline-to-dispense" option for pharmacies that will lose money on a transaction. Id. § 17–92–507(e).[5][9] ”

    Questions presented

    The petitioner presented the following questions to the court:

    Questions presented:
    • Whether the 8th Circuit erred in holding that Arkansas’ statute regulating pharmacy benefit managers’ drug-reimbursement rates, which is similar to laws enacted by a substantial majority of states, is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), in contravention of the Supreme Court’s precedent that ERISA does not preempt rate regulation.[1]

    Outcome

    In a unanimous decision, the court reversed the judgment of the 8th Circuit and remanded the case back to the lower court for further proceedings, holding that Arkansas’ Act 900 is not preempted by ERISA.[2] Justice Sonia Sotomayor delivered the majority opinion of the court. Justice Clarence Thomas filed a concurring opinion. Justice Amy Coney Barrett took no part in the consideration or decision of the case.

    Opinion

    In her opinion, Justice Sotomayor wrote:[2]

    “ Arkansas’ Act 900 regulates the price at which pharmacy benefit managers reimburse pharmacies for the cost of drugs covered by prescription-drug plans. The question presented in this case is whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. §1001 et seq., pre-empts Act 900. The Court holds that the Act has neither an impermissible connection with nor reference to ERISA and is therefore not pre-empted.[9] ”
    —Justice Sonia Sotomayor

    Concurring opinion

    Justice Clarence Thomas filed a concurring opinion. In his concurring opinion, Justice Thomas wrote:[2]

    “ I join the Court's opinion in full because it properly applies our precedents interpreting the pre-emptive effect of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §1144.


    I write separately because I continue to doubt our ERISA pre-emption jurisprudence. Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 327 (2016) (THOMAS, J., concurring). The plain text of ERISA suggests a two-part pre-emption test: (1) do any ERISA provisions govern the same matter as the state law at issue, and (2) does that state law have a meaningful relationship to ERISA plans? Only if the answers to both are in the affirmative does ERISA displace state law. But our precedents have veered from the text, transforming §1144 into a "vague and 'potentially bound-less' ... 'purposes and objectives' pre-emption" clause that relies on "generalized notions of congressional purposes." Wyeth v. Levine, 555 U.S. 555, 587 (2009) (THOMAS, J., concurring in judgment). Although that approach may allow courts to arrive at the correct result in individual cases, it offers little guidance or predictability. We should instead apply the law as written.[9]

    		”
    —Justice Clarence Thomas

    Text of the opinion

    Read the full opinion here.


    Oral argument

    Audio

    Audio of oral argument:[10]



    Transcript

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 SCOTUSblog, "Rutledge v. Pharmaceutical Care Management Association," accessed January 13, 2020
    2. ↑ 2.0 2.1 2.2 2.3 2.4 Supreme Court of the United States, "Rutledge v. Pharmaceutical Care Management Association: Opinion of the Court," decided December 10, 2020
    3. ↑ U.S. Supreme Court, "Press release from April 3, 2020," accessed April 3, 2020
    4. ↑ 4.0 4.1 4.2 4.3 The United States Court of Appeals for the Eighth Circuit, "Pharm. Care Mgmt. Ass'n v. Rutledge," decided June 8, 2018
    5. ↑ 5.0 5.1 Ark. Code § 17-92-507, "Section 17-92-507 - Maximum allowable cost lists," accessed January 13, 2020
    6. ↑ Cornell Law School Legal Information Institute, "Preemption," accessed January 13, 2020
    7. ↑ Investopedia, "Medicare Part D," accessed January 13, 2020
    8. ↑ U.S. Department of Labor, "ERISA," accessed January 13, 2020
    9. ↑ 9.0 9.1 9.2 9.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    10. ↑ Supreme Court of the United States, "Oral Argument - Audio," accessed October 12, 2020
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