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In a blow to pharmacy benefit managers, the U.S. Supreme Court ruled that an Arkansas law can be used to regulate these controversial middlemen in the pharmaceutical supply chain.

The state law governs reimbursements rates that pharmacy benefit managers, or PBMs, must pay to pharmacies. Specifically, the law requires PBMs to reimburse pharmacies at or above their wholesale costs paid for generic drugs, and also prevents them from paying their own drug stores more than what is paid to other pharmacies. CVS Health, for instance, owns both a PBM and pharmacies.


However, a trade group that represents PBMs filed a lawsuit five years ago, arguing that the Arkansas law was preempted in health plans regulated by a federal law known as the Employee Retirement Income Security Act, or ERISA. A federal court judge agreed, as did a federal appeals court in 2018. PBMs and health plans also maintain that the law would make it harder for them to contain costs, since pharmacies would have less motivation to buy lower-cost medicines from wholesalers.

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