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Pharmacy Benefit Manager disclosure law preempted by federal benefits law, the U.S. Court of Appeals for the Eighth Circuit ruled

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The 2014 law forces pharmacy benefit managers to disclose pricing methodology to Iowa’s insurance commissioner and to allow pharmacies to comment on and appeal pricing decisions. The Eighth Circuit on Jan. 11 found this law to be unenforceable as preempted by the Employee Retirement Income Security Act because it interferes with the uniform administration of ERISA plans nationwide.

The Pharmaceutical Care Management Association, the PBM industry association that challenged the law in court, called the decision a “shot across the bow” for other states that might be considering adopting similar laws.

The decision “sends an important signal that states can’t impose a patchwork of costly mandates on employers and unions that offer pharmacy benefits,” Mark Merritt, president and chief executive officer of PCMA, said in a Jan. 11 statement.

The National Community Pharmacists Association—which in 2016 filed a brief urging the Eighth Circuit to uphold the Iowa law—said in a statement that it was “deeply disappointed” with the ruling. NCPA CEO B. Douglas Hoey vowed to continue supporting policies like Iowa’s, which he praised as an attempt to “bring transparency to a PBM industry that has exploited secrecy to reap record profits at the expense of hardworking Americans.

In striking the law, the Eighth Circuit said that forcing PBMs to report data to state officials about their role in administering ERISA plan benefits runs counter to Congress’ goal of national uniformity in the administration of employee benefit plans. The Eighth Circuit relied on a recent U.S. Supreme Court decision using ERISA to partly invalidate a Vermont program that collected health claims data.

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Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

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