Oklahoma Insurance Dept. Wants To Regulate PBMs ASAP

By Emily Brill
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Law360 (June 4, 2020, 7:04 PM EDT) -- The Oklahoma Insurance Department wants to start regulating pharmacy benefit managers as soon as possible, urging a federal judge to deny a PBM lobby's attempt to block a state law that targets the industry's allegedly unfair reimbursement practices.

The state agency told U.S. District Judge Bernard Jones on Wednesday that it has received more than 100 complaints about PBMs' conduct in the past month alone, and the time to enforce the Patient's Right to Pharmacy Choice Act is now.

"There are pharmacies that will not survive the year if the State is prevented from enforcing [the act]," the agency said in a response opposing the Pharmaceutical Care Management Association's motion for a preliminary injunction against the 2019 law.

The PCMA asked for the injunction on May 13, telling Judge Jones that enforcement of the Patient's Right to Pharmacy Choice Act would cause PBMs "irreparable harm" by forcing them to restructure their business model during a pandemic. An Oklahoma business lobby and Hobby Lobby Stores Inc. filed an amicus brief in support of the injunction request on May 15.

The Oklahoma Insurance Department said Wednesday that PCMA is exaggerating how much harm the law would do, failing to back up its vague claims that complying with the law would be too expensive. Other federal judges have recognized this and denied the PCMA's attempts to block regulation in states such as North Dakota, the agency said.

"The notion that there are substantial administrative costs in shifting operations is not supported by the record," the agency said. "The harm must be certain — unsupported intimations will not suffice."

The PCMA also inflated its claims of the challenges posed to the PBM industry by the COVID-19 pandemic, the agency said. The association claimed PBMs were on the "front lines" responding to COVID-19, even though "PBMs are by definition middlemen, not front-line workers."

"If anyone impacted by the Oklahoma law is on the 'front lines' of the pandemic, it is pharmacists, who are face-to-face with Oklahoma patients every day, and who the state is seeking to protect from PBM abuses through enforcement of the Act," the agency said. "PCMA's members are among the largest and most profitable companies in the country. When this is over, they will be fine."

The PCMA sued the Oklahoma Insurance Department over the Patient's Right to Pharmacy Choice Act in October, claiming portions of the law were invalid because they were preempted by the federal Employee Retirement Income Security Act.

The PCMA and the agency agreed to stay the litigation in January, because the U.S. Supreme Court was set to hear a case this spring about whether PBM regulation is preempted by ERISA.

Then the COVID-19 pandemic hit. The Supreme Court's PBM case hearing got pushed to October, and the Oklahoma Insurance Department said it needed to enforce the law now.

"The fast-developing COVID-19 emergency has convinced the state it needs all the regulatory tools at its disposal to protect Oklahomans going forward, particularly Oklahoma's vulnerable populations," the agency said in early April.

Judge Jones lifted the stay on April 22. Soon after, the PCMA moved for a preliminary injunction.

The Patient's Right to Pharmacy Choice Act gives the Oklahoma Insurance Department the right to ensure PBMs don't reimburse their own pharmacies more for drugs than they do unaffiliated pharmacies.

PBMs help manage benefit plans' drug components, serving as a middleman between the benefit plan and pharmacies. Over the years, the industry has expanded greatly, with many PBMs now owning and operating pharmacies themselves, reimbursing those pharmacies at higher rates than others and making it hard for community pharmacies to survive, pharmacists say.

Justin Wilson, an Oklahoma pharmacist, said in a declaration filed alongside the Oklahoma Insurance Department's response on Wednesday that the Patient's Right to Pharmacy Choice Act marked a promising attempt to fix "very real problems with the PBM industry," taking steps such as giving community pharmacists more bargaining power when negotiating with PBMs.

Counsel and representatives for the PCMA and representatives for the Oklahoma Insurance Department did not immediately respond to requests for comment Thursday. Counsel for the Oklahoma Insurance Department declined comment.

The PCMA is represented by Joe E. Edwards of Crowe & Dunlevy, and Dean Richlin, Kristyn DeFilipp, Andrew London and Stephen Stich of Foley Hoag LLP.

The Oklahoma Insurance Department is represented by Randall J. Yates and Zach West of the Oklahoma attorney general's office.

The case is Pharmaceutical Care Management Association v. Mulready et al., case number 5:19-cv-00977, in the U.S. District Court for the Western District of Oklahoma.

--Editing by Adam LoBelia.

For a reprint of this article, please contact reprints@law360.com.

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