Amicus Curiae Brief — Leslie Rutledge, Attorney General of Arkansas, Petitioner v. Pharmaceutical Care Management Association

Supreme Court briefApr 1, 2020

Ask Donna

What actually matters in this document.

Text

No. 18-540

IN THE

Supreme Court of the United States

___________

LESLIE RUTLEDGE, in her official capacity as Attorney

General of the State of Arkansas,

Petitioner,

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION,

Respondent.

___________

On Writ of Certiorari to the

United States Court of Appeals

for the Eighth Circuit

___________

BRIEF OF THE ACADEMY OF MANAGED

CARE PHARMACY AS AMICUS CURIAE

IN SUPPORT OF RESPONDENT

___________

TACY F. FLINT*

ANDREW F. RODHEIM

SIDLEY AUSTIN LLP

One South Dearborn Street

Chicago, IL 60603

(312) 853-7000

tflint@sidley.com

Counsel for Amicus Curiae

April 1, 2020

*Counsel of Record

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................

INTEREST OF AMICUS CURIAE .....................

SUMMARY OF ARGUMENT .............................

ARGUMENT ........................................................

I. WHEN PHARMACY BENEFIT PLANS

ARE

ABLE

INCORPORATE

EVIDENCE-BASED MANAGED CARE

PHARMACY STRATEGIES INTO PLAN

BENEFIT DESIGN, THEY IMPROVE

HEALTH AND LOWER COSTS ..................

II. RELAXING THE SCOPE OF ERISA

PREEMPTION TO AUTHORIZE ACT 900

WOULD PUT EFFECTIVE MANAGED

CARE PHARMACY STRATEGIES LIKE

THESE AT RISK ...........................................

A. Act 900 Impermissibly Regulates Plan

Administration ........................................

B. Managed Care Pharmacy Professionals

Should Be Permitted To Develop Tools

For Patient Outcomes And Management

Of Costs Without The Constraint Of

Disparate State Regulation ....................

CONCLUSION ....................................................

(i)

CASES

TABLE OF AUTHORITIES

Page

Aetna Health, Inc. v. Davila, 542 U.S. 200

(2004) ..........................................................

Egelhoff v. Egelhoff, 532 U.S. 141 (2001) ... 20, 25

Fort Halifax Packing Co. v. Coyne, 482 U.S.

1 (1987) ..................................................... 18, 19

Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct.

936 (2016) ................................................. 18, 19

Metro. Life Ins. Co. v. Massachusetts, 471

U.S. 724 (1985) ...........................................

N.Y. State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 514 U.S.

645 (1995) ...................................................

Pharm. Care Mgmt. Ass’n v. District of

Columbia, 613 F.3d 179 (D.C. Cir. 2010) ...

STATUTES

29 U.S.C. § 1144(a) ........................................

§ 1144(b)(2) ...................................

Ark. Code Ann. § 17-92-507 ..........................

§ 17-92-507(c) ......................

§ 17-92-507(e) ......................

SCHOLARLY AUTHORITIES

AMCP Partnership Forum: Optimizing Prior

Authorization for Appropriate Medication

Selection, 26 J. Managed Care & Specialty

Pharmacy 55 (2020) ...................................

Jeffrey D. Dunn et al., Utilization and Drug

Cost Outcomes of a Step-Therapy Edit for

Generic Antidepressants in an HMO in an

Integrated Health System, 12 J. Managed

Care Pharmacy 294 (2006) ........................

iii

TABLE OF AUTHORITIES—continued

Page

Michael A. Fischer & Jerry Avorn, Step

Therapy—Clinical Algorithms, Legislation, and Optimal Prescribing, 317 J. Am.

Med. Ass’n 801 (2017) .................. 11, 12, 13, 23

Patrick P. Gleason, Commentary, Assessing

Step-Therapy Programs: A Step in the

Right Direction, 13 J. Managed Care

Pharmacy 273 (2007) .................................

Patrick P. Gleason et al., Dalfampridine

Prior Authorization Program: A Cohort

Study, 19 J. Managed Care Pharmacy 18

(2013) .......................................................... 9, 10

Daniel M. Hartung et al., Effect of a High

Dosage Opioid Prior Authorization Policy

on Prescription Opioid Use, Misuse, and

Overdose Outcomes, 39 Substance Abuse

239 (2018) ...................................................

Sharona Hoffman, Step Therapy: Legal and

Ethical Implications of a Cost-Cutting

Measure, 73 Food & Drug L.J. 38 (2018) ..

Shellie L. Keast et al., Assessment of the

Effect of an Enhanced Prior Authorization

and Management Program in a United

States Medicaid Program on Chronic

Hepatitis C Treatment Adherence and

Cost, 58 J. Am. Pharmacists Ass’n 485

(2018) ........................................................ 13, 14

Shellie L. Keast et al., Effects of a Prior

Authorization Policy for ExtendedRelease/Long-Acting Opioids on Utilization and Outcomes in a State Medicaid

Program, 113 Addiction 1651 (2018) .........

TABLE OF AUTHORITIES—continued

Page

Neil J. MacKinnon & Ritu Kumar, Prior

Authorization Programs: A Critical Review

of the Literature, 7 J. Managed Care

Pharmacy 297 (2001) ........................ 10, 11, 15

Brenda R. Motheral, Pharmaceutical StepTherapy Interventions: A Critical Review

of the Literature, 17 J. Managed Care

Pharmacy 143 (2011) .................................

Catherine I. Starner et al., Rosiglitazone

Prior Authorization Safety Policy: A

Cohort Study, 18 J. Managed Care

Pharmacy 225 (2012) .................................

Tricia Lee Wilkins, Prior Authorization and

Utilization Management Concepts in

Managed Care Pharmacy, 25 J. Managed

Care & Specialty Pharmacy 641 (2019) .... 8, 21

Krista Yokoyama et al., Effects of a StepTherapy Program for Angiotensin Receptor

Blockers on Antihypertensive Medication

Utilization Patterns and Cost of Drug

Therapy, 13 J. Managed Care Pharmacy

235 (2007) ...................................................

OTHER AUTHORITIES

The Alliance, When You’re Considering

Self-Funding (Aug. 2014), https://thealliance.org/wp-content/uploads/2017/08/

WhenYoureConsideringSelfFunding_

whitepaper.pdf ...........................................

TABLE OF AUTHORITIES—continued

Emma J. Chapman, Am. Health Lawyers

Ass’n, Pharmacy Maximum Allowable

Cost (MAC) Laws: A 50 State Survey

(2017), http://garnerhealth.com/wp-content/

uploads/2014/02/Final_AHLA_Pharmacy_

MAC_50_State_Survey.pdf ........................

Ctrs. for Medicare & Medicaid Servs.,

National Health Expenditure Projections

2019-2028, https://www.cms.gov/files/

document/nhe-projections-2019-2028forecast-summary.pdf .............................

Fed. Trade Comm’n, Pharmacy Benefit

Managers: Ownership of Mail-Order

Pharmacies (Aug. 2005), https://www.ftc.

gov/sites/default/files/documents/reports/

pharmacy-benefit-managers-ownershipmail-order-pharmacies-federal-tradecommission-report/050906pharmbenefitrpt

_0.pdf ..........................................................

Medicare Advantage Prior Authorization

and Step Therapy for Part B Drugs, Ctrs.

for Medicare & Medicaid Servs. (Aug. 7,

2018), https://www.cms.gov/newsroom/

fact-sheets/medicare-advantage-priorauthorization-and-step-therapy-part-bdrugs ...........................................................

Office of Inspector General, Dep’t of Health

& Human Servs., OEI-03-11-00640,

Medicaid Drug Pricing in State Maximum

Allowable Cost Programs (Aug. 2013),

https://oig.hhs.gov/oei/reports/oei-03-1100640.pdf ....................................................

Page

INTEREST OF AMICUS CURIAE1

Amicus curiae the Academy of Managed Care

Pharmacy (AMCP) is the national professional society

dedicated to the concept and practice of

pharmaceutical care in managed health care

environments, also known as managed care pharmacy.

AMCP is a diverse professional association of

pharmacists, physicians, nurses, and professionals in

managed care pharmacy organizations, including

health plans, pharmacy benefit managers (PBMs), and

integrated delivery networks, as well as researchers

and those employed by life sciences and

biopharmaceutical companies. AMCP’s more than

8,000 members nationally improve health outcomes of

nearly 300 million Americans served by private and

public health plans, PBMs, and emerging care models.

AMCP’s mission—and the goal of managed care

pharmacy—is to improve patient health by ensuring

access to high-quality, cost-effective medications and

other therapies. To achieve this goal, AMCP and its

member professionals leverage their specialized

expertise in clinical evidence and economics to

optimize the design of pharmacy benefit plans in order

to ensure that patients access safe and appropriate

medications that will lead to the best possible health

outcomes at the lowest cost. AMCP advocates at both

the national and state level for the development and

application of evidence-based medication use

1 Pursuant to Supreme Court Rule 37.6, amicus curiae AMCP

states that no counsel for any party authored this brief in whole

or in part and that no entity or person, aside from amicus curiae

and its counsel, made any monetary contribution toward the

preparation and submission of this brief. Pursuant to Rule 37.3,

AMCP states that all parties have consented to the filing of this

brief.

strategies that improve access to medication, ensure

effective medication use, enhance patient and

population health outcomes, and safeguard the wise

use of health care dollars. As explained in Part I, infra,

research demonstrates that these managed care

pharmacy tools lead to both improved health outcomes

for patients and reduced medication costs.

Because AMCP works to develop and promote the

implementation of evidence-based medication use

strategies at the population level, AMCP and its

members have a direct interest in ensuring that such

measures can be widely implemented. To that end,

AMCP has an interest in advocating that ERISA’s

broad preemptive force be preserved, so that ERISAgoverned pharmacy benefit plans are not foreclosed by

state regulations from incorporating medication use

management strategies in their plan designs. What is

more, if managed care pharmacy organizations are

required to comply with a multitude of disparate state

regulations, compliance costs will ineluctably rise,

thus offsetting the cost-saving benefits of managed

care pharmacy tools or causing organizations to forgo

the development and implementation of such tools

altogether.

This case addresses whether an Arkansas statute,

Ark. Code Ann. § 17-92-507 (“Act 900”), whereby

Arkansas seeks to regulate ERISA-governed health

plans specifically in the area of prescription-drug

benefits, “relates to” ERISA plans and is therefore

preempted by ERISA. 29 U.S.C. § 1144(a). Should the

Court reverse the Eighth Circuit’s holding that Act 900

is preempted, and permit Arkansas’s restriction of

employee health benefit plans to go into effect, the

goals of managed care pharmacy to improve health

outcomes by ensuring use of appropriate and costeffective medications will be impeded. Moreover, the

threat of further state regulation of pharmacy plan

benefits—and further balkanization of such

regulations—risks yet greater disruption in the

development and implementation of managed care

pharmacy strategies. AMCP submits this brief to

ensure the Court has a complete picture of the health

and cost-saving benefits of evidence-based measures

through managed care pharmacy—and the risks that

may follow if state regulations are permitted to create

obstacles to these measures.

SUMMARY OF ARGUMENT

Pharmaceuticals play an increasingly important role

in the prevention, cure, and management of disease.

An essential component of ERISA-governed health

benefit plans, therefore, is the ability of plan

beneficiaries to acquire clinically appropriate

medication to treat their medical needs. At the same

time, however, expenditures for drugs have been

increasing at rates higher than or comparable to

expenditures for other health-related products and

services. Prescription drug spending is projected to

increase by 3.7% in 2020, accelerating to an increase

of 5.4% to 5.9% per year from 2021 through 2028. Ctrs.

for Medicare & Medicaid Servs., National Health

Expenditure

Projections

2019-2028,

https://www.cms.gov/files/document/nhe-projections2019-2028-forecast-summary.pdf.

With the costs of prescription drugs rising, and as

medications continue to be more specialized,

pharmacy benefit plans must balance patient access to

prescription medications with the critical need for

affordability. More specifically, pharmacy benefit plan

sponsors must align the necessity of ensuring that

plan beneficiaries have access to the effective and safe

medications they need, on the one hand, with the

importance of controlling rapidly increasing costs for

prescription medications, on the other. Managed care

pharmacy professionals aim to achieve this critical

balance by structuring pharmacy benefit plans so that

all patients receive the highest-quality, safest, and

most cost-effective medications that will best enhance

the patients’ health outcomes.

Managed care pharmacy organizations, including

PBMs, have developed a wide variety of managed care

tools to effectuate this aim. The managed care

pharmacy toolkit includes innovative strategies to

optimize utilization of appropriate and cost-effective

prescription drugs by the population of beneficiaries

covered by a pharmacy benefit plan. These strategies

use evidence-based guidelines to promote consistent

use of those medications that produce the best clinical

outcomes and the greatest value for patients. Evidence

shows that these strategies—including prior

authorization requirements, step therapy programs,

and other population health–driven utilization

management tools—have meaningfully enhanced

patient outcomes while helping to maintain the

affordability of prescription drug benefits.

The uniformity and predictability of pharmacy

benefit regulation that ERISA provides is critical to

the development and implementation of such managed

care pharmacy strategies. State regulations that

dictate how pharmacy benefit plans are to be

administered undercut the ability of managed care

pharmacy professionals both to develop and to deploy

these clinically beneficial and cost-saving measures.

This has already happened in the sphere of fully

insured pharmacy benefit plans, which are not

governed by ERISA, and which therefore are subject to

a wide variety of state regulations. For plans that are

not governed by ERISA, some states have restricted

the use of medication utilization strategies. In order to

preserve the benefits of managed care pharmacy—

benefits of both improved outcomes and reduced

costs—it is critical that, where ERISA applies, federal

law is read broadly to preempt state regulation of how

pharmacy benefit plans are designed and

administered.

At issue in this case is a tool that pharmacy benefit

plans and PBMs use in determining reimbursements

paid to pharmacies for prescription drugs: Maximum

Allowable Cost (MAC) pricing and MAC lists. A MAC

list is a continuously updated schedule of generic

drugs covered by a pharmacy benefit plan, setting

forth the maximum allowable cost the plan will cover

for that drug. By reimbursing pharmacies based on

MAC pricing rather than using a cost-reimbursement

model, pharmacy benefit plans and PBMs incentivize

pharmacies to dispense cost-saving generic drugs

(rather than more expensive brand-name equivalents).

Moreover, the use of MAC pricing ensures that

pharmacies will seek out the lowest possible price for

generic medications, so that employers and

consumers—those purchasing health insurance

benefits—do not pay more than necessary. In these

ways, MAC pricing—like the medication use strategies

described in Part I, infra—promotes the goal of

managed care pharmacy to incentivize the use of costeffective generic drugs at the lowest possible price,

increasing the predictability and efficiency of

pharmacy benefit plans. Yet, as respondent

demonstrates, Arkansas’s Act 900—and the MAC

pricing regulations that many other states have

imposed—regulate the administration of pharmacy

benefit plans to constrain plans’ use of this cost-saving

tool.

State-specific regulations on the administration of

ERISA pharmacy benefit plans like Act 900 should not

be permitted to stand. Nor should state regulations be

permitted to undermine the other critical tools that

managed care pharmacy professionals have developed

to enhance patients’ health while controlling

pharmacy benefit plan costs. As AMCP demonstrates

here, these tools are best developed and employed by

managed care pharmacy organizations with the

expertise necessary to evaluate clinical data and

medical guidance in order to identify evidence-based

strategies that will ensure patients consistently

receive the highest-value, most cost-effective, and

safest drugs available. Disparate state regulations

have doubly adverse effects: not only do such

regulations remove innovative tools from the hands of

managed care pharmacy professionals, but in addition

the lack of uniformity itself undermines managed care

pharmacy and the level of care provided to patients.

Rather than developing, assessing, and implementing

new strategies to improve patient outcomes, managed

care pharmacy professionals would instead spend time

and resources ensuring compliance with differing

localized requirements.

In sum, if regulation of pharmacy benefit plans can

be balkanized through a patchwork of state regulation,

AMCP’s goal of promoting managed care pharmacy—

and the population-wide health benefits that managed

care pharmacy professionals work to advance—will be

significantly impeded. ERISA exists to prevent that

outcome. The decision below should be affirmed.

ARGUMENT

I. WHEN PHARMACY BENEFIT PLANS ARE

ABLE TO INCORPORATE EVIDENCEBASED MANAGED CARE PHARMACY

STRATEGIES

INTO

PLAN

BENEFIT

DESIGN, THEY IMPROVE HEALTH AND

LOWER COSTS.

Pharmacy benefit plans and the PBMs that

administer them use a variety of tools to ensure that

the population of individuals covered by the plan

achieves the best possible health outcomes at the

lowest cost. See Fed. Trade Comm’n, Pharmacy Benefit

Managers: Ownership of Mail-Order Pharmacies

10–15 (Aug. 2005), https://www.ftc.gov/sites/default/

files/documents/reports/pharmacy-benefit-managersownership-mail-order-pharmacies-federal-tradecommission-report/050906pharmbenefitrpt_0.pdf. In

particular, managed care pharmacy organizations

work to develop population-level strategies that will

ensure that patients have access to and consistently

use the highest-value, most cost-effective medications

that will lead to the best outcomes for the population

served by the plan.

By studying data and outcomes of a population over

time, managed care pharmacy professionals can

design benefit plans to provide coverage for the most

appropriate medication to be delivered to the patient.

Where evidence demonstrates that a less expensive or

lower-risk medication would provide the same or

better outcomes, it is substituted; higher-cost

medications are used only after lower-cost alternatives

have failed; and adherence is maximized through

utilization management programs. As detailed in the

examples set forth below, where PBMs and pharmacy

benefit plans have been able to implement such

evidence-based tools, they have succeeded

improving patients’ health while lowering costs.

Without ERISA’s guarantee of nationwide

uniformity in the administration of employee health

benefit plans, however, these positive health outcomes

would not have been possible. If managed care

pharmacy professionals must account for a patchwork

of state regulations of health treatment programs, the

increase in necessary compliance costs might make

these strategies too costly to pursue. And state laws

might foreclose the deployment of medication use

strategies even where a careful review of medical

evidence supports their application. The broad

preemptive force of ERISA is necessary to ensure that

ERISA-governed pharmacy benefit plans can continue

to use these beneficial tools.

Prior authorization. In order to ensure the use of

clinically

appropriate,

safe,

and

affordable

medications, pharmacy benefit plans may—based on

an evidence-based process including evaluation of

clinical trials, peer-reviewed literature, and consensus

guidelines—provide that certain medications will be

covered only if the patient receives prior authorization

to use that specific drug. In particular, the plan may

require that health care providers certify that a

patient’s unique clinical needs and therapeutic

rationale support the use of certain medications that

pose unusually high risks or costs, rather than other

safer or less expensive alternatives. See Tricia Lee

Wilkins, Prior Authorization and Utilization

Management Concepts in Managed Care Pharmacy, 25

J. Managed Care & Specialty Pharmacy, 641, 641

(2019). Evidence demonstrates that appropriate

deployment of this utilization management tool

improves outcomes while reducing costs.

For example, opioids pose a grave risk of addiction

and adverse long-term outcomes, and for many

patients less-risky alternatives are available. Prior

authorization requirements for opioids have been

shown to encourage health care providers to prescribe

such alternatives to patients for whom the risks of

opioids are not warranted. See, e.g., Shellie L. Keast et

al., Effects of a Prior Authorization Policy for

Extended-Release/Long-Acting Opioids on Utilization

and Outcomes in a State Medicaid Program, 113

Addiction 1651, 1657–58 (2018) (prior authorization

policy reduced extended-release/long-acting opioid

use); Daniel M. Hartung et al., Effect of a High Dosage

Opioid Prior Authorization Policy on Prescription

Opioid Use, Misuse, and Overdose Outcomes, 39

Substance Abuse 239, 243–45 (2018) (prior

authorization policy caused “significant decline” in

high dosage opioid prescriptions fills with a

corresponding “significant increase” in substitute

medications for neuropathic pain).

Another example is dalfampridine, a medication

that improves walking in certain patients with

multiple sclerosis. There is no evidence that

dalfampridine helps multiple sclerosis patients with

severely limited mobility, and dalfampridine poses a

heightened risk of seizures in patients with renal

impairment or a history of seizures. Patrick P. Gleason

et al., Dalfampridine Prior Authorization Program: A

Cohort Study, 19 J. Managed Care Pharmacy 18, 18–

19 (2013). Accordingly, some pharmacy benefit plans

require prior authorization before dalfampridine is

covered, to reduce use of the medication by patients for

whom it will not be effective or for whom it will pose

an excessive seizure risk. Id. at 19. Analysis of plan

data has demonstrated that this prior authorization

requirement both improved patients’ safety and

reduced dalfampridine costs. Id. at 22.

A final example is rosiglitazone, a medication that

evidence shows is effective for the management of type

2 diabetes, but which can exacerbate congestive heart

failure when used concurrently with nitrates or

insulin. Catherine I. Starner et al., Rosiglitazone Prior

Authorization Safety Policy: A Cohort Study, 18 J.

Managed Care Pharmacy 225, 226 (2012). Analysis of

medication usage by patients has demonstrated that a

prior authorization requirement for rosiglitazone tied

to a patient’s concurrent use of nitrates or insulin

leads to a significant decrease in unsafe use of

rosiglitazone, without any long-term harm to patients’

overall treatment. Id. at 229–31.

As these examples demonstrate, by designing

benefit plans to implement the procedural

requirement of prior authorization where medical

evidence supports that additional step, pharmacy

benefit plans and the PBMs administering them have

improved patient outcomes, ensured appropriate use

of medications, and reduced costs. Of course, if

evidence does not support the use of prior

authorization—if a prior authorization requirement is

put in place unnecessarily—that requirement could

potentially have adverse consequences, such as

imposing avoidable burdens on physicians and

impeding patients’ access to drugs. See Neil J.

MacKinnon & Ritu Kumar, Prior Authorization

Programs: A Critical Review of the Literature, 7 J.

Managed Care Pharmacy 297, 297–98 (2001). Thus,

managed care pharmacy professionals must evaluate

the available medical evidence to identify those

medications for which prior authorization is

appropriate. Where prior authorization requirements

are well designed to “direct prescribers to follow

evidence-based clinical practice,” they can not only

reduce costs, but also improve patient outcomes and

quality of life. Id. at 301–02.

Step therapy. Step therapy, a variant of prior

authorization, likewise promotes better outcomes at

reduced cost when it is carefully designed to reflect

medical evidence. Step therapy is the practice of

beginning drug therapy for a medical condition with

the safest and most cost-effective drug, and “stepping

up” to alternative drugs only when the initial therapy

fails. The purpose is to avoid situations where a

patient is prescribed a “needlessly expensive” or

clinically unproven drug when a safer or “less costly”

drug “would be an equal or better choice.” Michael A.

Fischer & Jerry Avorn, Step Therapy—Clinical

Algorithms, Legislation, and Optimal Prescribing, 317

J. Am. Med. Ass’n 801, 801 (2017) (citing a study

showing that one-third of diabetes patients were not

prescribed metformin, an inexpensive medication that

is the first step recommended by all major guidelines).2

If a provider indicates that the first-step medication

was ineffective or caused adverse side effects for a

particular patient, coverage is authorized for the “step

up” option.

Evidence shows that step therapy, too, improves

outcomes and appropriate medication use while also

reducing costs. For example, one study established

2 Indeed, the Centers for Medicare & Medicaid Services

recently provided Medicare Advantage plans the option to

implement step therapy for physician-administered and other

Part B drugs as a way to both lower costs and improve overall

quality of care. Medicare Advantage Prior Authorization and Step

Therapy for Part B Drugs, Ctrs. for Medicare & Medicaid Servs.

(Aug. 7, 2018), https://www.cms.gov/newsroom/fact-sheets/

medicare-advantage-prior-authorization-and-step-therapy-partb-drugs.

that step-therapy programs for two of the most

commonly used classes of medications—proton pump

inhibitors and nonsteroidal anti-inflammatory

drugs—led to reduced costs without any increase in

use of other related medical services. Brenda R.

Motheral, Pharmaceutical Step-Therapy Interventions: A Critical Review of the Literature, 17 J.

Managed Care Pharmacy 143, 150 (2011). Another

study found that step-therapy programs for

angiotensin receptor blockers, used to treat

hypertension, resulted in antihypertensive drug

therapy cost savings of 13% per day. Krista Yokoyama

et al., Effects of a Step-Therapy Program for

Angiotensin Receptor Blockers on Antihypertensive

Medication Utilization Patterns and Cost of Drug

Therapy, 13 J. Managed Care Pharmacy 235, 239–40

(2007). And a third study determined that steptherapy intervention requiring patients to first utilize

a generic antidepressant reduced average cost per day

by 9% without any adverse effect to patients’ overall

utilization of antidepressant medications. Jeffrey D.

Dunn et al., Utilization and Drug Cost Outcomes of a

Step-Therapy Edit for Generic Antidepressants in an

HMO in an Integrated Health System, 12 J. Managed

Care Pharmacy 294, 298 (2006).

As with prior authorization more generally, poorly

designed or unsupported step therapy requirements

can have unintended adverse consequences. “[I]f based

on poor evidence or implemented inflexibly, the

approach can cause clinical problems.” Fischer &

Avorn, supra, at 801–02. But “[w]hen conceived and

implemented intelligently,” using “evidence-based

criteria, with clinically appropriate and reasonable

provisions for exceptions,” step therapy “encourage[s]

more rational prescribing and help[s] control

medication costs, while ensuring that patients are

receiving the most data-driven regimens.” Id. at 801.

Population

Health–Driven

Utilization

Management. Finally, managed care pharmacy

professionals work to determine how to maximize

patients’ adherence to critical medications. In this

regard, management of hepatitis C medications shows

the benefits of managed care pharmacy—and the

harms that can follow when state laws constrain the

use of managed care pharmacy strategies. Recent

medical advances offer new medication-based

hepatitis C treatment regimens, with higher cure

rates, fewer adverse effects, and a shortened

treatment period. See Shellie L. Keast et al.,

Assessment of the Effect of an Enhanced Prior

Authorization and Management Program in a United

States Medicaid Program on Chronic Hepatitis C

Treatment Adherence and Cost, 58 J. Am. Pharmacists

Ass’n 485, 485 (2018). Not surprisingly, however, these

new medications are costly. Id. Accordingly, in order

to achieve the significant outcome benefits these new

treatments provide—in terms of both cost-effective

management and increased cure rates—patient

adherence and successful treatment completion is

essential. Id. at 490. A 2018 study highlights the

positive impact utilization management strategies can

have towards achieving these goals.

The study compared outcomes in two patient

cohorts: one for which no pharmacist management of

hepatitis C medications occurred because an

Oklahoma law barred such management, and one for

which an enhanced prior authorization and

management program was put in place. Id. at 486–87.

The program included a contract under which each

individual pharmacy agreed to counsel members and

provide consistent follow-up by pharmacists to

improve adherence. Id. at 487. The results were clear:

the prior authorization and management program

significantly improved adherence to the treatment

protocol and decreased treatment gaps while also

decreasing overall pharmacy-related treatment costs

for the payer. Id. at 489–90. Although this meant

increased medication costs at the outset, the result

was better outcomes for patients and lower long-term

costs. Id.

The prior authorization and management program

used in hepatitis C treatment discussed above is just

one example of how a managed care pharmacy

program can vastly improve population-wide health.

Such programs—by, for example, providing a

mechanism to monitor for proper adherence—

encourage managed care pharmacy professionals to

develop, implement, and take advantage of the longterm cost saving potential and enormous outcome

benefits that innovative, but expensive, drug regimens

permit. Of course, the form of population-wide

utilization programs, and the circumstances in which

they apply, matter: some will offer greater benefits and

cost-savings than others. Managed care pharmacy

professionals thus must evaluate population-based

medical evidence to determine how to allocate

resources, and to whom, when crafting these

strategies.

II. RELAXING THE SCOPE OF ERISA

PREEMPTION TO AUTHORIZE ACT 900

WOULD PUT EFFECTIVE MANAGED CARE

PHARMACY STRATEGIES LIKE THESE AT

RISK.

Experience and data confirm that effective managed

care pharmacy requires a delicate balance: pharmacy

benefit plans must “deal with rising drug costs,” on the

one hand, while on the other hand “not denying or

limiting access to those drugs that improve

therapeutic outcomes and health-related quality of

life.” MacKinnon & Kumar, supra, at 297. Pharmacy

benefit plans can and have achieved this balance

through careful use of evidence-based plan design to

direct patients into the highest-value, safest, and most

cost-effective medication programs.

Unfortunately, intrusion by state and local

governments into ERISA-covered pharmacy benefit

plans threatens to tip the scales. Arkansas’s Act 900 is

a clear example, as it impermissibly dictates plan

sponsors’ choices about how to design pharmacy

benefit plans, and disrupts the balance that plans and

PBMs have negotiated between reducing costs and

maintaining broad access to medications. If Act 900 is

permitted to stand, further state intrusions into

ERISA-governed pharmacy benefit plans may follow—

undercutting the success that managed care pharmacy

professionals have achieved in designing and

deploying effective utilization management tools.

Managed care pharmacy professionals will be forced to

spend time and resources on ensuring compliance with

disparate state regulations, offsetting the cost-benefits

of these population-based utilization management

programs,

or,

perhaps,

discouraging

their

development altogether.

A. Act 900 Impermissibly Regulates Plan

Administration.

MAC pricing is another tool that pharmacy benefit

plans and the PBMs that administer them use to

encourage the appropriate, cost-effective use of generic

drugs while promoting the affordability of pharmacy

benefits. The use of MAC pricing reduces health care

costs in multiple ways. When pharmacies are paid a

fixed amount rather than based on their cost,

pharmacies have a greater incentive to dispense lower-

cost generic drugs rather than higher-cost brand-name

drugs that are no more effective. JA150; Office of

Inspector General, Dep’t of Health & Human Servs.,

OEI-03-11-00640, Medicaid Drug Pricing in State

Maximum Allowable Cost Programs 4–5 (Aug. 2013),

https://oig.hhs.gov/oei/reports/oei-03-11-00640.pdf. And

where pharmacies receive a fixed rather than costbased reimbursement, they also have a greater

incentive to purchase generic drugs at the lowest

possible price, which in turn encourages price

competition among generic drug manufacturers and

drug wholesalers. JA151. And moreover, the use of

MAC pricing results in increased efficiency and

predictability for pharmacy benefit plans because

costs are clear in advance. That is why both public and

private payers use MAC lists as a means of achieving

the goals of managed care pharmacy. See Resp. Br. 13.

Attempting to avoid the force of ERISA’s broad

preemption provision, petitioner and its amici seek to

minimize the impact of Act 900 on the administration

of health benefit plans, describing it as mere “rate

regulation.” E.g., Pet’r Br. 14 (asserting that Act 900

“regulates drug reimbursement rates and provides

mechanisms for enforcing that rate regulation,” which

are said to be “necessary incidents of Arkansas’s

system of rate regulation”). The amici pharmacist

associations likewise assert that “[t]he focus of this

litigation is on laws regulating the rates at which

PBMs reimburse pharmacies,” which the pharmacists

assert do not “regulate[] plan administration.” Br. of

Arkansas Pharmacists Association et al., as Amici

Curiae 21.

But Act 900 is far more intrusive on pharmacy

benefit plan administration than would be a mere

regulation of prices. See Resp. Br. 22–26. Act 900

works not by imposing specified rates, but by setting

detailed, Arkansas-specific standards for the structure

and administration of ERISA-governed plans,

specifically related to MAC pricing schemes. It

requires disclosure of detailed plan information to

pharmacies, Ark. Code Ann. § 17-92-507(c)(1); it sets

specific criteria and timelines by which plans (and the

PBMs acting as their agents) must update their MAC

lists in response to pharmacies’ asserted acquisition

costs, id. § 17-92-507(c)(2); it dictates detailed appeal

procedures that plans must establish for pharmacies

to challenge MAC list rates and particular claim

reimbursements, id. § 17-92-507(c)(4)(A); it requires

plans to permit the reversal or rebilling of claims when

the MAC list rate is less than the pharmacy’s

acquisition cost, id. § 17-92-507(c)(4)(C)(iii); and it

permits a pharmacy to refuse to serve a plan

participant altogether if the pharmacy concludes that

the MAC list rate is below the pharmacy’s acquisition

cost, id. § 17-92-507(e). These requirements do

substantially more than regulate rates: they regulate

the conduct of PBMs, the plans that PBMs serve, and

the administration of plan benefits overall.

What is more, Arkansas’s Act 900 is just one of the

many state-specific regulations that interfere with the

design of pharmacy benefit plans and undercut

nationally uniform plan administration. See Resp. Br.

27–31 (collecting disparate state laws addressing the

administration of prescription-drug benefits on behalf

of ERISA-governed plans); Emma J. Chapman, Am.

Health Lawyers Ass’n, Pharmacy Maximum Allowable

Cost (MAC) Laws: A 50 State Survey (2017),

http://garnerhealth.com/wp-content/uploads/2014/02/

Final_AHLA_Pharmacy_MAC_50_State_Survey.pdf

(detailing the varied state requirements related to

MAC pricing); Br. of State of California et al., as Amici

Curiae 33 (acknowledging that “States have taken

different approaches to regulating PBMs”). Thus,

pharmacy benefit plans and PBMs not only must

comply with state regulations that intrude on benefit

plan design and administration, but also must do so

differently in the many states that impose their own

idiosyncratic forms of regulation.

This, of course, is exactly what ERISA’s preemption

clause aims to prevent. Because regulation of

employee health benefit plans is “exclusively a federal

concern,” Aetna Health, Inc. v. Davila, 542 U.S. 200,

208 (2004), ERISA preempts any state law that “has

an impermissible ‘connection with’ ERISA plans,

meaning a state law that ‘governs … a central matter

of plan administration’ or ‘interferes with national

uniform plan administration.’” Gobeille v. Liberty Mut.

Ins. Co., 136 S. Ct. 936, 943 (2016) (quoting Egelhoff v.

Egelhoff, 532 U.S. 141, 148 (2001)). ERISA’s

preemptive scope serves to promote uniformity and to

enable health benefit plans, including the PBMs that

administer their pharmacy benefits, to maximize

value for plan beneficiaries without having to

negotiate disparate local requirements. See id. (ERISA

“seeks to make the benefits promised to an employer

more secure by mandating certain oversight systems

and other standard procedures”).

Congress recognized that plan administration

includes a host of obligations. These include, for

example, “determining the eligibility of claimants,

calculating benefit levels, making disbursements,

monitoring the availability of funds for benefit

payments, and keeping appropriate records in order to

comply with applicable reporting requirements.” Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987).

“The most efficient way to meet these responsibilities

is to establish a uniform administrative scheme, which

provides a set of standard procedures to guide

processing of claims and disbursement of benefits.” Id.

But “if a benefit plan is subject to differing regulatory

requirements of differing States,” the goal of

uniformity would be “difficult to achieve.” Id.; see also

Gobeille, 136 S. Ct. at 944 (“Requiring ERISA

administrators to master the relevant laws of 50 states

and to contend with litigation would undermine the

congressional goal of minimizing the administrative

and financial burden on plan administrators—

burdens ultimately borne by the beneficiaries.”

(alterations omitted) (quoting Egelhoff, 532 U.S. at

149–50)); N.Y. State Conference of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656–

57 (1995) (“[T]he goal was to minimize the

administrative and financial burdens of complying

with conflicting directives among States … requiring

the tailoring of plans and employer conduct to the

peculiarities to the law of each jurisdiction.” (quoting

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142

(1990))).

Nor is it any answer that—as amici the United

States and American Medical Association argue—Act

900 applies “only to PBMs, not to ERISA plans.” Br. of

Am. Medical Ass’n et al., as Amicus Curiae 13; see also

Br. of United States as Amicus Curiae 27 (Act 900

“imposes obligations on PBMs, not plans”). This

purported distinction is illusory. To begin, it does not

exist in the statute, which governs pharmacy benefit

plans administering their own benefits and PBMs

alike. See Resp. Br. 46–47. And regardless, a

regulation that governs the reimbursement strategies

that a PBM may use is neither more nor less than a

regulation of the administration of benefits on behalf

of a plan. When a pharmacy benefit plan contracts for

the administration of its plan by a PBM that uses MAC

pricing (or other managed care pharmacy tools), the

plan

selecting

the

PBM’s

MAC-based

reimbursement system to be the plan’s “system for

processing claims and paying benefits.” Egelhoff, 532

U.S. at 150; see also Resp. Br. 38. As the D.C. Circuit

explained in holding a similar regulation preempted

under ERISA, statutes like Act 900 that impose

significant restrictions on PBMs “bind plan

administrators because the ‘choice’ they leave an

[employee health benefit plan] between selfadministration and third-party administration of

pharmaceutical benefits is in reality no choice at all.”

Pharm. Care Mgmt. Ass’n v. District of Columbia, 613

F.3d 179, 188 (D.C. Cir. 2010).

B. Managed Care Pharmacy Professionals

Should Be Permitted To Develop Tools

For Patient Outcomes And Management

Of Costs Without The Constraint Of

Disparate State Regulation.

The state-specific restriction on plan benefit design

and administration embodied in Arkansas’s Act 900 is

an impermissible intrusion into the administration of

ERISA-governed pharmacy benefit plans. This Court

should make clear that ERISA preemption excludes

states from imposing state-specific requirements on

the administration of ERISA-governed pharmacy

benefit plans—and that managed care pharmacy

strategies that plans and PBMs implement to reduce

costs while improving population outcomes are free

from state regulation. In particular, without ERISA’s

guarantee of uniform standards, managed care

pharmacy

professionals

would

severely

compromised in their ability to develop and deploy

evidence-based utilization management tools to

improve patients’ health outcomes at the lowest

possible costs.

The importance of uniformity in benefit plan

regulation—and the costs that multifarious state

regulation would impose—is particularly clear in

connection with the design and deployment of

utilization management tools. A critical goal of

managed care pharmacy is to improve health at the

population level as well as the individual level—

including through the utilization management

programs that marshal population-level evidence to

design benefit plans to direct all patients to the drugs

that will treat their medical needs most effectively and

at the lowest cost. These practices cannot improve

population-level outcomes unless they can be designed

and deployed as to the entire population. If patients in

different states must be treated differently as a result

of local regulations, then evidence-based interventions

to improve population-level outcomes will be curtailed.

In addition, the guarantee of uniformity that ERISA

provides with respect to administration of covered

pharmacy benefit plans incentivizes the development

of evidence-based utilization management tools. As

detailed above, managed care pharmacy professionals

must precisely calibrate tools like prior authorization

and step therapy based on the unique risks, costs, and

benefits of specific medications as they are used by

specific populations. See, e.g., Wilkins, supra, at 641.

To be effective, such tools must be designed based on

the managed care pharmacy professionals’ continuous

evaluation of the evidence of a medicine’s effectiveness

and side effects, and must carefully balance a

medicine’s cost and safety risks against the benefit

that a medication may provide for an individual

patient. See id. at 643 (managed care pharmacy

organizations “have the responsibility and opportunity

to incorporate clinical and technology advancements

into these processes with a constant goal of improving

health outcomes and cost-effectiveness”). ERISA’s

guarantee of uniform rules—free from potentially

inconsistent regulations imposed by different state

legislatures that may be responding to different

economic interests—permits the experimentation and

evaluation necessary to develop and improve such

programs, and ultimately, improve patient care

overall.

Outside the context of ERISA-governed health

plans, states already regulate population-wide

utilization management programs. Unlike selfinsured health benefit plans, fully insured plans are

subject to state and local regulations, which in that

context are not preempted by ERISA. See 29 U.S.C.

§ 1144(b)(2); Metro. Life Ins. Co. v. Massachusetts, 471

U.S. 724, 738–47 (1985). This leads to a substantial

difference in cost: because self-funded benefit plans do

not need to comply with a patchwork of state and local

laws restricting potential cost-saving measures, they

face lower administrative expenses than fully funded

plans. See The Alliance, When You’re Considering SelfFunding 4 (Aug. 2014), https://the-alliance.org/wpcontent/uploads/2017/08/WhenYoureConsideringSelf

Funding_whitepaper.pdf.

State-level regulation of step therapy provides a

clear illustration of the flaws in a scheme whereby

states are permitted to engage in disuniform

regulation of the administration of pharmacy benefit

plans. Several states have enacted legislation directed

to the use of step therapy programs outside the context

of ERISA-governed plans. See Sharona Hoffman, Step

Therapy: Legal and Ethical Implications of a CostCutting Measure, 73 Food & Drug L.J. 38, 53 (2018)

(“As of mid-2017, 14 states had passed legislation

addressing step therapy, and at least 12 others had

bills under consideration.” (footnote omitted)). But

legislative measures are not well suited to the complex

considerations that go into the development of an

effective step therapy plan.

As detailed above, step therapy systems are

medication- and population-specific: they turn on

detailed analysis of the evidence as to safety and

effectiveness of available medications as used by

particular populations of patients to determine

whether more cost-effective or safer, “lower-step”

medications should be tried. Thus, to be “[d]one well,”

step therapy must be based on careful consideration of

both medical and economic factors. Fischer & Avorn,

supra, at 802. Given the complexity of this balance for

any particular drug, step therapy is not susceptible to

broad-based legislative efforts, especially on a stateby-state basis. That is because “[i]t is unlikely that

legislators, by pulling one available lever in a complex

system, can improve the rationality and affordability

of prescribing. It will be difficult to implement such

policies through laws and still respect the clinical and

economic nuances that should ideally be driving

optimal prescribing.” Id. Instead, “[l]aws to restrict the

use of a single cost-containment approach only add

complexity …, without clearly addressing the real

problems with prescribing.” Id. The benefits of step

therapy are best achieved when pharmacy benefit

plans are “allowed to enact reasonable evidence-based

policies to avoid needless expenses incurred by

suboptimal prescribing practices, often driven by

intense marketing to prescribers and patients (and

now, to legislators).” Id.

While these laws are not at issue in the instant case,

they present another example of the respect in which

state-specific regulation can interfere with the design

and administration of ERISA-governed self-insured

health benefit plans, ultimately harming beneficiaries

in the form of less specialized and effective treatment

as well as high costs. Managed care pharmacy

professionals that develop and refine step therapy

protocols for health benefit plans rely on current

scientific, medical, and pharmaceutical treatment

evidence and guidelines. They must therefore retain

flexibility to make and continuously update judgments

based on the evolving body of evidence before them.

This is best accomplished by “ongoing efforts and

collaboration among payers, prescribers, pharmacists,

and patient groups to ensure that solutions meet the

needs of all stakeholders.” AMCP Partnership Forum:

Optimizing Prior Authorization for Appropriate

Medication Selection, 26 J. Managed Care & Specialty

Pharmacy 55, 60 (2020). And these efforts are ongoing.

See Patrick P. Gleason, Commentary, Assessing StepTherapy Programs: A Step in the Right Direction, 13 J.

Managed Care Pharmacy 273, 274 (2007) (discussing

“ongoing assessment … of PBM utilization

management programs”). If state legislators impose

static regulations that are not targeted to specific

medications and populations, the health and cost

benefits that step therapy has been shown to provide

will be lost.

And the costs of such legislation are exacerbated

when different states impose different rules.

Significantly worse than bending medication- and

population-specific step therapy protocols to meet one

set of legislative edicts, managed care pharmacy

professionals facing a panoply of state regulations

would be compelled to develop and implement

different strategies in different states to meet each

state’s rules. Such a system has inherent

administrative inefficiencies: Compliance costs will be

significant, offsetting the cost-related benefits of these

strategies and ultimately increasing health care costs

overall. Moreover, a patchwork of state regulations

also limits the ability to evaluate the effectiveness of

any given strategy across a population. Indeed, some

states’ requirements could even preclude entirely the

use of a utilization management program that has

been shown both to improve health outcomes and

reduce costs—thus depriving patients and pharmacy

benefit plans of the most effective tools. This is directly

contrary to “[o]ne of the principal goals of ERISA”: “to

enable

employers

‘to

establish

uniform

administrative scheme, which provides a set of

standard procedures to guide processing of claims and

disbursement of benefits.’” Egelhoff, 532 U.S. at 148

(quoting Fort Halifax, 482 U.S. at 9).

CONCLUSION

To ensure the fulsome development and deployment

of managed care pharmacy strategies, this Court

should reiterate that ERISA preempts state regulation

of ERISA-governed pharmacy benefit plans. The

decision below should be affirmed.

Respectfully submitted,

TACY F. FLINT*

ANDREW F. RODHEIM

SIDLEY AUSTIN LLP

One South Dearborn Street

Chicago, IL 60603

(312) 853-7000

tflint@sidley.com

Counsel for Amicus Curiae

April 1, 2020

*Counsel of Record

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.