Petition for Writ of Certiorari — Dirk Wilke, Interim State Health Officer of North Dakota, et al., Petitioners v. Pharmaceutical Care Management Association

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United States Court of Appeals

for the Eighth Circuit

_____________

No. 18-2926

_____________

Pharmaceutical Care Management Association

Plaintiff – Appellant

v.

Mylynn Tufte, in her official capacity as the State

Health Officer of North Dakota; Mark J. Hardy, in

his official capacity as the Executive Director of the

North Dakota Board of Pharmacy; Steven P. Irsfeld,

in his official capacity as President of the North

Dakota Board of Pharmacy; Wayne Stenehjem, in his

official capacity as the Attorney General of North

Dakota

Defendants – Appellees

_____________

Appeal from United States District Court

for the District of North Dakota – Bismarck

_____________

Submitted: October 15, 2019

Filed: August 7, 2020

_____________

Before SMITH, Chief Judge, GRUENDER and

BENTON, Circuit Judges.

_____________

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GRUENDER, Circuit Judge.

This case concerns Pharmaceutical Care

Management Association’s (“PCMA”) claim that the

Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. § 1001 et seq., and the Medicare

Prescription Drug, Improvement, and Modernization

Act of 2003 (“Medicare Part D”), 42 U.S.C. § 1395w101 et seq., preempt two sections of the North Dakota

Century Code (the “legislation”) regulating the

relationship between pharmacies, pharmacy benefits

managers (“PBMs”), and other third parties that

finance personal health services. After PCMA and

the State of North Dakota1 cross-moved for summary

judgment, the district court determined that only one

provision in the legislation was preempted by

Medicare Part D and entered judgment in favor of

North Dakota on the remainder of PCMA’s claims.

We affirm in part, reverse in part, and remand with

directions that judgment be entered in favor of

PCMA.

PCMA is a national trade association that

represents PBMs. PBMs are third-party health plan

administrators that manage prescription drug

benefits on behalf of health insurance plans. In this

role, PBMs negotiate prescription drug prices with

drug manufacturers and pharmacies, create

networks of pharmacies to fill prescriptions for

PCMA sued Mylynn Tufte, State Health Officer of North

Dakota, Mark Hardy, Executive Director of the North Dakota

Board of Pharmacy, Fran Gronberg, President of the North

Dakota Board of Pharmacy, and Wayne Stenehjem, Attorney

General of North Dakota, in their official capacities. Because of

the nature of PCMA’s claims, we refer to the defendants

collectively as “North Dakota.”

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insured individuals, and process insurance claims

when prescriptions are filled.

In 2017, North Dakota passed N.D. Century Code

sections 19-02.1-16.1 and 19.02.1-16.2, which,

according to North Dakota, “sought to define the

rights of pharmacist[s] in relation to [PBMs], and to

regulate certain practices by PBMs.” The legislation

regulates the fees PBMs and “third-party payer[s]”

may charge pharmacies, N.D. Cent. Code § 19-02.116.1(2); limits what copayments PBMs or third-party

payers may charge, id. § 19-02.1-16.1(4); dictates the

quality metrics PBMs and third-party payers may

use to evaluate pharmacies and structures how they

may reward performance, id. §§ 19-02.1-16.1(3), (11),

-16.2(4); prohibits, subject to certain exceptions,

PBMs from having “an ownership interest in a

patient assistance program and a mail order

specialty pharmacy,” id. § 19.02.1-16.2(3); regulates

benefits provisions and plan structures, id. §§ 1902.1-16.1(3), (4), (5) (8), (9), (11), -16.2(5); and

requires certain disclosures on the part of PBMs and

prohibits PBMs from setting limits on information

pharmacists may provide patients, id. §§ 19-02.116.1(6), (7), (10), -16.2(2). A PBM or third-party

payer that violates any section of the legislation is

guilty of a class B misdemeanor. Id. §§ 19-02.116.1(12), -16.2(6).

Shortly after the legislation’s enactment in 2017,

PCMA filed a complaint seeking a declaration of

preemption and an injunction prohibiting the

enforcement of the legislation. At summary

judgment, the district court determined that none of

the statutory provisions were preempted by ERISA

and that only one of the provisions was preempted by

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Medicare Part D. PCMA appeals, renewing its

argument that both ERISA and Medicare Part D

preempt the entire legislation.

We review de novo the district court’s preemption

and statutory interpretation rulings. Pharm. Care

Mgmt. Ass’n v. Rutledge, 891 F.3d 1109, 1112 (8th

Cir. 2018). With certain limited exceptions, ERISA

preempts “any and all State laws insofar as they may

now or hereafter relate to any employee benefit plan.”

29 U.S.C. § 1144(a) (emphasis added). “The breadth

of this section is well known,” Rutledge, 891 F.3d at

1112, and courts have struggled for decades to cabin

its reach in order to prevent the clause from

becoming “limitless,” Gobeille v. Liberty Mut. Ins.,

577 U.S. ---, 136 S. Ct. 936, 943 (2016); N.Y. State

Conf. of Blue Cross & Blue Shield Plans v. Travelers

Ins., 514 U.S. 645, 655-56 (1995) (rejecting an

“uncritical literalism” that extends ERISA’s

preemption clause to the “furthest stretch of its

indeterminacy”); see also Cal. Div. of Labor

Standards Enf’t v. Dillingham Constr., N.A., Inc.,

519 U.S. 316, 335 (1997) (Scalia, J., concurring)

(counseling courts to avoid reading the clause too

broadly because, “as many a curbstone philosopher

has observed, everything is related to everything

else”).

Endeavoring to clarify ERISA’s “unhelpful text,”

Travelers Ins., 514 U.S. at 656, the Supreme Court

has determined the clause preempts a state law that

“relates to” an ERISA plan by having an

impermissible “reference to” or “connection with” an

ERISA plan, id. Here, we need not address the

“connection with” element of the analysis because we

conclude the legislation is preempted due to its

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impermissible “reference to” ERISA plans. See

Pharm. Care Mgmt. Ass’n v. Gerhart, 852 F.3d 722,

730 (8th Cir. 2017) (“Where a State law is preempted

because it has a prohibited ‘reference to’ ERISA or

ERISA plans, we need not reach the question of

whether it is also preempted under the ‘connection

with’ prong of the analysis.”).

A state law has an impermissible “reference to”

ERISA plans where it (1) “acts immediately and

exclusively upon ERISA plans” or (2) “where the

existence of ERISA plans is essential to the law’s

operation.” Gobeille, 136 S. Ct. at 943. PCMA asserts

that the legislation is preempted because it imposes

requirements by reference to ERISA plans through

its definitions of “third-party payers” and “plan

sponsors.” According to PCMA, these references

“ensure[] that the existence of an ERISA plan

triggers application” of the legislation’s provisions.

The district court disagreed, determining that,

because the legislation also covers entities that are

not ERISA plans, it neither acts immediately and

exclusively upon ERISA plans nor does it make the

existence of an ERISA plan essential to the operation

of the regulatory scheme. We agree with PCMA that

the legislation is preempted because its references to

“third-party

payers”

and

“plan

sponsors”

impermissibly relate to ERISA benefit plans.

Sections 19-02.1-16.1 and -16.2 regulate

“[p]harmacy benefits manger[s]” and “[t]hird-party

payer[s].” N.D. Cent. Code §§ 19-02.1-16.1(1), 16.2(1). They then define a “[p]harmacy benefits

manager” as “a person that performs pharmacy

benefits management . . . for a . . . third-party payer.”

Id. § 19-03.6-01(4) (emphasis added). “Third-party

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payer” is defined as “an organization other than the

patient or health care provider involved in the

financing of personal health services.” Id. § 19-03.601(6). This definition includes ERISA plans, which

are necessarily “involved in the financing of personal

health services” and are distinct from “the patient or

health care provider.” See id.; 29 U.S.C. § 1002(1)

(explaining that, for the purposes of ERISA, an

employee benefit plan is one that is established “for

the purpose of providing” “medical, surgical, or

hospital care or benefits”). The legislation also

regulates “[p]lan sponsor[s],” which it defines as “the

employer in the case of an employee benefit plan

established or maintained by a single employer, or

the employee organization in the case of a plan

established or maintained by an employee

organization.” N.D. Cent. Code § 19-03.6-01(5)

(emphasis added). This definition is taken verbatim

from ERISA, see 29 U.S.C. § 1002(16)(B), and these

“plan sponsors,” depending on their functions, may

qualify as ERISA fiduciaries, see id. § 1002(21)(A).

Two of our prior cases dictate that regulating by

implicit reference to ERISA plans results in

preemption. First, in Gerhart, we determined that an

Iowa statute was preempted because it had a

prohibited “reference to” ERISA. 852 F.3d at 729-30.

Although we found that the Iowa act at issue

contained an “express reference” to ERISA, see id. at

729, we also noted that “the Iowa law . . . makes

implicit reference to ERISA through regulation of

PBMs who administer benefits for ‘covered entities,’

which, by definition, include health benefit plans and

employers, labor unions, or other groups ‘that

provide[] health coverage,’” id. (emphasis added). We

explained that because “[t]hese entities are

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necessarily subject to ERISA regulation,” the

requirements “necessarily affect[] ERISA plans,”

and, as a result, the Iowa law contained an

“impermissible reference to” ERISA. Id. at 729-30.

One year later, in Rutledge, we followed this

reasoning in evaluating an Arkansas statute that

was “similar in purpose and effect” to the Iowa law at

issue in Gerhart. See Rutledge, 891 F.3d at 1112.

There, we determined the Arkansas law contained an

impermissible “reference to” ERISA plans, see id. at

1112-13, because the challenged law regulated PBMs

that administered a “pharmacy benefits plan or

program,” see Ark. Code. Ann. § 17-92-507(a)(7)

(2017), which in turn was defined as any plan or

program that “pays for . . . pharmacist services,” id. §

17-92-507(a)(9). We concluded the Arkansas law

“implicitly referred to ERISA by regulating the

conduct of PBMs administering or managing

pharmacy benefits” on behalf of ERISA plans. See

Rutledge, 891 F.3d at 1112.

As in Gerhart and Rutledge, so too here. The

North Dakota legislation’s definitions of and

references to “pharmacy benefits manager,” “thirdparty payer,” and “plan sponsor” mean the

legislation’s provisions apply to plans “subject to

ERISA regulation.” Id. “Because benefits affected by

[the statute] are provided by ERISA-covered

programs, the requirements imposed for the

management and administration of these benefits

necessarily affects ERISA plans.” Gerhart, 852 F.3d

at 729. Thus, the existence of an ERISA plan is

essential to the law’s operation because “it cannot be

said that the . . . law functions irrespective of the

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existence of an ERISA plan.” Id. at 729-30 (internal

quotation marks, ellipses, and brackets omitted).

As the State of Arkansas did in Rutledge, North

Dakota argues that Gerhart should be limited to its

consideration of the Iowa law’s “express reference” to

ERISA plans and that Gerhart’s “implicit reference”

analysis is dicta inconsistent with Supreme Court

precedent.2 But we have already rejected this

argument. Rutledge, 891 F.3d at 1112 (“The state

argues that Gerhart should be limited to its

consideration of the Iowa Act’s ‘express reference’ to

ERISA, and that Gerhart’s ‘implicit reference’

analysis is dicta inconsistent with Supreme Court

precedent. We disagree.”). Instead, Gerhart and

Rutledge control, and a statute that implicitly

regulates ERISA plans as part of its regulatory

scheme is preempted by ERISA and cannot be saved

Citing Dillingham Construction, 519 U.S. at 325, North

Dakota argues that our cases construing the scope of ERISA’s

preemption clause conflict with Supreme Court precedent. The

State suggests that if a law regulates a class of third-party

administrators or claim processors whose customers merely

include but are not limited to ERISA plans, it logically follows

that the law does not act immediately and exclusively upon

ERISA plans and that the existence of ERISA plans is not

essential to the law’s operation. See also Pharm. Care Mgmt.

Ass’n v. District of Columbia, 613 F.3d 179, 189-90 (D.C. Cir.

2010) (reasoning similarly); Pharm. Care Mgmt. Ass’n v. Rowe,

429 F.3d 294, 304 (1st Cir. 2005) (same). The Supreme Court

recently granted a writ of certiorari in Rutledge, 589 U.S. ---,

140 S. Ct. 812 (2020) (mem.), to resolve this question. But

regardless of whether Gerhart and Rutledge were rightly

decided, we are bound by those panel decisions unless they are

abrogated by the Supreme Court or overruled by this circuit

sitting en banc. See Mader v. United States, 654 F.3d 794, 800

(8th Cir. 2011) (en banc).

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merely because the reference also includes entities

not covered by ERISA. See id. (rejecting Arkansas’s

argument that “we are not completely bound by” the

Gerhart panel’s reasoning).

Accordingly, the North Dakota legislation is

preempted because it “relates to” ERISA plans “by

regulating the conduct of PBMs administering or

managing pharmacy benefits.” See Rutledge, 891

F.3d at 1112; see also Metro. Life Ins. v

Massachusetts, 471 U.S. 724, 739 (1985) (“Even

indirect state action bearing on private pensions may

encroach upon the area of exclusive federal concern.”

(brackets omitted)); Express Scripts, Inc. v. Wenzel,

262 F.3d 829, 833 (8th Cir. 2001) (“State laws that

are not targeted at ERISA plans, but which

indirectly force a plan administrator to make a

particular decision or take a particular action may be

held to ‘relate to’ employee benefit plans.”).

Next, North Dakota urges in a footnote at the end

of its argument regarding ERISA preemption that, if

we find the legislation to be preempted, we should

“remand for a determination of which provisions are

saved from preemption under ERISA’s Savings

Clause.” The district court did not address this issue

and North Dakota provides no argument as to which

provisions might be saved by the savings clause. See

29 U.S.C. § 1144(b)(2)(A). We therefore conclude that

North Dakota has waived this issue. See Mahler v.

First Dakota Title Ltd. P’ship, 931 F.3d 799, 807 (8th

Cir. 2019) (finding an issue waived where plaintiff

mentioned it only in passing and did not include the

issue in the statement of issues); Hamilton v.

Southland Christian Sch., Inc., 680 F.3d 1316, 131819 (11th Cir. 2012) (holding that appellee’s failure to

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raise an affirmative defense on appeal waives any

right to claim such a defense on appeal).

For the reasons above, we affirm in part, reverse

in part, and remand with directions to enter

judgment in favor of PCMA.3

_____________

North Dakota does not cross-appeal the district court’s

determination that Medicare Part D preempts North Dakota

Century Code section 19-02.1-16.2(2). And because Gerhart and

Rutledge dictate that ERISA preempts the North Dakota

legislation in its entirety, we need not address that

determination. See Duffner v. City of St. Peters, 930 F.3d 973,

976 (8th Cir. 2019) (noting that “[w]e may affirm on any ground

supported by the record”).

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NORTH DAKOTA

PHARMACEUTICAL

CARE MANAGEMENT

ASSOCIATION,

)

)

)

)

Plaintiff,

)

vs.

)

)

MYLYNN TUFTE, in

)

her official capacity as

the State Health Officer )

of North Dakota; MARK )

J. HARDY, in his official )

)

capacity as the

Executive Director of the )

)

North Dakota Board of

)

Pharmacy; FRAN

)

GRONBERG, in her

)

official capacity as the

)

President of the North

)

Dakota Board of

Pharmacy; and WAYNE )

)

STENEHJEM, in his

)

official capacity as the

)

Attorney General of

)

North Dakota,

)

Defendants. )

ORDER GRANTING

IN PART AND

DENYING IN PART

THE PARTIES’

CROSS MOTIONS

FOR SUMMARY

JUDGMENT

Case No.: 1:17-cv-141

Before the Court are cross motions for summary

judgment. The Plaintiff, Pharmaceutical Care

Management Association (“PCMA”) filed its motion

for summary judgment on January 19, 2018. See

Docket No. 33. The Defendants, Mylynn Tufte, Mark

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Hardy, Fran Gronberg, and Wayne Stenehjem, in

their official capacities (collectively “North Dakota”),

filed a response in opposition and a cross-motion for

summary judgment on March 9, 2018. See Docket

Nos. 38 and 39. PCMA filed a response on April 9,

2018. See Docket No. 40. North Dakota filed a reply

onApril 23, 2018. See Docket No. 42. With the

Court’s permission, PCMA filed supplemental

authority on July 9, 2018. See Docket No. 44. North

Dakota filed a response to PCMA’s supplemental

authority on July 20, 2018. See Docket No. 50. In

light of recent case law, both parties also filed

supplemental briefing on July 20, 2018. See Docket

Nos. 48 and 49. For the reasons set forth below, the

Court grants, in part, each motion for summary

judgment and denies, in part, each motion for

summary judgment.

I. BACKGROUND

PCMA is a national trade association

representing pharmacy benefit managers (“PBMs”),

with its principal place of business in Washington,

D.C. See Docket No. 1. PBMs are third-party health

plan administrators that manage and administer

prescription drug benefits on behalf of health

insurance plans. See Docket No. 10-3, p. 3. PBMs

negotiate prescription drug prices with drug

manufacturers and pharmacies, create networks of

pharmacies to fill prescriptions, and process and pay

insurance claims. See Docket No. 1, p. 4. When an

insured patient fills a prescription, the pharmacy

generally contacts a PBM to obtain insurance

coverage and copayment information. See Docket No.

39-2, p. 6. After the pharmacy fills the prescription,

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the PBM reimburses the pharmacy based on a rate

set out in a contract between the PBM and the

pharmacy. See Docket No. 1, p. 6. The PBM then

bills the health insurance plan at a rate negotiated

between the PBM and the health insurance plan. See

Docket No. 39-2, p. 6. In sum, PBMs are

intermediaries between patients’ and health

insurance plans’ demand for prescription drugs and

manufacturers’

and

pharmacies’

supply

of

prescription drugs.

In April 2017, North Dakota’s governor, Doug

Burgum, signed Senate Bills 2258 and 2301 into law.

See S.B. 2258, 2017 Leg., 65th Sess. (ND 2017); S.B.

2301, 2017 Leg., 65th Sess. (ND 2017). The laws

regulate PBMs and pharmacies. According to North

Dakota, the legislation “sought to define the rights of

pharmacist in relation to [PBMs], and to regulate

certain practices by PBMs.” See Docket No. 39-1, p.

2. The legislation contains provisions concerning (1)

the practice of pharmacy; (2) pharmacy accreditation

and credentialing; and (3) perceived self-dealing and

abusive practices on the part of PBMs. The parties

contest the validity of various provisions, all of which

are summarized below.

A. PROVISIONS

CONCERNING

PRACTICE OF PHARMACY

THE

The legislation contains the following provisions

concerning the practice of pharmacy:



S.B. 2258 §1(7) allows pharmacies to

disclose “relevant” information to patients,

including “the cost and clinical efficacy of a

more affordable alternative drug if one is

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available,” and it prohibits gag orders on

such disclosure.



S.B. 2258 §1(5) allows pharmacies to

disclose to patients or plan sponsors

information regarding the amount of

reimbursement the pharmacy receives

after a prescription drug is dispensed.



S.B. 2258 § 1(8) authorizes pharmacies to

“mail or deliver drugs to a patient as an

ancillary service of a pharmacy.”



S.B. 2258 § 1(9) bars contracts that

prohibit pharmacies from charging patients

shipping and handling fees.



S.B. 2301 § 1(5) authorizes pharmacies to

dispense “any and all drugs allowed” under

their license.

B. PROVISIONS CONCERNING PHARMACY ACCREDITATION AND CREDENTIALING

The legislation contains the following provisions

concerning

pharmacy

accreditation

and

credentialing:



S.B. 2258 §1(11) prohibits PBMs from

requiring

“pharmacy

accreditation

standards or recertification requirements

inconsistent with, more stringent than, or

in addition to federal and state

requirements for licensure as a pharmacy

in this state.”



S.B. 2301 §1(4) similarly prohibits PBMs

from requiring, for participation in a PBM’s

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pharmacy

network,

“accreditation

standards or recertification requirements

. . . which are inconsistent with, more

stringent than, or in addition to the federal

and state requirements for licensure as a

pharmacy in this state.”



S.B. 2258 § 1(3) requires PBMS to utilize

pharmacy performance standards set by

unbiased, nationally recognize entities, and

it regulates the fees PBMs may impose

based on pharmacy performance standards.

C. PROVISIONS

CONCERNING

PERCEIVED SELF-DEALING AND ABUSIVE

PRACTICES ON THE PART OF PBMS

The legislation contains the following provisions

concerning perceived self-dealing and abusive

practices on the part of PBMs:



S.B. 2258 § 1(2) prohibits PBMs and thirdparty payers from charging pharmacies

certain fees, including fees that are

imposed after the point of sale, not reported

on the remittance advice for a claim, or are

not apparent at the time of claim

processing.



S.B. 2258 § 1(4) prohibits copayments that

exceed the cost of the medication being

purchased, and it bars PBMs from

“redact[ing] the adjudicated cost,” i.e., the

amount the PBM or third-party payer

reimburses a pharmacy for a prescription.



S.B. 2258 §1(10) requires PBMs to disclose

certain information about their pharmacy

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networks “to enable the pharmacy to make

an informed contracting decision.”



S.B. 2301 § 1(2) obligates PBMs and thirdparty payers having ownership interest in

a pharmacy to disclose, to plan sponsors, on

request, the difference between the amount

paid to the pharmacy and the amount

charged to the plan sponsor.



S.B. 2301 § 1(3) prohibits PBMs from

having an ownership interest in patient

assistance programs or mail-order specialty

pharmacy unless the PBM agrees “to not

participate in a transaction that benefits

the [PBM] . . . instead of another person

owed a fiduciary duty.”

On July 11, 2017, PCMA filed a complaint against

State Health Officer Mylynn Tufte; Executive

Director of the North Dakota Board of Pharmacy,

Mark J. Hardy; President of the North Dakota Board

of Pharmacy, Fran Gronberg; and North Dakota’s

Attorney General, Wayne Stenehjem. See Docket No.

1. PCMA then filed a motion for a preliminary

injunction on July 20, 2017. See Docket No. 10. The

Court held a hearing regarding PCMA’s motion for

preliminary injunction on August 22, 2017. See

Docket No. 24. On November 7, 2017, the Court

denied PCMA’s motion for a preliminary injunction.

See Docket No. 27. Now the Court considers the

parties’ cross-motions for summary judgment. See

Docket Nos. 33 and 38.

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II. LEGAL DISCUSSION

PCMA argues the legislation places restrictions

and requirements on PBMs that are preempted by

the Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. § 1001 et seq., and

Medicare Prescription Drug Improvement and

Modernization Act of 2003 (“Medicare Part D”), 42

U.S.C. § 1395w-101 et seq. PCMA seeks this Court’s

declaration that the legislation is expressly

preempted by federal law. In opposition, North

Dakota contends the legislation regulates areas of

concern that have been excepted from federal

regulation. As detailed below, the Court concludes

the legislation is not preempted by federal law, save

one provision requiring PBMs to disclose certain

information to health insurance plans, which the

Court finds preempted by an overlapping Medicare

Part D standard.

A. STANDARD OF REVIEW

Summary judgment is appropriate when the

evidence, viewed in a light most favorable to the nonmoving party, indicates no genuine issues of material

fact exist and the moving party is entitled to

judgment as a matter of law. Davison v. City of

Minneapolis, 490 F.3d 648, 654 (8th Cir. 2007); see

also Fed. R. Civ. P. 56(a). Summary judgment is not

appropriate if there are factual disputes that may

affect the outcome of the case under the applicable

substantive law. Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248 (1986). A genuine issue of material fact

is not the “mere existence of some alleged factual

dispute between the parties.” State Auto Ins. Co. v.

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Lawrence, 358 F.3d 982, 985 (8th Cir. 2004). Rather,

an issue of material fact is genuine “if the evidence is

such that a reasonable jury could return a verdict for

the nonmoving party.” Anderson, 477 U.S. at 248.

The moving party always bears the burden of

demonstrating the absence of a genuine issue of

material fact. Celotex Corp. v. Catrett, 477 U.S. 317,

323 (1986). The non-moving party may not rely

merely on allegations or denials; it must set out

specific facts showing a genuine issue for trial.

Forrest v. Kraft Foods, Inc., 285 F.3d 688, 691 (8th

Cir. 2002). The court must view the facts in the light

most favorable to the non-moving party. Adickes v.

S.H. Kress & Co., 398 U.S. 144, 157 (1970).

B. THE PREEMPTION DOCTRINE

The preemption doctrine is rooted in the

Supremacy Clause, which states federal law “shall be

the supreme Law of the Land . . . any Thing in the

Constitution or Laws of any State to the Contrary

notwithstanding.” U.S. Const. art. VI, cl. 2. Because

of the Supremacy Clause’s mandate, a state law that

conflicts with federal law is without effect. Maryland

v. Louisiana, 451 U.S. 725, 746 (1981). Courts have

delineated two types of preemption: express and

implied. See Gade v. Nat’l Solid Wastes Mgmt. Ass’n,

505 U.S. 88, 98 (1992). Express preemption occurs

when Congress has “unmistakably ordained” that its

enactments alone are to regulate a subject. Jones v.

Rath Packing Co., 430 U.S. 519, 525 (1977). Implied

preemption occurs when congressional command is

implicitly contained in a statute’s structure and

purpose. Gade, at 98.

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Congressional intent is at the base of all

preemption analysis. Cipollone v. Liggett Grp., Inc.,

505 U.S. 504, 516 (1992). Courts must start their

inquiry with the assumption that the historic police

powers of the States were not meant to be

superseded by federal law unless that was the “clear

and manifest” intent of Congress. Rice v. Sante Fe

Elevator Corp., 331 U.S. 218, 230 (1947); see also

Cipollone, at 516. This assumption assures the

“federal-state balance will not be disturbed

unintentionally by Congress or unnecessarily by the

courts.” Jones, 430 U.S. at 525. “[A] high threshold

must be met if a state law is to be preempted for

conflicting with the purposes of a federal Act.”

Chamber of Commerce of the U.S. v. Whiting, 563

U.S. 582, 607 (2011) (quoting Gade, 505 U.S. at 110).

C. ERISA PREEMPTION

ERISA comprehensively regulates employee

welfare benefit plans that “through the purchase of

insurance or otherwise,” provide medical, surgical, or

hospital care, or benefits in the event of sickness,

accident, disability, or death. 29 U.S.C. § 1002(1).

ERISA was intended to:

protect interstate commerce and the interests

of participants in employee benefit plans and

their beneficiaries, by requiring the disclosure

and reporting to participants and beneficiaries

of financial and other information with respect

thereto, by establishing standards of conduct,

responsibility, and obligation for fiduciaries of

employee benefit plans, and by providing for

appropriate remedies, sanctions, and ready

access to the Federal courts.

20a

29 U.S.C. § 1001(b).

“To meet the goals of a comprehensive and

pervasive Federal interest and the interests of

uniformity with respect to interstate plans, Congress

included an express preemption clause in ERISA for

the displacement of State action in the field of

private employee benefit programs.” Minn. Chapter

of Associated Builders & Contractors, Inc. v. Minn.

Dep’t of Pub. Safety, 267 F.3d 807, 810 (8th Cir.

2001). The Supreme Court has described the

preemption clause as having “a broad scope, and an

expansive sweep,” and being “conspicuous for its

breadth.” California Div. of Labor Standards

Enforcement v. Dillingham Constr., N.A., Inc., 519

U.S. 316, 324 (1997) (internal citation omitted).

The scope of ERISA preemption has left courts

“deeply troubled.” Prudential Ins. Co. of America v.

Nat’l Park Med. Ctr. Inc., 154 F.3d 812, 815 (8th Cir.

1998). Courts have struggled to reconcile the

sweeping language of ERISA’s preemption clause

with the assumption that Congress does not intend

to bar state action in fields of traditional state

regulation or historic police powers. See New York

State Conference of Blue Cross & Blue Shield Plans

v. Travelers Ins. Co., 514 U.S. 645, 654-55 (1995)

(“we have never assumed lightly that Congress has

derogated state regulation, but instead have

addressed claims of pre-emption with the starting

presumption that Congress does not intend to

supplant state law.”). The Supreme Court has

warned that ERISA’s preemption clause must not be

read to “extend to the furthest stretch of its

indeterminacy.” De Buono v. NYSA-ILA Med. and

Clinical Services Fund, 520 U.S. 806, 813 (1997).

21a

The preemption clause specifically provides that

ERISA “shall supersede any and all State laws

insofar as they may now or hereafter relate to any

employee benefit plan[.]” 29 U.S.C. § 1144(a)

(emphasis added). “Yet, Congress did not define what

it meant by state laws that ‘relate to’ an ERISA

benefit plan anywhere in the statute.” Prudential,

154 F.3d at 819. The Supreme Court has

“endeavored with some regularity to interpret and

apply the ‘unhelpful text’ of ERISA’s pre-emption

provision.” Dillingham, 519 U.S. at 324 (quoting

Travelers Ins. Co., 514 US at 656). The Court’s

endeavor has resulted in a two-part test. ERISA

preempts state laws that (1) include a reference to

ERISA plans, or (2) have an impermissible

connection with ERISA plans. Gobeille v. Liberty

Mut. Ins. Co., 136 S.Ct. 936, 943 (2016).

1. WHETHER S.B. 2258 AND S.B. 2301

INCLUDE A REFERENCE TO ERISA

PLANS

Neither S.B. 2258 nor S.B. 2301 contain an

explicit reference to ERISA or ERISA plans. ERISA

is not mentioned, discussed, defined, or excluded in

either bill. However, PCMA argues that both S.B.

2258 and S.B. 2301 contain “implicit” references to

ERISA because, within each bill, the terms

pharmacy benefit manager, third-party payer, and

plan sponsor are defined broadly enough to implicate

ERISA health plans. See Docket No. 33-1, pp. 16-18.

Under the “reference to” inquiry, the Supreme

Court has preempted state laws that (1) imposed

requirements by reference to ERISA covered

programs; (2) specifically exempted ERISA plans

22a

from an otherwise generally applicable statute; and

(3) premise a cause of action on the existence of an

ERISA plan. Prudential, 154 F.3d at 822. An

impermissible reference to ERISA occurs when a

state law “acts immediately and exclusively upon

ERISA plans . . . or where the existence of ERISA

plans is essential to the law’s operation[.]” Gobeille,

136 S.Ct. at 943 (internal citation and quotation

omitted).

PCMA cites the Eighth Circuit Court of Appeals

decision in Pharmaceutical Care Management

Association v. Gerhart for the proposition that a

general state-law reference broad enough to

encompass ERISA plans must result in preemption.

852 F.3d 722 (8th Cir. 2017). In PCMA’s words: “A

statute that implicitly refers to ERISA plans, such as

by including ‘health benefit plans’ within its scope,

has a prohibited reference to ERISA plans.” See

Docket No. 33-1, p. 16. In Gerhart, PCMA sued the

state of Iowa seeking a declaration that an Iowa

state law regulating how PBMs established generic

drug pricing was preempted by ERISA. Id. at 726.

The Eighth Circuit held the Iowa statute contained

an impermissible reference to ERISA. Id. at 729-30.

The court noted that, by its “express terms,” the Iowa

law “specifically exempts certain ERISA plans from

its otherwise general application.” Id. at 729. The

court held that “[b]ecause of this impermissible

reference to ERISA or ERISA plans, [the Iowa law] is

preempted under 29 U.S.C. § 1144(a).” Id. at 730.

The court also noted the law contained an “implicit

reference” to ERISA because it regulated PBMs that

administer benefits for plans subject to ERISA. Id. at

729.

23a

The Eighth Circuit recently commented on the

Gerhart

holding

in

Pharmaceutical

Care

Management Association. v. Rutledge, 891 F.3d 1109

(8th Cir. 2018). The court stated:

The state argues that Gerhart should be

limited to its consideration of the Iowa Act’s

“express reference” to ERISA, and that

Gerhart’s “implicit reference” analysis is dicta

inconsistent with Supreme Court precedent.

We disagree. In addition to finding that Iowa

Code § 510B.8 had a prohibited express

reference to ERISA, the Gerhart court found

that the “Iowa law also makes implicit

reference to ERISA through regulation of

PBMs who administer benefits for ‘covered

entities,’ which, by definition, include health

benefit plans and employers, labor unions, or

other groups ‘that provide[ ] health coverage.’

These entities are necessarily subject to ERISA

regulation.” 852 F.3d at 729.

Id. at 1112 (alteration in original).

PCMA argues the decisions in Gerhart and

Rutledge establish a new rule regarding the

“reference to” inquiry. See Docket No. 48, p. 8

(“Rutledge confirmed that an implicit reference to

ERISA exists even where the law does not only

regulate entities necessarily subject to ERISA

regulation.”) (emphasis in original). However, the

rule PCMA attempts to distill from Gerhart—that a

general state-law provision broad enough to

encompass ERISA plans within its scope constitutes

an implicit reference to an ERISA plan—would

vastly expand the scope of the ERISA preemption

doctrine. The Court finds nothing in the Eight

24a

Circuit’s analysis to indicate such an intent. The

Rutledge court explained Gerhart is not “inconsistent

with the Supreme Court’s precedent in Travelers or

De Buono . . . .” 891 F.3d at 1112. Those cases

require preemption under the “reference to” inquiry

when a state law (1) acts “immediately and

exclusively” on ERISA plans, or (2) when the

existence of an ERISA plan is “essential to the law’s

operation.” Gobeille, 136 S.Ct. at 943 (alteration in

original) (quoting Dillingham, 519 U.S. at 325).

Reading any state-law definition broad enough to

include ERISA plans within its scope to constitute an

impermissible “implicit” reference to ERISA would

extend the preemption clause “to the furthest stretch

of its indeterminacy.” De Buono, 520 U.S. at 813. For

example, North Dakota’s definition of “organization”

includes, among others, “any legal or commercial

entity,” N.D.C.C. § 1-01-49(5), and would “by

definition” include “entities [that] are necessarily

subject to ERISA regulation.” Gerhart, 852 F.3d at

729. The United States Supreme Court has rejected

this type of “uncritical literalism” in applying the

ERISA preemption clause. See Gobeille, 136 S.Ct. at

943 (quoting Travelers, 514 U.S. at 656). As such,

regarding the “reference to” analysis the Court must

conduct, it will apply the test set out in Dillingham

and refined by its progeny: “[w]here a State’s law

acts immediately and exclusively upon ERISA plans .

. . or where the existence of ERISA plans is essential

to the law’s operation . . ., that ‘reference’ will result

in pre-emption.” Gobeille, at 943 (alteration in

original) (quoting Dillingham, 519 U.S. at 325).

25a

i. NORTH DAKOTA’S DEFINITION

OF “PHARMACY BENEFITS MANAGER”

PCMA argues North Dakota’s definition of

“pharmacy benefits manager” includes entities that

provide services to ERISA plans, and thus the

definition constitutes an impermissible reference to

ERISA. See Docket No. 33-1, pp. 16-17. The

legislation provides that “pharmacy benefit

manager,” as used within each bill, has the same

definition as set out in N.D.C.C. § 19-03.6-01 (dealing

with pharmacy records audits). See S.B. 2258

§ 1(1)(a) and S.B. 2301 § 1(1)(a); see also N.D.C.C.

§§ 19-02.1-14.2(1)(d)

and

19-02.1-16.1(1)(a).

“Pharmacy benefits manager” is defined as:

[A] person that performs pharmacy benefits

management and includes any other person

acting for such person under a contractual or

employment relationship in the performance of

pharmacy benefits management for a

managed care company, nonprofit hospital or

medical service organization, insurance

company, third-party payer, or health program

administered by a state agency.

See N.D.C.C. § 19-03.6-01(4).

It is conceivable that a “pharmacy benefits

manager” could provide services to an insurance

plan, and that the insurance plan could be subject to

ERISA. But that is one outcome of many, and more

importantly, one not expressed in the legislation’s

language. A state law impermissibly references

ERISA when it “acts immediately and exclusively

upon ERISA plans . . . or where the existence of

26a

ERISA plans is essential to the law’s operation[.]”

Gobeille, 136 S.Ct. at 943. North Dakota’s definition

of “pharmacy benefits manager” includes entities

that contract with a broad range of parties. Although

insurance plans may be one of these parties, the

definition makes no distinction as to whether an

insurance plan is subject to ERISA. The Court finds

the legislation does not impermissibly reference

ERISA plans by way of North Dakota’s definition of

pharmacy benefits manager.

ii. NORTH DAKOTA’S DEFINITION

OF “THIRD-PARTY PAYER”

PCMA argues North Dakota’s definition of “thirdparty payer” impermissibly includes ERISA plans

within its scope. See Docket No. 33-1, pp. 16-17. The

legislation provides that the term “third-party

payer,” as used within each bill, has the same

definition as in N.D.C.C. § 19-03.6-01. See S.B. 2258

§ 1(1)(c) and S.B. 2301 §1(1)(d); see also N.D.C.C.

§ 19-02.1-16.1(1)(c). “Third-party payer” is defined as

“an organization other than the patient or health

care provider involved in the financing of personal

health services.” N.D.C.C. § 19-03.6-01(6). The

definition clearly applies to a broad range of entities

that have no relation to ERISA. The legislation, by

way of North Dakota’s definition of third-payer,

neither “acts immediately and exclusively upon

ERISA plans” nor is the “existence of ERISA plans

essential to the law’s operation.” Gobeille, 136 S.Ct.

at 943. The Court finds no impermissible reference to

ERISA in North Dakota’s definition of third-party

payer.

27a

iii. NORTH DAKOTA’S DEFINITION

OF “PLAN SPONSOR”

PCMA argues North Dakota’s definition of “plan

sponsor” impermissibly references ERISA plans.

PCMA specifically cites the definition’s inclusion of

the term “employee benefit plan,” which includes

ERISA plans within its scope. See Docket No. 33-1, p.

18. The legislation provides that “plan sponsor,” as

that term is used within each bill, has the same

definition as in N.D.C.C. § 19-03.6-01. See S.B. 2258

§ 1(1)(b) and S.B. 2301 § 1(1)(b); see also N.D.C.C.

§ 19-02.1-16.1(1)(b). That provision defines “plan

sponsor” as “the employer in the case of an employee

benefit plan established or maintained by a single

employer, or the employee organization in the case of

a plan established or maintained by an employee

organization . . . or other similar group that

establishes or maintains the plan.” See N.D.C.C.

§ 19-03.6-01(5) (emphasis added). PCMA contends

that because the reference to “employee benefit plan”

encompasses ERISA covered plans, it constitutes an

impermissible implicit reference to an ERISA plan.

See Docket No. 33-1, p. 18.

PCMA’s argument is without merit. The

legislation uses the term “plan sponsor” to either

allow pharmacies, or require PBMs, to disclose

certain information to, among others, the sponsors of

plans. See S.B. 2258 § 1(5) (allowing pharmacies to

disclose information to plan sponsors and patients

regarding drug reimbursement amounts); S.B. 2301

§ 1(2) (requiring PBMs to disclose the difference

between amounts paid to pharmacies and amounts

charged to plan sponsors for prescription drugs).

However, the plans referenced in the definition of

28a

“plan sponsors” may or may not be subject to ERISA,

and thus the law still has purpose absent ERISA

applicability. See e.g. 29 U.S.C. §§ 1003(b) and

1144(a) (exempting government-sponsored plans,

church-sponsored plans, workmen’s compensation

plans, and other types of plans from ERISA

regulation and preemption). In other words, the

legislation makes no distinction between ERISA and

non-ERISA plans, and it applies equally to both.

Thus, it does not constitute an impermissible

reference to ERISA or ERISA plans.

In sum, PCMA’s arguments regarding the scope

of certain terms and definitions oversimplifies the

issue. The “reference to” inquiry concerns the law’s

implications on ERISA plans—i.e., whether the law

“acts immediately and exclusively upon ERISA plans

. . . or where the existence of ERISA plans is

essential to the law’s operation[.]” Gobeille, 136 S.Ct.

at 943 (internal citation and quotation omitted).

North Dakota’s law does neither, and thus the Court

finds no impermissible reference to ERISA.

2. WHETHER THE LEGISLATION HAS

AN IMPERMISSIBLE CONNECTION

WITH ERISA PLANS

Because the Court finds that neither bill includes

a “reference to” ERISA, the Court continues its

preemption analysis under the “connection with”

prong. A state law has an impermissible “connection

with” ERISA plans when it “governs . . . a central

matter of plan administration” or “interferes with

nationally uniform plan administration.” Gobeille,

136 S.Ct. at 943. PCMA’s arguments largely focus on

PBMs’ relationships with ERISA plans. PCMA

29a

asserts the legislation’s imposition of requirements

on PBMs necessarily affects PBMs’ ability to provide

services to ERISA plans. Thus, PCMA’s logic

continues, the legislation’s limitations on PBMs have

impermissible downstream effects on ERISA plans

and plan administration. See Docket No. 33-1, pp.

20-21. In response, North Dakota emphasizes the

legislation’s relationship to the practice of

pharmacy—an area normally left to state regulation.

See Docket No. 49, p. 10.

Both parties also disagree as to how the Eighth

Circuit Court of Appeals’ recent decisions in Gerhart

and Rutledge bear on the “connection with” analysis

this Court must conduct. Gerhart involved an Iowa

law that regulated how PBMs establish generic drug

pricing and also mandated disclosure of PBMs’

maximum allowable cost (“MAC”) methodology.1 852

F.3d at 726. The Eighth Circuit found the

establishment of MAC lists and generic drug

reimbursement rates to be matters central to plan

administration, and it concluded Iowa’s regulation of

MAC calculations interfered with nationally uniform

plan administration. Id. at 731. Similarly, in

Rutledge, PCMA challenged an Arkansas law

mandating PBMs follow certain practices with

regard to MAC methodology. 891 F.3d at 1111. The

Eighth Circuit affirmed the district court’s conclusion

that the Arkansas law interferes with uniform plan

administration because it “regulates PBMs in ways

Maximum allowable cost lists detail the amount a PBM is

willing to reimburse a pharmacy for the purchase of a generic

prescription drug. Each PBM uses its own methodology to

determine these reimbursement rates and to create maximum

allowable cost lists. Gerhart, at 726.

1

30a

fundamentally similar to the Iowa statute in Gerhart

. . . .” 240 F. Supp. 3d. 951, 958 (E.D. Ark. 2017); 891

F.3d at 1112-1113;. While illustrative, the Court does

not find either Gerhart or Rutledge necessarily

dispositive of this case as the parties suggest. North

Dakota’s legislation does not mandate any specific

practice

regarding

MAC

methodology

or

reimbursement rates. Rather, the legislation

contains provisions regulating the practice of

pharmacy and pharmacy accreditation standards,

provisions addressing disclosure obligations, and

prohibitions on certain post point-of-sale fees that

may be levied on pharmacies. Thus, the Court will

examine the specifics of North Dakota’s law to

determine whether it (1) governs matters central to

plan administration, or (2) interferes with nationally

uniform plan administration. See Gobeille, 136 S.Ct.

at 943.

i. WHETHER THE LEGISLATION

GOVERNS MATTERS CENTRAL TO

PLAN ADMINISTRATION

A state law that governs matters central to

ERISA plan administration is preempted by ERISA.

Gobeille, 136 S.Ct. at 943. “Obligations undertaken

with plan administration include ‘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.’” Gerhart, 852 F.3d at 730 (quoting

Fort Halifax Packing Co. Inc., v. Coyne, 482 U.S. 1, 9

(1987)). Neither bill contains any provisions

concerning claimant eligibility determinations, the

31a

monitoring of funds for benefit payments, or the

keeping of appropriate records for reporting

requirements. Rather, the legislation limits the

supplanting

of

state

pharmacy

licensing

requirements, see e.g. S.B. 2258 § 1(11); S.B. 2301

§ 1(4), addresses conflicts occurring in the provision

of pharmacy services in North Dakota, see e.g. S.B.

2301 § 1(3), authorizes North Dakota pharmacies to

engage in certain practices, see e.g. S.B. 2258 §§ 1(7),

(8), and (9); S.B. 2301 § 1(5), and imposes disclosure

obligations and post point-of-sale fee limitations, see

e.g. S.B. 2258 §§ 1(2) and (4). In short, the legislation

largely regulates pharmacy services, certain fees,

and communication between pharmacies, their

customers, and PBMs. The Court finds neither bill

governs a matter central to ERISA plan

administration.

ii. WHETHER THE LEGISLATION INTERFERES WITH NATIONALLY

UNIFORM PLAN ADMINISTRATION

A state law that interferes with nationally

uniform plan administration is preempted by ERISA.

Gobeille, 136 S.Ct. at 943. PCMA argues the

legislation will impose a variety of burdens and

expenses upon PBMs, the imposition of which will

have a downstream effect on ERISA plans. The

legislation’s incidental effect on plans, PCMA

asserts, will result in interference with nationally

uniform plan administration. See Docket No. 33-1,

pp. 20-21. The Court does not doubt that, like other

state healthcare regulation, the legislation will have

some effect on healthcare plans. For example, the

32a

legislation places various requirements on PBMs

that may result in PBMs losing certain revenues or

incurring expenses. See, e.g., S.B. 2258 §§ 1(2) and

(9) (prohibiting PBMs from levying post point-of-sale

fees on pharmacies and requiring disclosure of

pharmacy network information to enable pharmacies

to make informed contracting decisions). PBMs may

attempt to recoup these lost revenues and expenses

by passing costs on to plans. These increased costs

could potentially affect plans’ decision-making. But

this effect is too tenuous to constitute interference

with nationally uniform plan administration. “[I]f

ERISA were concerned with any state action—such

as medical-care quality standards or hospital

workplace regulations—that increased costs of

providing certain benefits, and thereby potentially

affected the choices made by ERISA plans, [the

Court] could scarcely see the end of ERISA’s preemptive reach, and the words ‘relate to’ would limit

nothing.” Dillingham, 519 U.S. at 329.

PCMA’s arguments fail to bridge the gap between

the legislation and interference with plan

administration—let alone nationally uniform plan

administration. Put another way, PCMA has not

explained how the alleged effects of the legislation

will change how ERISA plans are administered. To

be sure, PCMA has explained, in detail, how the

legislation will force PBMs to modify their business

practices. See, e.g., Docket Nos. 33-3, 33-4, and 33-5.

But it has not articulated a change in custom or

practice that the legislation requires ERISA plans to

make. A state law interferes with nationally uniform

plan administration when it subjects plans to

different requirements in different states. See

Egelhoff, 532 U.S. at 148. North Dakota’s law does

33a

not impose any requirements on ERISA plans.

Consequently, the Court finds the legislation does

not interfere with nationally uniform plan

administration.

D. MEDICARE PART D PREEMPTION

Having determined the legislation is not

preempted by ERISA, the Court turns to the parties’

arguments concerning Medicare Part D preemption.

In regards to Medicare, Congress has proclaimed:

“The standards established under this part shall

supersede any State law or regulation (other than

State licensing laws or State laws relating to plan

solvency) with respect to [Part D] plans which are

offered by [Part D] organizations under this part.” 42

U.S.C. § 1395w-26(b)(3); see also 42 U.S.C. § 1395w112(g) (applying Part C’s preemption provision to

Part D). “The federal scheme preempts a state law

when (1) Congress or the Centers for Medicare and

Medicaid Services (CMS) has established ‘standards’

in the area regulated by the state law; and (2) the

state law acts ‘with respect to’ those standards.”

Rutledge, 891 F.3d at 1113 (citing § 1395w-26(b)(3)).

“For purposes of the preemption provision, a

standard is a statutory provision or a regulation

promulgated under [Medicare] and published in the

Code of Federal Regulations.” New York City Health

and Hospitals Corp. v. WellCare of New York, Inc.,

801 F. Supp. 2d 126, 140 (S.D.N.Y. 2011) (quoting

Med. Card Sys., Inc., v. Equipo Pro Convalecencia,

587 F. Supp. 2d 384, 387 (D.P.R. 2008)); see also

Uhm v. Humana, Inc., 620 F.3d 1134, 1148 n. 20 (9th

Cir. 2010).

34a

According to CMS, the agency responsible for

regulating Medicare Part D plans, Part D

preemption occurs “only when CMS actually creates

standards in the area regulated. To the extent we do

not create any standards whatsoever in a particular

area, we do not believe preemption would be

warranted.” Federal Regulations for Medicare

Program; Medicare Prescription Drug Benefit, 70

Fed. Reg. 4,320 (January 28, 2005). For preemption

to occur, “[c]onflict between the state law and the

federal standard is unnecessary.” Rutledge, 891 F.3d

at 1113.

Medicare’s preemption provision contains a

savings clause that expressly prohibits federal

interference with state regulation of the practice of

medicine: “Nothing in this subchapter shall be

construed to authorize any Federal officer or

employee to exercise any supervision or control over

the practice of medicine or the manner in which

medical services are provided . . . .” 42 U.S.C. § 1395.

In addition, the Medicare preemption provision

expressly exempts “State licensing laws or State laws

relating to plan solvency” from its scope. 42 U.S.C.

§ 1395w-26(b)(3).

PCMA argues nearly every provision of the

legislation is preempted by Medicare Part D. North

Dakota asserts none are preempted. The Court will

address each contested provision in the following

order: (1) provisions concerning the practice of

pharmacy; (2) provisions regarding accreditation and

credentialing requirements; and (3) provisions

directed at perceived abusive practices and PBM selfdealing. But first the Court turns to PCMA’s

preliminary argument that three specific Medicare

35a

provisions generally preempt any state regulation of

contracts between PBMs and pharmacies.

1. PCMA’S GENERAL

ARGUMENT

PREEMPTION

PCMA first argues 42 U.S.C. § 1395w-104, which

provides beneficiary protections for prescription drug

coverage, preempts any state regulation of contracts

between pharmacies and Part D plans. See Docket

Nos. 33-1, p. 36 and 40, p. 46. PCMA specifically

points to Section 1395w-104(b)(1)(A), requiring Part

D plans to “permit the participation of any pharmacy

that meets the terms and conditions under the plan.”

PCMA argues that because of this standard “a Part

D Sponsor need not contract with a pharmacy that

does not meet those terms and conditions; if a

pharmacy wishes to participate in a plan sponsor’s

network, it has no choice but to accept the plan’s

‘terms and conditions.’” See Docket No. 33-1, p. 36.

Thus, PCMA contends the legislation “interfere[s]

with that standard by preventing North Dakota’s

pharmacies from accepting the plan’s ‘terms and

conditions.’” See Docket No. 33-1, p. 36. First, the

Court disagrees with PCMA’s characterization of this

standard, i.e. that it was meant to give pharmacies

“no choice but to accept the plan’s ‘terms and

conditions.’” See Docket No. 33-1, p. 36. The standard

ensures

patients

have

ready

access

to

pharmaceutical services—hence its title: “Access to

covered part D drugs—assuring pharmacy access—

Participation of any willing pharmacy.” 42 U.S.C.

§ 1395w-104(b)(1)(A); see also Rutledge, 891 F.3d at

1114 (characterizing the standard as setting “forth

requirements with regard to Medicare recipients’

36a

access to pharmacies”). Moreover, this standard has

no bearing on the negotiation and contracting

process between pharmacies and PBMs. The Court

finds Section 1395w-104(b)(1)(A) does not overlap

with North Dakota’s regulation of contracts between

pharmacies and PBMs, and thus it does not preempt

the legislation.

PCMA similarly argues 42 C.F.R. § 423.505,

which provides certain requirements for contracts

between CMS and Part D plan sponsors, preempts

any state regulation of contracts between pharmacies

and PBMs. See Docket Nos. 33-1, p. 37 and 40, p. 46.

PCMA specifically cites Section 423.505(b)(18)

requiring Part D plans to agree “to have a standard

contract with reasonable and relevant terms and

conditions of participation whereby any willing

pharmacy may access the standard contract and

participate as a network pharmacy . . . .” This

standard parallels 42 U.S.C. § 1395w-104, discussed

directly above, to ensure Part D beneficiaries have

access to pharmaceutical services. Moreover, it only

applies to contracts “between the Part D plan

sponsor and CMS.” Section 423.505(a). The Court

concludes this provision does not preempt the

legislation’s regulation of contracts between PBMs

and pharmacies.

Last, PCMA argues the Medicare Part D “noninterference clause” preempts all state regulation of

contracts between PBMs and pharmacies. See Docket

Nos. 33-1, p. 38; 40, pp. 26-27; and 48, p. 11. The

clause provides:

In order to promote competition under this

part and in carrying out this part, the

Secretary –

37a

(1) may not interfere with negotiations

between

drug

manufacturers

and

pharmacies and PDP sponsors; and

(2) may not require a particular formulary or

institute a price structure for the

reimbursement of covered part D drugs.

42 U.S.C. § 1395w-111(i). By its plain terms, the

clause prohibits the Secretary of the United States

Department of Health and Human Services from

interfering in certain areas. However, the Eighth

Circuit Court of Appeals has interpreted the clause

to prohibit “both federal and state interference in

negotiations between Part D sponsors and

pharmacies . . . .” Rutledge, 891 F.3d at 1113

(emphasis added). PCMA argues “every challenged

provision of [the legislation] interferes in contract

negotiations between plan sponsors/PBMs and

pharmacies by mandating or proscribing outcomes on

issues that would otherwise be bargained for.” See

Docket No. 33-1, p. 38.

PCMA’s argument—that the non-interference

clause creates a type of general field preemption of

state regulation on PBM contracts—is unpersuasive.

First, Rutledge did not decide the preliminary issue

of whether the non-interference clause even applies

to PBM-related regulation. By its plain terms, the

clause prohibits interference between “drug

manufactures and pharmacies and PDP sponsors.”

42 U.S.C. § 1395w111(i)(1). And thus Rutledge did

not hold, as PCMA suggests, that any and all state

regulation of contract negotiations between

pharmacies and PBMs is preempted by Medicare

Part D. Rather than finding the non-interference

clause creates a type of field preemption, Rutledge

38a

explained: “The federal scheme preempts a state law

when (1) Congress or [CMS] has established

‘standards’ in the area regulated by the state law;

and (2) the state law acts ‘with respect to’ those

standards.” Rutledge, at 1113. Rutledge then went on

to examine specific Medicare Part D standards and

concluded the state laws at issue were preempted

because they acted “with respect to” the Part D

Standard. See Rutledge, at 1113-1114 (finding

Arkansas laws regulating the price of retail drugs

and allowing pharmacies to decline to dispense drugs

were preempted by the Medicare Negotiated Price

Standard and the Medicare Pharmacy Access

Standard). Given the Eighth Circuit’s recent analysis

in Rutledge, the Court concludes Section 1395w111(i)

does not bar states from all regulation of PBM

contracts. Accordingly, as instructed by Rutledge, the

Court will examine each provision of the legislation

to determine (1) if Congress or CMS has established

a standard in the area regulated; and (2) whether the

state regulation acts with respect to those standards.

Id. at 1113. The Court concludes all but one provision

survive Medicare Part D analysis.

2. PROVISIONS

CONCERNING

PRACTICE OF PHARMACY

THE

The legislation contains various provisions

regulating the practice of pharmacy. It contains

provisions: (1) allowing pharmacies to dispense any

drug they are licensed to dispense; (2) allowing

pharmacies to disclose pricing information to

patients; and (3) allowing pharmacies to mail or

deliver drugs to patients. As detailed below, the

Court finds these provisions, which regulate the

39a

practice of pharmacy in North Dakota, are not

preempted by Medicare Part D. They do not act with

respect to a Medicare standard, and even if they did,

they regulate the practice of medicine and thus fall

within the scope of the Medicare savings clause. See

42 U.S.C. § 1395 (“Nothing in this subchapter shall

be construed to authorize any Federal officer or

employee to exercise any supervision or control over

the practice of medicine or the manner in which

medical services are provided”).

i. PHARMACIES MAY DISPENSE

ANY DRUG ALLOWED BY THEIR

LICENSE

The legislation provides: “A licensed pharmacy or

pharmacist may dispense any and all drugs allowed

under that license.” S.B. 2301 § 1(5). PCMA suggests

this provision acts with respect to CMS’s standards

concerning formularies. PCMA argues: “[T]his

provision would bar the use of formularies. A

formulary is a list of drugs that a Part D plan covers.

CMS extensively regulates the development and use

of formularies. . . . Allowing North Dakota to ban

formularies

deliberately

undermines

CMS’s

contemplation, regulation, and approval of them.”

See Docket No. 33-1, p. 47. The Court disagrees. This

provision allows pharmacies to dispense drugs in a

manner consistent with their licenses. It has no

bearing on whether a drug may be listed on a

formulary, and it contains no language banning

formularies or compelling Part D plans to cover any

drugs. The Court finds PCMA’s arguments

unavailing.

40a

ii. PHARMACY DISCLOSURE OBLIGATIONS

The legislation contains two provisions regarding

pharmacy disclosure obligations. It first contains a

provision concerning the disclosure of information

regarding drug efficiency and cost:

A pharmacy or pharmacist may provide

relevant information to a patient if the patient

is

acquiring

prescription

drugs.

This

information may include the cost and clinical

efficacy of a more affordable alternative drug if

one is available. Gag orders of such a nature

placed on a pharmacy or pharmacist are

prohibited.

S.B. 2258 § 1(7). The legislation also contains a

provision

allowing

pharmacies

to

disclose

reimbursement amounts they receive:

A pharmacy or pharmacist may disclose to the

plan sponsor or to the patient information

regarding the adjudicated reimbursement paid

to the pharmacy which is compliant under the

federal Health Insurance Portability and

Accountability Act of 1996 . . . .

S.B. 2258 § 1(5). In support of preemption, PCMA

asserts CMS has developed standards concerning

what information must be disclosed to plan

beneficiaries. PCMA cites to various provisions

identifying plan sponsors’ disclosure obligations to

beneficiaries. See Docket No. 40, p. 53; see also 42

U.S.C. § 1395w-104(a)(1) and (a)(2) (setting forth

annual disclosure obligations plan sponsors must

provide to plan enrollees); 42 U.S.C. § 1395w-104(k)

41a

(plan sponsors must ensure pharmacies inform plan

enrollees of “any differential between the price of the

drug to the enrollee and the price of the lowest priced

generic covered part D drug under the plan”).

However, North Dakota’s law does not speak to plan

sponsor disclosure obligations. Rather, it sets forth

disclosure obligations for pharmacies. Thus, it does

not overlap with the standards PCMA cites.

Moreover, it falls squarely within the savings clause

for regulations concerning the manner in which

medical services are provided. See 42 U.S.C. § 1395.

iii. DRUG DELIVERY SERVICES

The legislation also authorizes pharmacies to

mail or deliver drugs to patients: “A pharmacy or

pharmacist may mail or deliver drugs to a patient as

an ancillary service of a pharmacy.” S.B. 2258 § 1(8).

A related provision allows pharmacies to charge

shipping and handling fees: “A pharmacy benefits

manager or third-party payer may not prohibit a

pharmacist or pharmacy from charging a shipping

and handling fee to a patient requesting a

prescription be mailed or delivered.” S.B. 2258 § 1(9).

In support of preemption, PCMA cites standards that

“contemplate the existence of mail-order pharmacies

that are distinct from retail pharmacies.” See Docket

No. 33-1, p. 44; see also 42 C.F.R. § 423.120(a)(1)

(authorizing Part D sponsors to charge beneficiaries

higher cost-sharing amounts for using retail

pharmacies instead of mail-order pharmacies).

PCMA also cites the definition of “dispensing fees,”

which includes “pharmacy costs associated with

ensuring that possession of the appropriate covered

Part D drug is transferred to a Part D enrollee.” 42

42a

C.F.R. § 423.100. Although the standards PCMA

relies on might “contemplate the existence” of mail

order pharmacies, they do not regulate mail order

pharmacy services like North Dakota’s law. Thus,

there is no overlap between the legislation and the

federal standards. And even if there was, the Court

finds the legislation’s provisions regarding drug

delivery services constitutes a regulation concerning

the manner in which medical services are provided

under the Medicare savings clause. See 42 U.S.C.

§ 1395.

3. PROVISIONS REGARDING PHARMACY ACCREDITATION AND CREDENTIALING REQUIREMENTS

The legislation contains provisions concerning

two areas of pharmacy accreditation and

credentialing.

First,

it

contains

provisions

prohibiting PBMs from imposing accreditation

requirements that are stricter than state and federal

law. Second, the legislation requires PBMs to utilize

benchmarks set by an unbiased, nationallyrecognized entity when evaluating pharmacy

performance, and it regulates the fees PBMs may

levy on pharmacies due to deficient performance. As

detailed below, the Court finds none of these

provisions overlap with a CMS standard. Further, to

the extent any did, they would fall under the

Medicare preemption provision’s exception for state

laws concerning licensing. See 42 U.S.C. § 1395w26(b)(3) (Medicare standards supersede any state law

or regulation “other than State licensing laws”); see

also 42 U.S.C. § 1395w-112(g) (applying Part C’s

preemption provision to Part D).

43a

i. IMPOSITION OF ACCREDITATION

REQUIREMENTS

With respect to PBMs’ imposition of accreditation

requirements on pharmacies, the legislation

provides:

A pharmacy benefits manager or third-party

payer may not require pharmacy accreditation

standards or recertification requirements

inconsistent with, more stringent than, or in

addition to federal and state requirements for

licensure as a pharmacy in this state.

S.B. 2258 § 1(11). The legislation also regulates the

accreditation requirements pharmacies must satisfy

to participate in PBM networks:

A pharmacy benefits manager or third-party

payer may not require pharmacy accreditation

standards or certification requirements to

participate in a network which are

inconsistent with, more stringent than, or in

addition to the federal and state requirements

for licensure as a pharmacy in this state.

S.B. 2301 § 1(4).

In support of preemption, PCMA points to federal

standards requiring Part D sponsors to have quality

assurance arrangements that ensure cost-efficiency,

avoid adverse drug interactions, and mitigate

medication errors. See Docket No. 33-1, p. 40; see

also 42 U.S.C. § 1395w-104(c); 42 C.F.R. § 423.153(c).

PCMA asserts these standards go “above and beyond

state pharmacy licensing” and that CMS has

“reserved for itself the role of partnering with private

industry to identify the optimum performance

44a

measures.” See Docket No. 33-1, p. 40. However, as

explained below, the regulation of pharmacy practice

standards has been left to the states, and CMS has

not imposed any pharmacy accreditation standards.

In fact, the same standard PCMA cites requires Part

D sponsors to ensure pharmacies “comply with

minimum standards for pharmacy practice as

established by the States.” 42 C.F.R. § 423.153(c)(1).

CMS has explained in its commentary:

It has been our longstanding policy to leave

the establishment of pharmacy practice

standards to the states, and we do not intend

to change that now. We continue to believe

pharmacy practice standards established by

the states provide applicable minimum

standards for all pharmacy practice standards,

and § 423.153(c)(1) requires representation

that network providers are required to comply

with minimum standards for pharmacy

practice as established by the states.

Medicare Policy and Technical Changes; Contract

Year 2019, 82 Fed. Reg. 56,336-01, 56,411 (Nov. 28,

2017) (to be codified at 42 C.F.R. pts. 405, 417, 422,

423 and 498).

After seeking public comment on various

proposed rules, CMS indicated it does not intend to

regulate pharmacy accreditation standards:

Several

commenters

provided

that

accreditation is best performed by an

independent, third-party actor . . . . Several

commenters believed that CMS should

establish accreditation standards, and that

CMS approval should be the only requirement

45a

for acceptance of accreditation . . . . Many

commenters contended.

[....]

While we did not propose specific accreditation

standards, we will consider it in the future if

we find that our current requirements are no

longer sufficient . . . . While CMS appreciates

the commenters’ concerns that accreditation is

best performed by an independent, third-party

actor, we did not consider such a policy change

in the proposed rule and would need to

consider the issue further.

Medicare Policy and Technical Changes; Contract

Year 2019, 83 Fed. Reg. 16,440-01, 16,597-598 (Apr.

16, 2018) (to be codified at 42 C.F.R. pts. 405, 417,

422, 423 and 498). In this same commentary, CMS

specifically addressed a comment concerning North

Dakota’s accreditation provision:

Comment: A commenter provided that North

Dakota and New Hampshire have enacted

laws prohibiting PBMs from requiring

additional accreditation other than the

requirement of the applicable state board of

pharmacy. Another commenter offered that

they have seen situations where state

standards are insufficient, unenforced, or

unmonitored.

Response: CMS thanks the stakeholder for

this information, and encourages commenters

to keep us apprised of such examples.

However, at present, we continue to believe

state pharmacy practice acts represent a

46a

reasonably consistent minimum standard of

practice.

Id. at 16,598. Although the Court owes no deference

to CMS, the agency does have a unique

understanding of the Medicare statutes, and the

Court may consider its commentary. See Wyeth v.

Levine, 555 U.S. 555, 576-77 (2009) (although

agencies generally have no authority to pronounce on

preemption, their unique understanding of the

statutes they administer gives them an ability to

make determinations about how state requirements

may impact the federal regulatory scheme); see also

Uhm, 620 F.3d at 1155. As CMS has explained,

accreditation and licensing are areas of regulation

that have been left to the states. Because CMS has

not promulgated standards in this area, the Court

finds North Dakota’s legislation concerning

pharmacy accreditation requirements is not

preempted by Medicare Part D.

ii. PHARMACY

BENCHMARKS

PERFORMANCE

The legislation also requires PBMs to utilize

benchmarks set by an unbiased, nationallyrecognized entity when evaluating pharmacy

performance, and it regulates the fees PBMs may

levy on pharmacies due to their deficient

performance. Section 1(3) of S.B. 2258 provides as

follows:

3. Pharmacy performance measures or pay for

performance pharmacy networks shall

utilize the electronic quality improvement

platform for plans and pharmacies or other

47a

unbiased nationally recognized entity

aiding in improving pharmacy performance

measures.

a. A pharmacy benefits manager or thirdparty payer may not collect a fee from a

pharmacy

if

the

pharmacy’s

performance scores or metrics fall

within the criteria identified by the

electronic quality improvement platform

for plans and pharmacies or other

unbiased nationally recognized entity

aiding

in

improving

pharmacy

performance measures.

b. If a pharmacy benefits manager or

third-party payer imposes a fee upon a

pharmacy for scores or metrics or both

scores and metrics that do not meet

those established by the electronic

quality improvement platform for plans

and pharmacies or other nationally

recognized entity aiding in improving

pharmacy performance measures, a

pharmacy benefits manager or thirdparty payer is limited to applying the

fee to the professional dispensing fee

outlined in the pharmacy contract.

c. A pharmacy benefits manager or thirdparty payer may not impose a fee

relating to performance metrics on the

cost of goods sold by a pharmacy.

S.B. 2258 § 1(3). PCMA argues this provision is

preempted by the same federal standards cited

above, which require Part D plan sponsors to have

48a

quality assurance arrangements that ensure costefficiency, avoid adverse drug interactions, and

mitigate medication errors. See Docket No. 33-1, pp.

39-41; see also 42 U.S.C. § 1395w-104(c); 42 C.F.R.

§ 423.153(c). The Court rejects this argument for the

same reasons articulated above. CMS has not

articulated pharmacy practice standards. Rather,

Part D sponsors must take measures to ensure

pharmacies “comply with minimum standards for

pharmacy practice as established by the States.” 42

C.F.R. § 423.153(c)(1). North Dakota’s legislation

sets a standard for pharmacy performance by

articulating the benchmarks that may be used to

measure pharmacy performance—i.e., the “electronic

quality improvement platform for plans and

pharmacies” or “other unbiased nationally recognized

entity aiding in improving pharmacy performance

measures.” S.B. 2258 § 1(3). The Court concludes

S.B. 2258 § 1(3) is not preempted.

4. PROVISIONS CONCERNING SELFDEALING AND ABUSIVE PRACTICES

North Dakota’s law contains various provision

directed at perceived self-dealing and abusive

practices on the part of PBMs. The legislation (1)

prohibits PBMs from levying certain fees and

charges on pharmacies and patients; (2) imposes

disclosure obligations on PBMs; and (3) prohibits

PBMs that own mail-order or specialty pharmacies

from engaging in self-dealing. As articulated below,

the Court finds the bulk of the law not preempted,

save one provision requiring PBMs to disclose certain

information to plans, which the Court finds

49a

preempted by an overlapping Medicare Part D

standard.

i. REGULATION

CHARGES

OF

FEES

AND

The legislation provides the following prohibitions

on post point-of-sale fees:

2. A pharmacy benefits manager or thirdparty payer may not directly or indirectly

charge or hold a pharmacy responsible for a

fee related to a claim:

a. That is not apparent at the time of

claim processing;

b. That is not reported on the remittance

advice of an adjudicated claim; or

c. After the initial claim is adjudicated at

the point of sale.

S.B. 2258 § 1(2). PCMA argues CMS has enacted

“intricate standards” concerning post point-of-sale

fees. See Docket No. 40, p. 56. PCMA points to

standards that contemplate post point-of-sale fees in

reconciliation calculations used to determine the

amounts Part D sponsors “actually pay” for

prescription drugs.2 See Docket No. 40, pp. 56-57; see

PCMA explains the reconciliation process: “CMS requires

sponsors and PBMs to report post point-of-sale fees to CMS by

requiring them to report amounts ‘actually paid’ for the drugs

and the [remuneration] a plan has received. . . . The amounts

reported by plans and PBMs factor into payments by CMS. At

the end of a contract year, through a reconciliation process,

CMS makes final reinsurance and risk corridor payments to

Part D sponsors based on the amounts ‘actually paid’ by the

2

50a

e.g. 42 C.F.R. § 423.308 (defining “direct and indirect

remuneration” to include retroactive fees). PCMA

suggests North Dakota’s law alters the Part D

reconciliation scheme by “banning retroactive fees.”

See Docket No. 40, p. 57. PCMA argues the

legislation “would nullify part of the standard

concerning what makes up a negotiated price and

would change the calculation of payments made by

CMS to plans during the reconciliation process by

removing retroactive fees from the equation.” See

Docket No. 40, p. 57. The Court finds PCMA’s

argument unpersuasive. The legislation regulates

the imposition of fees levied on pharmacies that are

related to claims for prescription drugs. It does not

overlap with, nor does it alter, the calculations used

in the reconciliation process. PCMA has not pointed

to any federal standard concerning PBMs’ imposition

of fees on pharmacies. The Court finds S.B. 2258’s

provision regulating post point-of-sale fees is not

preempted by Medicare Part D.

PCMA also argues the legislation’s regulation of

copayments is preempted. The legislation provides

the following concerning copayments:

A pharmacy benefits manager or third-party

payer may not charge a patient a copayment

that exceeds the cost of the medication. If a

patient pays a copayment, the dispensing

provider or pharmacy shall retain the

adjudicated cost and the pharmacy benefits

manager or third-party payer may not redact

the adjudicated cost.

Part D sponsor for the provision of the Part D benefit.” See

Docket No. 40, pp. 56-57.

51a

S.B. 2258 § 1(4). PCMA argues this provision

overlaps with federal standards that set copayment

amounts for certain drugs. See Docket No. 33-1, pp.

41-42; see also 42 C.F.R. § 423.104(d)(5)(i). PCMA

suggests that retainment of copayments is “an

entitlement that CMS has granted to plans.” See

Docket No. 33-1, p. 42. The Court disagrees. The

standards PCMA cites may set copayment amounts,

but they do not specify which entity is entitled to

retain copayments as does North Dakota’s law.

PCMA also argues there are federal standards

accounting for “direct and indirect remuneration” to

plans after a prescription drug has been sold, which

may include copayment amounts. See Docket No. 331, p. 42; see also 42 C.F.R. § 423.308. However, these

standards, which account for various fees and

payments, also do not mandate the allocation of

certain payments to certain parties. The Court finds

North Dakota’s regulation of copayments is not

preempted by Medicare Part D.

ii. DISCLOSURE OBLIGATIONS

The

legislation

contains

two

provisions

concerning PBM disclosure obligations. The first

provision requires PBMs to disclose information

about PBM pharmacy networks to pharmacies.

According to North Dakota, this provision was

intended to help pharmacies evaluate the

profitability of PBM contracts by providing

pharmacies with information detailing the number of

patients that would be subject to a PBM contract’s

reimbursement policies. See Docket No. 39-1, p. 10.

The provision states:

52a

Upon request, a pharmacy benefits manager

or third-party payer shall provide a pharmacy

or pharmacist with the processor control

number, bank identification number, and

group number for each pharmacy network

established or administered by a pharmacy

benefits manager to enable the pharmacy to

make an informed contracting decision.

S.B. 2258 § 1(10). The second disclosure provision

obligates PBMs with an ownership interest in a

pharmacy to disclose, to plan sponsors, the difference

between the amount paid to a pharmacy and the

amount charged to the plan sponsor. It states:

If requested by a plan sponsor contracted

payer, a pharmacy benefits manager or thirdparty payer that has an ownership interest,

either directly or through an affiliate or

subsidiary, in a pharmacy shall disclose to the

plan sponsor contracted payer any difference

between the amount paid to a pharmacy and

the amount charged to the plan sponsor

contracted payer.

S.B. 2301 § 1(2).

In support of preemption, PCMA cites various

federal standards discussing PBMs’ disclosure

obligations to beneficiaries, CMS, and plan sponsors.

See Docket No. 33-1, pp. 42-43; see also 42 U.S.C.

§§1395w-104(a)(1)-(2)

(setting

forth

annual

disclosure obligations plan sponsors must provide to

plan enrollees); 42 U.S.C. §§1395w-104(k) (plan

sponsors must ensure pharmacies inform plan

enrollees of “any differential between the price of the

drug to the enrollee and the price of the lowest priced

53a

generic covered part D drug under the plan”); 42

U.S.C. § 1320b-23 (requiring PBMs to disclose

information regarding drug sales and pricing to

CMS); 42 C.F.R. § 423.514(d) (detailing reporting

requirements for pharmacy benefits manager data to

plan sponsors and CMS).

PCMA does not cite any federal standard, and the

Court is not aware of any, that concerns the

disclosure of information by PBMs to pharmacies.

Because CMS has not promulgated standards in this

area, the Court finds S.B. 2258 § 1(10), which

requires the disclosure of PBM pharmacy network

information to pharmacies, is not preempted by

Medicare Part D. However, the Court agrees with

PCMA regarding S.B. 2301’s PBM disclosure

obligations to plan sponsors. Federal standards

specifically require PBMs to provide information to

plan sponsors, including the number of prescriptions

dispensed, the amount of rebates, discounts, or price

concessions the PBM negotiates and passes through

to the plan sponsor, and the difference between the

amount the PBM pays the pharmacy and the plan

sponsor. See 42 C.F.R. § 423.514(d); 42 U.S.C. §

1320b-23. Senate Bill 2301 § 1(2), which requires

certain PBMs to report to plan sponsors “any

difference between the amount paid to a pharmacy

and the amount charged to the plan sponsor”

overlaps with this standard, and thus the Court finds

it is preempted as applied to Medicare Part D plans.3

3 The Court’s holding does not invalidate the remainder of the

legislation. North Dakota has enacted a broad severability

clause. When a court finds any portion of a law invalid, “such

judgment does not affect, impair, nor invalidate any other

clause, sentence, paragraph, chapter, section or part . . . .”

54a

iii. PBM SELF DEALING

The legislation also contains a provision aimed at

potential self-dealing on the part of PBMs that own

pharmacies. It states:

A pharmacy benefits manager or a pharmacy

benefits manager’s affiliates or subsidiaries

may not own or have an ownership interest in

a patient assistance program and a mail order

specialty pharmacy, unless the pharmacy

benefit manager, affiliate, or subsidiary agrees

to not participate in a transaction that

benefits the pharmacy benefits manager,

affiliate, or subsidiary instead of another

person owed a fiduciary duty.

S.B. 2301 § 1(3). In support of preemption, PCMA

cites 42 C.F.R. § 423.501, which defines “related

entity” as any entity that is related to a PDP sponsor

by common ownership or control and performs some

of a plan’s management functions, furnishes services

to a plan enrollee, or leases or sells property to a

plan. See Docket No. 33-1, p. 45. PCMA also points to

a study and CMS manuals and publications that

address potential conflicts of interest in the

dispensing of prescription drugs. See Docket No. 331, pp. 46-48. PCMA argues: “CMS and North Dakota

address the same problem but chose a different

means to protect against it. As such, [S.B. 2301

§ 1(3)] is preempted because CMS and North Dakota

regulate the same conduct.” See Docket No. 40, p. 60.

N.D.C.C. § 1-02-20. The parties do not dispute the validity or

applicability of North Dakota’s severability clause.

55a

However, the manuals, publication, and study

CMS cites are not standards. “[A] standard is a

statutory provision or a regulation promulgated

under [Medicare] and published in the Code of

Federal Regulations.” New York City Health and

Hospitals Corp., 801 F. Supp. 2d at 140 (quoting Med

Card Sys., Inc., 587 F. Supp. 2d at 387); see also

Uhm, 620 F.3d 1148 n. 20. The one standard PCMA

cites simply defines the term “related entity.” See 42

C.F.R. § 423.501. This definitional provision does not

regulate PBM conflicts of interest in any way.

Because the legislation’s provision concerning PBM

self-dealing does not overlap with a Medicare Part D

standard, the Court finds it is not preempted.

III. CONCLUSION

The Court has carefully reviewed the entire

record, the parties’ filings, and the relevant law. For

the reasons set forth above, the Plaintiff’s motion for

summary judgment (Docket No. 33) is GRANTED

IN PART AND DENIED IN PART. The

Defendants’ cross-motion for summary judgment

(Docket No. 38) is also GRANTED IN PART AND

DENIED IN PART.

IT IS SO ORDERED

Dated this 5th day of September, 2018.

/s/ Daniel L. Hovland

x

Daniel L. Hovland, Chief Judge

United States District Court

56a

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NORTH DAKOTA

PHARMACEUTICAL

CARE MANAGEMENT

ASSOCIATION,

)

)

)

)

Plaintiff,

)

vs.

)

)

MYLYNN TUFTE, in

)

her official capacity as

the State Health Officer )

of North Dakota; MARK )

J. HARDY, in his official )

)

capacity as the

Executive Director of the )

)

North Dakota Board of

)

Pharmacy; FRAN

)

GRONBERG, in her

)

official capacity as the

)

President of the North

)

Dakota Board of

Pharmacy; and WAYNE )

)

STENEHJEM, in his

)

official capacity as the

)

Attorney General of

)

North Dakota,

)

Defendants. )

ORDER DENYING

PLAINTIFF’S

MOTION FOR A

PRELIMINARY

INJUNCTION

Case No.: 1:17-cv-141

Before the Court is the Plaintiff’s “Emergency

Motion for a Temporary Restraining Order and

Preliminary Injunction” filed on July 20, 2017. See

Docket No. 10. In its motion, the Plaintiff requested

the Court temporarily restrain and preliminarily

57a

enjoin Defendants from enforcing North Dakota

Senate Bills 2258 and 2301. On July 27, 2017, the

parties submitted a joint stipulation in which the

Plaintiff withdrew its request for a temporary

restraining order, in order to give the Court

additional time to address the merits of the request

for preliminary injunctive relief. See Docket No. 18.

On July 28, 2017, the Court found as moot the

Plaintiff’s motion for a temporary restraining order.

See Docket No. 19. On August 22, 2017, a hearing

was held regarding the preliminary injunction. See

Docket No. 24. For the reasons set forth below, the

Court denies the Plaintiff’s motion for a preliminary

injunction.

I. BACKGROUND

The Plaintiff, Pharmaceutical Care Management

Association (PCMA), is a national trade association

representing pharmacy benefit managers (PBMs),

with its principal place of business in Washington,

D.C. See Docket No. 1. PBMs are third-party health

plan administrators which manage and administer

prescription drug benefits on behalf of health

insurance plans. Retail pharmacies purchase

prescription

drugs

from

wholesalers

or

manufacturers to fill health plan participants’

prescriptions. When a plan participant (a patient or

consumer) fills a prescription, the pharmacy contacts

the PBM to obtain the participant’s coverage and

copayment information. After the prescription is

filled, the PBM reimburses the pharmacy at a

contractually-agreed upon rate. The PBM then bills

the health plan, which provides the participant’s

insurance, at a rate negotiated between the PBM and

58a

the health plan. This role renders the PBM a thirdparty health plan administrator.

In April 2017, North Dakota State Governor Doug

Burgum signed into law S.B. 2258 and S.B. 2301,

which were to become effective August 1, 2017.1 See

S.B. 2258, 2017 Leg., 65th Sess. (ND 2017); S.B.

2301, 2017 Leg., 65th Sess. (ND 2017). Among other

things, these laws will regulate how PBMs categorize

prescription drugs and also require PBMs to make

certain cost disclosures to network pharmacies and

plan participants. PCMA highlights the following

provisions2 as concerning:



S.B. 2258 § 1(2) prohibits PBMs and

third-party payers from charging pharmacies certain fees, including fees that

are imposed after the point of sale, not

reported on the remittance advice for a

claim, or are not apparent at the time of

claim processing.



S.B. 2258 § 1(3) limits the fees PBMs

and third-party payers may impose

1 On August 1, 2017, S.B. 2258 and S.B. 2301 became law as

applied to non-ERISA and non-Medicare Part D health plans.

See N.D.C.C. §§ 19-02.1-14.2 and 19-02.1-16.1. Prior to August

1, 2017, the parties stipulated the law would only go into effect

as to non-ERISA and non-Medicare Part D plans, pending the

resolution of this matter. See Docket No. 18. For the sake of

clarity, the Court will continue to refer to the legislation at

issue in this case as S.B. 2258 and S.B. 2301, as opposed to

what are now N.D.C.C. §§ 19-02.1-14.2 and 19-02.1-16.1,

respectively.

2 These provisions are excerpted from Plaintiff’s brief and are

not direct quotes of either bill’s language, unless indicated.

They are Plaintiff’s own summaries of the State bills’ effects.

59a

based on pharmacy performance standards.



S.B. 2258 § 1(4) bars PBMs and thirdparty payers from “redact[ing] the adjudicated cost,” or the amount the PBM or

third-party payer reimburses a pharmacy for a prescription.



S.B. 2258 § 1(6) allows pharmacists or

pharmacies belonging to a pharmacy

service administration organization to

receive a copy of contracts the pharmacy

service administration organization entered into with a pharmacy benefits

manager or third-party payer on their

behalf.



S.B. 2258 § 1(7) allows pharmacies to

disclose “relevant” information to patients, including reimbursement information, and prohibits contracts between

PBMs and pharmacies that prevent

such disclosure.



S.B. 2258 § 1(8) authorizes pharmacies

to “mail or deliver drugs to a patient as

an ancillary service of a pharmacy.”



S.B. 2258 § 1(9) prohibits contracts

which provide that a pharmacy may not

charge a shipping and handling fee to a

patient.



S.B. 2258 § 1(10) prohibits PBM or

third-party payers from imposing accreditation and recertification standards

60a

beyond preexisting federal and state licensing requirements.



S.B. 2301 § 1(2) obligates PBMs and

third-party payers having ownership

interest in a pharmacy to disclose the

difference between the amount paid to

the pharmacy and the amount charged

to the plan sponsor on request.



S.B. 2301 § 1(3) prohibits PBMs from

having an ownership interest in patient

assistance programs or mail-order specialty pharmacy unless the PBM agrees

“not to participate in a transaction that

benefits the PBM instead of another

person owed a fiduciary duty.”



S.B. 2301 § 1(5) authorizes pharmacies

to dispense “any and all drugs allowed”

under its license.



S.B. 2301 § 1(11) prohibits a PBM or

third-party payer from imposing accreditation standards beyond preexisting

federal and state licensing requirements.

See Docket No. 1, pp. 6-8; see also S.B. 2258 and

2301.

On July 11, 2017, PCMA filed a complaint against

State Health Officer Mylynn Tufte; Executive

Director of the North Dakota Board of Pharmacy,

Mark J. Hardy; President of the North Dakota Board

of Pharmacy, Fran Gronberg; and Attorney General

Wayne Stenehjem. See Docket No. 1. PCMA argues

the new laws, which were scheduled to go into effect

61a

on August 1, 2017, place restrictions and

requirements on PBMs that impermissibly reference

or are connected with health plans under the

Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. § 1001 et seq., and Medicare

Prescription Drug Improvement and Modernization

Act of 2003 (“Medicare Part D”), 42 U.S.C. § 1395w101 et seq. As a result, PCMA seeks this Court’s

declaration that the North Dakota state laws are

expressly preempted by federal legislation. The

parties stipulated not to effectuate S.B. 2258 and

S.B. 2301 as to ERISA and Medicare Part D plans,

pending the resolution of this matter. See Docket No.

19.

II. STANDARD OF REVIEW

PCMA seeks to obtain a preliminary injunction

pursuant to Rule 65(b) of the Federal Rules of Civil

Procedure. Rule 65(b) directs the court to look to the

specific facts shown by an affidavit to determine

whether immediate and irreparable injury, loss, or

damage will result to the applicant. It is wellestablished in the Eighth Circuit Court of Appeals

that a court is required to consider the factors set

forth in Dataphase Systems, Inc. v. C L Systems,

Inc., 640 F.2d 109, 114 (8th Cir. 1981), in

determining whether a preliminary injunction should

be granted. The Dataphase factors include: “(1) the

threat of irreparable harm to the movant; (2) the

state of balance between this harm and injury that

granting the injunction will inflict on other parties;

(3) the probability the movant will succeed on the

merits; and (4) the public interest.” Id.

62a

Preliminary injunctive relief is an “extraordinary

and drastic remedy.” Munaf v. Geren, 553 U.S. 674,

689-90 (2008). Accordingly, the party seeking such

relief bears the burden of establishing its propriety

with “clear proof.” Frejlach v. Butler, 573 F.2d 1026,

1027 (8th Cir. 1978). It is well-established that the

movant has the burden of establishing the necessity

of a preliminary injunction. Baker Elec. Coop., Inc. v.

Chaske, 28 F.3d 1466, 1472 (8th Cir. 1994). “No

single factor in itself is dispositive; in each case all of

the factors must be considered to determine whether

on balance they weigh towards granting the

injunction.” Id. at 1472.

III. LEGAL DISCUSSION

PCMA argues S.B. 2258 and S.B. 2301 are

preempted by ERISA and Medicare Part D, as those

federal laws each contain provisions providing that

any state laws relating to them will be superseded by

each of them respectively. PCMA argues S.B. 2258

and S.B. 2301 impermissibly regulate ERISA and

Medicare Part D health plans by regulating thirdparty payers and PBMs. According to PCMA, North

Dakota’s statutory definitions of third-party payers

and PBMs are broad enough to encompass ERISA

and Medicare Part D health plans. Therefore, PCMA

argues, any laws regulating third-party payers and

PBMs, as they are statutorily defined, necessarily

include ERISA and Medicare Part D health plans,

and are therefore preempted by federal law.

A. ERISA PREEMPTION

ERISA comprehensively regulates, among other

things, employee welfare benefit plans that “though

63a

the purchase of insurance or otherwise,” provide

medical, surgical, or hospital care, or benefits in the

event of sickness, accident, disability, or death. 29

U.S.C. § 1001(b). ERISA was intended to:

protect . . . participants in employee benefit

plans and their beneficiaries, by requiring the

disclosure and reporting to participants and

beneficiaries

of

financial

and

other

information

with

respect

thereto,

by

establishing

standards

of

conduct,

responsibility, and obligation for fiduciaries of

employee benefit plans, and by providing for

appropriate remedies, sanctions, and ready

access to the Federal courts.

29 U.S.C. § 1001(b).

“To meet the goals of a comprehensive and

pervasive Federal interest and the interests of

uniformity with respect to interstate [health] plans,

Congress included an express preemption clause in

ERISA for the displacement of State action in the

field of private employee benefit programs.” Minn.

Chapter of Associated Builders & Contractors, Inc. v.

Minn. Dep’t of Pub. Safety, 267 F.3d 807, 810 (8th

Cir. 2011). The scope of ERISA’s preemption has left

courts “deeply troubled.” Prudential Ins. Co. v. Nat’l

Park Medical Ctr., 154 F.3d 812, 815 (8th Cir. 1998).

The Supreme Court has described the preemption

clause as having “a broad scope, and an expansive

sweep,” and being “conspicuous for its breadth.”

California Division of Labor Standards Enforcement

v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324

(1997).

64a

Courts have struggled to reconcile the sweeping

language of ERISA’s preemption clause with the

assumption that Congress does not intend to bar

state action in fields of traditional state regulation or

historic police powers. See New York State

Conference of Blue Cross & Blue Shield Plans v.

Travelers Ins. Co., 514 U.S. 645, 654-55 (1995) (“we

have never assumed lightly that Congress has

derogated state regulation, but instead have

addressed claims of pre-emption with the starting

presumption that Congress does not intend to

supplant state law.”). The Supreme Court has

cautioned courts interpreting ERISA’s preemption

clause that it must not be read to “extend to the

furthest stretch of its indeterminacy.’” De Buono v.

NYSA-ILA Medical and Clinical Services Fund, 520

U.S. 806, 813 (1997).

The preemption clause specifically provides that

ERISA “shall supersede any and all State laws

insofar as they may now or hereafter relate to any

employee benefit plan[.]” 29 U.S.C. § 1144(a)

(emphasis added). “Yet, Congress did not define what

it meant by state laws that ‘relate to’ an ERISA

benefit plan anywhere in the statute.” Prudential,

154 F.3d 812, 819 (8th Cir. 1998). The Supreme

Court has offered some guidance on the scope of

ERISA’s preemption, by formulating a two-part test

to determine whether a state law “relates to” an

employee benefit plan covered by ERISA. It is now

generally understood and accepted that “[a state] law

relates to a covered employee benefit plan for

purposes of § 514(a) if it [1] has a connection with or

[2] reference to such a plan.” Shaw v. Delta Air

Lines, Inc., 463 U.S. 85, 97 (1983).

65a

1. Likelihood of Success on the Merits

The Eighth Circuit Court of Appeals has held that

the likelihood of success on the merits is the “most

significant” of the four factors to be considered by the

district court in considering preliminary injunctive

relief. S & M Constructors, Inc. v. Foley Co., 959 F.2d

97, 98 (8th Cir. 1992). When evaluating a movant’s

likelihood of success on the merits, the court should

“flexibly weigh the case’s particular circumstances to

determine ‘whether the balance of equities so favors

the movant that justice requires the court to

intervene to preserve the status quo until the merits

are determined.’” Calvin Klein Cosmetics Corp. v.

Lenox Labs., Inc., 815 F.2d 500, 503 (8th Cir. 1987).

At this preliminary stage, the Court need not decide

whether the party seeking the preliminary injunction

will ultimately prevail. PCTV Gold, Inc. v. SpeedNet,

LLC, 508 F.3d 1137, 1143 (8th Cir. 2007).

PCMA asserts it is likely to prevail on its claim

against the Defendants because controlling

precedent in the Eighth Circuit requires finding S.B.

2258 and 2301 are expressly preempted by ERISA.

See Docket No. 10-1, p. 7. PCMA points specifically

to Pharm. Care Mgmt. Ass’n v. Gerhart, 852 F.3d

722 (8th Cir. 2017). In Gerhart, PCMA sued the state

of Iowa, seeking a declaration that an Iowa state law

regulating how PBMs established generic drug

pricing was preempted by ERISA. Id. at 726. The

district court in Gerhart found the statute did not

have an impermissible connection with ERISA

because the PBMs retained “sufficient choice and

control.” Id. at 727. The Eighth Circuit Court of

Appeals disagreed, holding that the Iowa statute

contained both an impermissible “reference to” and

66a

“connection with” ERISA. Id. at 729-30. The case was

remanded, directing the district court to enter

judgment in favor of PCMA on the issue of express

preemption. Id. at 732. In response the defendants

argue that Gerhart is of no help in this case because

the Iowa and North Dakota statutes are vastly

different and the portions of Gerhart that PCMA

relies on amount to mere commentary with no legal

significance.3

Preemption claims turn on congressional intent.

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 515-19

(1992). “To discern Congress’ intent we examine the

explicit statutory language and the structure and

purpose of the statute.” Ingersoll-Rand Co. v.

McClendon, 498 U.S. 133, 138 (1990).

[When] Congress has expressly included

a broadly worded pre-emption provision

in a comprehensive statute such as

ERISA,

our

task

of

discerning

congressional intent is considerably

simplified. In § 514(a) of ERISA, as set forth

in 29 U.S.C. § 1144(a), Congress provided:

Except as provided in subsection (b) of

this section, the provisions

3 The Eighth Circuit Court of Appeals held that the Iowa law at

issue in Gerhart was preempted by ERISA because it contained

an explicit reference to ERISA. 852 F.3d at 729 (8th Cir. 2017).

The Eighth Circuit went on to discuss possible implicit

references. Defendants argue that S.B. 2258 and 2301 differ

from the Iowa law because they contain no explicit references to

ERISA and they further argue that any discussion in Gerhart

regarding implicit references is only legal dicta and not binding

precedent.

67a

of this subchapter and subchapter III of

this chapter shall supersede any and

all State laws insofar as they may

now or hereafter relate to any

employee benefit plan described in

section 1003(a) of this title and not

exempt under section 1003(b) of this

title.

Ingersoll-Rand, 498 U.S. at 138 (emphasis added).

Courts have determined ERISA’s preemption clause

is “deliberately expansive,” and “designed to

establish pension plan regulation as exclusively a

federal concern.” Id. With the presumption that

Congress intended preemption to be applied broadly,

the Court turns to whether S.B. 2258 and S.B. 2301

relate to ERISA. The laws will be found to relate to

ERISA if they have either a reference to or connection

with ERISA.

a. Whether there is a “reference to” ERISA in

S.B. 2258 and S.B. 2301

Under the “reference to” inquiry, the Supreme

Court has preempted state laws that (1) imposed

requirements by reference to ERISA covered

programs4; (2) specifically exempted ERISA plans

from an otherwise generally applicable statute; and

(3) premise a cause of action on the existence of an

ERISA plan. Prudential, 154 F.3d 812, 822 (8th Cir.

1998) (internal citations and quotations omitted). An

4 The obvious irony here is that in order to determine if there is

a “reference to” ERISA, the reviewing court first considers

whether the state law imposes requirements by “reference to”

ERISA . . . .

68a

impermissible “reference to” ERISA plans will be

found when a state law “acts immediately and

exclusively upon ERISA plans . . . or where the

existence of ERISA plans is essential to the law’s

operation[.]” Gobeille v. Liberty Mut. Ins. Co., 136

S.Ct. 936, 943 (2016) (internal citation and quotation

marks omitted).

The parties seem to agree and the Court finds

that neither S.B. 2258 nor S.B. 2301 contain an

explicit reference to ERISA. Nowhere in either bill’s

language is ERISA explicitly mentioned, discussed,

defined, or excluded. Therefore, the Court finds no

explicit “reference to” ERISA. PCMA argues,

however, that both S.B. 2258 and S.B. 2301 contain

implicit references to ERISA because, within each

bill, PBMs, third party payers, and plan sponsors are

defined broadly enough to implicate ERISA health

plans.

Both S.B. 2258 and S.B. 2301 explicitly provide

that “pharmacy benefit manager,” as used within

each bill, has the same definition as in N.D.C.C. § 1903.6-01. See S.B. 2258 § 1 (1)(a) and S.B. 2301 § 1

(1)(a); see also N.D.C.C. §§ 19-02.1-14.2(1)(d) and 1902.1-16.1(1)(a). “Pharmacy benefits manager” is

defined as:

“Pharmacy benefits manger” means a person

that performs pharmacy benefits management

and includes any other person acting for such

person under a contractual or employment

relationship in the performance of pharmacy

benefits management for a managed care

company, nonprofit hospital or medical

service organization, insurance company,

69a

third-party payer, or health program

administered by a state agency.

See N.D.C.C. § 19-03.6-01(4) (emphasis added).

PCMA argues S.B. 2258 and S.B. 2301 attempt to

regulate PBMs, and some of these PBMs provide

services for ERISA health plans. Therefore, PCMA

argues, the bills both implicitly reference ERISA.

However, the legislation defines PBMs as a “person”

who has a contractual relationship with a “managed

care company, nonprofit hospital or medical service

organization, insurance company, third-party payer,

or health program administered by a state agency.”

N.D.C.C. § 19-03.6-01(4). For purposes of S.B. 2258

and S.B. 2301, it appears that a PBM is a distinct

“person,” entering a contractual relationship with

one of the listed entities. The PBM is a separate

entity distinguishable from any health benefit plan,

let alone an ERISA-covered employee health benefit

plan.

It is certainly conceivable that a “pharmacy

benefits manager” could enter into a contractual

relationship with an employer sponsored health

benefit plan, and that such an employer sponsored

health benefit plan would be subject to ERISA.

However, that is merely one outcome of many and

not one that is clearly expressed in the statutory

language.5 The standard set by the Supreme Court

In contrast, the Eighth Circuit Court of Appeals in Gerhart

found that the Iowa law at issue made implicit reference to

ERISA through the regulation of PBMs who administer benefits

for “covered entities,” which, by definition, included “health

benefit plans and employers, labor unions, or other groups “that

provide health care coverage.” See Gerhart 852 F.3d 722, 72930. (emphasis added).

5

70a

does not require preempting any laws that could be

read to include ERISA health plans. Rather, the

standard set by the Supreme Court requires finding

an impermissible “reference to” ERISA plans when a

state law “acts immediately and exclusively upon

ERISA plans . . . or where the existence of ERISA

plans is essential to the law’s operation[.]” Gobeille,

136 S.Ct. at 943.

Through S.B. 2258 and S.B. 2301, North Dakota

seeks to regulate persons or entities who

independently serve as third parties in a relationship

between insurance plans and plan participants. The

insurance plans that they contract with may or may

not be ERISA plans. North Dakota’s regulation of

these third party entities has little or nothing to do

with who is the insurance plan carrier. ERISA

regulates employer sponsored health benefit plans. It

does not preempt a state from regulating

independent

entities

entering

contractual

relationships with insurance plans, whether they be

employer sponsored or not. An independent entity

choosing to do business with an employee health

benefit plan is not given a shield from state and local

regulations; to find that ERISA’s preemption clause

did as much would be to “extend to the furthest

stretch of its indeterminacy.” De Buono, 520 U.S. at

813. Therefore, in this case the Court finds no

implicit reference to ERISA plans by way of

regulating pharmacy benefit managers.

Similarly, S.B. 2258 and S.B. 2301 explicitly

provide that “third party payer,” as used within each

bill, has the same definition as in N.D.C.C. § 19-03.601. See S.B. 2258 § 1 (1)(c) and S.B. 2301 §1 (1)(d);

see also N.D.C.C. § 19-02.1-16.1(1)(c). “Third party

71a

payer” is defined as “an organization other than the

patient or health care provider involved in the

financing of personal health services.” N.D.C.C. § 1903.6-01(6).

PCMA

argues

this is another

impermissible, implicit reference to ERISA. The

Court is unconvinced. While the statutory language

could be read to include the employer sponsored

health benefit plans subject to ERISA, nowhere in

either bill does it say as much. The definition clearly

applies to a broad range of entities that have no

relation to ERISA or employer sponsored health

plans. As described above, to apply the preemption

clause under this circumstance would result in

“uncritical literalism,” for if “‘relate to’ were taken to

extend to the furthest stretch of its indeterminacy,

then for all practical purposes pre-emption would

never run its course, for really, universally, relations

stop nowhere.” Travelers, 514 U.S. at 655.

S.B. 2258 and S.B. 2301 also explicitly provide

that “plan sponsors,” as used within each bill, have

the same definition as in N.D.C.C. § 19-03.6-01. See

S.B. 2258 § 1(1)(b) and S.B. 2301 § 1(1)(b); see also

N.D.C.C. § 19-02.1-16.1(1)(b). PCMA points to the

definition of a “plan sponsor” as the mirror image of

ERISA’s definition of “plan sponsor,” and argues this

constitutes an implicit and impermissible reference

to health care benefit plans covered by ERISA. “Plan

sponsors” are defined as “the employer in the case of

an employee benefit plan established or maintained

by a single employer, or the employee organization in

the case of a plan established or maintained by an

employee organization.” See N.D.C.C. § 19-03.601(5).

72a

Like the definitions of “pharmacy benefits

manager” and “third party payer,” the definition of

“plan sponsors” is referring to a person or entity

separate and removed from the health plan itself.

Unlike the definitions of “pharmacy benefits

manager” and “third party payer,” however, the

definition of “plan sponsor,” explicitly references an

employer who provides an employee benefit plan and

makes mention of an employee benefit plan. The

Court finds PCMA’s argument that the statutory

definition of “plan sponsor” makes “reference to”

ERISA to be its most convincing argument. In order

to fully explore the effect of “plan sponsor,” the Court

will review the relevant analysis.

“A state law has a prohibited “reference to”

ERISA or ERISA plans when that law (1) impos[es]

requirements by reference to [ERISA] covered

programs, (2) specifically exempt[s] ERISA plans

from an otherwise generally applicable [statute], or

(3) premises a cause of action on the existence of an

ERISA plan.” Prudential, 154 F.3d at 822 (internal

citations and quotations omitted). “[W]here a State’s

law acts immediately and exclusively upon ERISA

plans . . . or where the existence of ERISA plans is

essential to the law’s operation . . . that ‘reference’

will result in pre-emption.” Gobeille, 136 S.Ct. at

943.

Applying those three factors to this case, the

Court finds that S.B. 2258 and S.B. 2301’s definition

of “plan sponsor,” which includes an employer who

provides an employee benefit plan, is not an implicit

reference to ERISA. First, neither S.B. 2258 and

2301 “impose requirements by reference to ERISA

covered programs.” See Dillingham, 519 U.S. at 324.

73a

S.B. 2258 and S.B. 2301 undoubtedly “impose

requirements,” but not “by reference to ERISA

covered programs.” Id. Both S.B. 2258 and 2301

make reference to a “plan sponsor.” A “plan sponsor,”

by definition, is “the employer in the case of an

employee benefit plan . . . or the employee

organization in the case of a plan established . . . by

an employee organization . . . .” See N.D.C.C. § 1903.6-01(5) (emphasis added). The employer and the

employee organization are both distinct and separate

entities, distinguishable from an employee benefit

plan, itself.

“Plan sponsors” are referenced in one section of

each bill:

S.B. 2258: “A pharmacy benefits manager or

third-party payer may not prohibit

a pharmacist or pharmacy from

participating in a class action

lawsuit.

A

pharmacy

or

pharmacist may disclose to the

plan sponsor or to the patient

information

regarding

the

adjudicated

reimbursement

paid to the pharmacy which is

compliant under the federal Health

Insurance

Portability

and

Accountability Act of 1996 . . . .”

S.B. 2301: “If requested by a plan sponsor

contracted payer, a pharmacy

benefits manager or thirdparty payer that has an

ownership interest, either directly

or

through

an

affiliate

or

subsidiary, in a pharmacy shall

74a

disclose to the plan sponsor

contracted

payer

any

difference between the amount

paid to a pharmacy and the

amount charged to the plan

sponsor contracted payer.”

See S.B. 2258(1)(5) and S.B. 2301(1)(2) (emphasis

added).

The Court finds that S.B. 2258 does not impose

requirements by making reference to ERISA covered

programs. Looking to the statutory language, which

is clear and unambiguous on its face, S.B. 2258

permits pharmacies and pharmacists to disclose

information to a plan sponsor. See S.B. 2258 § 1(5).

While, S.B. 2258 allows pharmacies and pharmacists

to disclose information, it does not require them to,

so it cannot be said that S.B. 2258 imposes

requirements by making reference to an ERISA

program. Even if the statutory language required,

rather than permitted, pharmacies and pharmacists

to disclose information to a plan sponsor, it would not

change the outcome. In that instance, S.B. 2258

would impose a requirement on pharmacies and

pharmacists, but not an ERISA covered program.

In contrast, S.B. 2301 requires, rather than

permits, PBMs and third party payers to disclose

information to plan sponsors. While S.B. 2301

imposes a requirement, the Court finds it does not do

so by reference to an ERISA-covered program.

Instead, S.B. 2301 imposes a requirement on PBMs

and third party payers by reference to plan sponsors.

Plan sponsors, by definition, refer to an employer or

75a

an employee organization,6 both of which are

separate and distinct entities and distinguishable

from an employee benefit plan. Section 514(a) of 29

U.S.C. § 1144(a) contains the preemption clause

which states that ERISA “shall supersede any and

all State laws insofar as they may now or hereafter

relate to any employee benefit plan . . . .” but not

insofar as they relate to an employer.

The second consideration for a court deciding

whether a state law has a “reference to” ERISA is

whether the laws specifically exempt ERISA plans

from an otherwise generally applicable statute. See

Mackey v. Lanier Collection Agency & Service, Inc.,

486 U.S. 825, 830 (1988). The Court finds that

neither S.B. 2258 nor S.B. 2301 specifically exempt

ERISA plans, as no such provision exists in either

bill. The third consideration, whether the law

“premises a cause of action on the existence of an

ERISA plan,” is similarly irrelevant. See IngersollRand, 498 U.S. at 140. The Court finds that neither

S.B. 2258 nor S.B. 2301 premises a cause of action on

the existence of an ERISA plan, as no such provision

exists in either bill.

Accordingly, the Court finds that neither S.B.

2258 nor S.B. 2301 contain an implicit reference to

ERISA. Significantly, neither of the bills act

“immediately and exclusively upon ERISA plans.”

See N.D.C.C. 19-03.6-01(5) (“‘Plan sponsor’ means the

employer in the case of an employee benefit plan . . . or the

employee organization in the case of a plan established . . . by

an employee organization . . . .” ). To be sure, the plan sponsor

(i.e., employer or employee organization) is associated with an

employee benefit plan; plan sponsors are not, however,

synonymous with the plan itself.

6

76a

Dillingham, 519 U.S. at 325. Neither of the bills were

“specifically designed to affect employee benefit

plans,” nor can it be said that “the existence of

ERISA plans is essential to the law’s operation.” See

Ingersoll-Rand, 498 U.S. at 139; Dillingham, 519

U.S. at 325; see also Travelers, 514 U.S. at 656

(finding no preemption involving state-mandated

surcharges imposed on parties and HMOs because

the charges applied “regardless of whether the

commercial coverage or membership, respectively,

[was] ultimately secured by an ERISA plan.).

Instead, both of the bills “function[ ] irrespective of

. . . the existence of an ERISA plan.” Ingersoll-Rand,

498 U.S. 133, 139 (1990).

“In the end, what saves the [state law] from

ERISA preemption is that it does not have anything

to do with employee benefit plans in particular. It is

merely one of many state laws that regulates one of

many products that an employee benefit plan might

choose to buy. The [state law] regulates health

insurance in a broad and neutral way . . . The mere

fact that many ERISA plans choose to buy health

insurance for their plan members does not cause a

regulation of health insurance automatically to

‘relate to’ an employee benefit plan . . . .” Washington

Physicians Service Ass’n v. Gregoire, 147 F.3d

1039,1046-47 (9th Cir. 1998). In conclusion, the

Court finds that neither S.B. 2258 nor S.B. 2301

contain either an explicit or implicit “reference to”

ERISA.

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b. Whether S.B. 2258 and S.B. 2301 have a

“connection with” ERISA

Because the Court finds that neither bill makes a

“reference to” ERISA, the Court continues its

preemption analysis, under the “connection with”

prong. A state law has an impermissible “connection

with” ERISA plans when it “governs . . . a central

matter of plan administration” or “interferes with

nationally uniform plan administration.” Gobeille,

136 S.Ct. at 943. The Court finds that neither S.B.

2258 nor S.B. 2301 have such a connection with

ERISA.

First, neither S.B. 2258 nor S.B. 2301 govern “a

central matter of plan administration.” Gobeille, 136

S.Ct. at 943. “Obligations undertaken with plan

administration include ‘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.’” Gerhart, 852 F.3d at 730 (quoting

Fort Halifax Packing Co. Inc., v. Coyne, 482 U.S. 1, 9

(1987)). None of these obligations are at issue here

with either S.B. 2258 or S.B. 2301.

Neither S.B. 2258 nor S.B. 2301 contain any

provisions discussing or addressing claimant

eligibility determinations, the monitoring of funds for

benefit payments, or the keeping of appropriate

records for reporting requirements. If either bill is

disguising some serious consequence in any of these

matters, PCMA has not demonstrated it. PCMA does

argue that the bills’ provisions relate to calculations

of benefit levels and making of disbursements. Some

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of the provisions in the bills which PCMA points to

for support include those preventing PBMs from

charging pharmacies fees imposed after the point of

sale; authorizing pharmacies to mail or deliver drugs

to patients; requiring that PBMs allow pharmacies to

charge shipping and handling fees; authorizing

pharmacies to dispense any drugs allowed by their

licensure; and barring PBMs from providing

specialty drug benefits through mail-order specialty

pharmacies in which the PBM owns an interest. See

Docket No. 10-1, pp. 11-12.

The Defendants respond that not all state laws

related to health care can constitute laws governing

central matters of plan administration. If that were

the case, the roles the state plays in which

physicians to license or which controlled substances

to restrict could be said to affect how a health plan is

administered because they ultimately impact the

plan participants’ benefit levels, prescription drug

disbursements, and overall care. The Defendants

point to cases in which the Supreme Court held that

when a plan (or its agent) enters the marketplace for

goods or services, the state may regulate those

transactions without running afoul of ERISA. See De

Buono, 520 U.S. at 8167; Dillingham, 519 U.S. 316,

329 (1997)8; Travelers, 514 U.S. 645, 649 (1995)9.

7 ERISA’s preemption clause did not preclude New York from

imposing a gross receipts tax on ERISA funded medical centers.

See De Buono, 520 U.S. 806 (1997)

8 California wage law did not “relate to” employee benefit plans

and thus is not preempted by ERISA. See Dillingham, 519 U.S.

316 (1997).

9 New York law requiring hospitals to collect surcharges from

patients covered by a commercial insurer but not by Blue

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Otherwise, ERISA would preempt everything from

general medical practice standards to state wage

laws, because all regulations at the state level would

“invariably affect the cost and price of services”

ultimately paid for by ERISA plans.

The Court finds no provisions in either S.B. 2258

or S.B. 2301 governing central matters of plan

administration. The bills at issue permit pharmacies

to dispense prescription drugs the State has already

licensed them to dispense.10 The bills provide for

greater disclosure of third party payer’s and PBMs’

prescription drug pricing. The bills also limit the

requirements and fees a third party payer or PBM

can place on a pharmacy. The majority of provisions

in both S.B. 2258 and S.B. 2301 relate to

communication issues between pharmacies and

PBMs and, as such, do not govern central matters of

any health plan’s plan administration.

Because neither S.B. 2258 nor S.B. 2301 “govern

. . . a central matter of plan administration,” the

Court finds they do not “interfere[] with nationally

uniform plan administration.” PCMA argues that

these bills will impose a variety of burdens and

expenses upon its members that will interfere with

the “benefit structures” selected by ERISA benefit

Cross/Blue Shield plan did not “relate to” employee benefit

plans and are not preempted by ERISA. See Travelers, 514 U.S.

645 (1995).

10 Currently, third party payers and PBMs create a list of what

they have determined to be “specialty drugs”. Third party

payers and PBMs then restrict pharmacies from dispensing any

prescription drugs on their “specialty drug” list. Plan

participants are then directed to buy the “specialty drug”

directly from the third party payer or PBM.

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plans and administered by them. But, in the same

breath, PCMA admits S.B. 2258 and S.B. 2301 can go

into effect as to non-ERISA and non-Medicare Part D

health plans. PCMA, is a national trade association

representing multiple PBMs, some of whom provide

services for health plans covered by ERISA and some

of whom provide services for non-ERISA health

plans. PCMA cannot claim in good faith that S.B.

2258 or S.B. 2301 interferes with nationally uniform

plan administration, while conceding the bills may

ultimately take effect as to other health plans.

PCMA’s argument is too abstract. “If ERISA were

concerned with any state action – such as medicalcare quality standards or hospital workplace

regulations – that increased costs of providing

certain benefits, and thereby potentially affected the

choices made by ERISA plans, [the Court] could

scarcely see the end of ERISA’s preemptive reach,

and the words ‘relate to’ would limit nothing.”

Dillingham, 519 U.S. at 329. PCMA fails to explain

in any detail how these bills, which essentially (1)

require third party payers and PBMs to answer

questions about payment determination, when

asked; and (2) permit pharmacies to offer the same

services as third party payers and PBMs, really

affects nationally uniform plan administration.

Accordingly, the Court finds S.B. 2258 and S.B. 2301

do not interfere with nationally uniform plan

administration, the bills have no “connection with”

ERISA, and the bills are not preempted by ERISA.

c. ERISA’s Savings Clause

Neither party in this case argues the applicability

of ERISA’s so-called “savings” clause. “While § 514(a)

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of ERISA broadly pre-empts state laws that relate to

an employee benefit plan, that pre-emption is

substantially qualified by an ‘insurance savings

clause.’” Metropolitan Life Ins. Co. v. Massachusetts,

471 U.S. 724, 733 (1985). “The insurance saving

clause preserves any state law ‘which regulates

insurance, banking, or securities.’” Id. at 739-40.

While neither party has raised this argument, the

Court makes the alternative finding that, even if S.B.

2258 and S.B. 2301 were preempted by ERISA, they

would escape the effects of that preemption by falling

within ERISA’s saving clause.

In determining the scope of the savings clause,

the Court begins by taking a “common-sense” view of

the question of whether the state laws in question

“regulate insurance.” Metropolitan Life, 471 U.S. at

739-40. To determine whether a particular practice

falls within the “business of insurance,” the Supreme

Court used three criteria from the McCarran

Ferguson Act:

[F]irst, whether the practice has the effect of

transferring or spreading a policyholder’s risk;

second, whether the practice is an integral

part of the policy relationship between the

insurer and the insured; and third, whether

the practice is limited to entities within the

insurance industry.”

Id. at 743.

The Supreme Court noted that the focus of the

statutory term under the McCarran-Ferguson Act

was “the relationship between the insurance

company and the policyholder.” Metropolitan Life,

471 U.S. at 744. “A common-sense view of the word

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‘regulates’ would lead to the conclusion that in order

to regulate insurance, a law must not just have an

impact on the insurance industry, but must be

specifically directed toward that industry.” Pilot Life

Ins. Co. v. Dedeaux, 481 U.S. 41, 50-51 (1987)

(Although the state common law did concern “the

policy relationship between the insurer and the

insured,” the Court found that “[t]he connection to

the insurer-insured relationship is attenuated at

best,” because it did not “define the terms of the

relationship between the insurer and the insured.”).

Therefore, the North Dakota state laws will be

found to “regulate insurance” if (1) they are directed

specifically toward the insurance industry, and (2)

they apply to the “business of insurance” within the

meaning of the McCarran-Ferguson Act. See 15

U.S.C. §§ 1011-1015. Pilot Life Ins., 481 U.S. at 48.

The laws apply to the business of insurance under

the McCarran-Ferguson Act if they (1) have the

effect of transferring or spreading the policyholder’s

risk; (2) are an integral part of the policy relationship

between the insurer and the insured; and (3) are

limited to entities within the insurance industry.

Metropolitan Life, 471 U.S. at 743.

The Court concludes that even if S.B. 2258 and

S.B. 2301 were found to “relate to” ERISA, they

would be saved from preemption by the ERISA

savings clause. First, both bills “regulate insurance”

under a common-sense approach,” because they are

laws “specifically directly toward that industry.”

Pilot Life Ins. Co., 481 U.S. at 50. Both S.B. 2258 and

S.B. 2301 seek to regulate PBMs and third party

payers, entities that are engaged in the business of

health insurance. PBMs in North Dakota are

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regulated by the State’s insurance department. See

Hearing on S.B. 2258 Before the H. Indus. Bus. &

Labor Comm., 65th Leg. Assemb., Reg. Sess. (N.D.

2017) (statement of Mark Hardy, PharmD ExecutiveDirector of the ND State Board of Pharmacy). It was

the intent of the North Dakota Legislature to impose

regulations on PBMs and third party payers that

prevent them from restricting local North Dakota

pharmacies from dispensing the drugs they are

licensed to dispense, by placing these drugs on

“specialty drug” lists.11

Further, the North Dakota laws satisfy the

McCarran-Ferguson factors. First, they have the

effect of transferring or spreading the policyholder’s

risk. See Gregoire, 147 F.3d at 1046-47 (concluding

the Washington act did transfer or spread the

policyholder’s risk by mandating coverage of

additional treatments or conditions). It is clear the

bills confer a benefit on insureds. By allowing

pharmacists and pharmacies to resume a greater role

in the dispensing of prescription drugs, including the

mailing and shipping of prescription drugs, S.B. 2258

and S.B. 2301 essentially mandate greater coverage

and treatment of conditions for the policyholder,

which has the effect of spreading the policyholder’s

risk. See Gregoire, 147 F.3d at 1046 (“It is irrelevant

that the Act accomplishes its risk-spreading function

in an unusual way. Risk-spreading is a concept that

involves more than the mere selection of certain

medical conditions for coverage. The degree of riskspreading between the insured and the carrier also

See N.D. Leg. Assemb., Bill Videos for S.B. 2301,

http://www.legisl.nd.gov/assembly,652017/billvideo/bv2301.html.

11

84a

depends on what kinds of treatments the policy

agrees to pay for, what kinds of deductibles it will

charge, and whether there will be a cap on overall

expenses.”)

Second, the North Dakota bills are an integral

part of the policy relationship between the insurer

and the insured. Metropolitan Life, 471 U.S. at 743.

The North Dakota laws have a “connection to the

insurer-insured relationship” because they “define

the terms of the relationship between the insurer

and the insured,” Pilot Life, 481 U.S. at 50-51. In

Gregoire, the Eighth Circuit rejected the argument

that the Washington act regulated only the

relationship between the carrier and the provider,

rather than the relationship between the carrier and

the insured, because the Washington act “confers a

benefit on insureds by expanding the treatments that

their health carriers must provide or pay for.”

Gregorie, 147 F.3d at 1046-47. Similarly, in this case,

S.B. 2258 and S.B. 2301 confer a benefit on insureds

by expanding the treatments available to them

through their local pharmacies, and by mail, as

opposed to ordering directly through PBMs.

Finally, the North Dakota laws are limited to

entities within the insurance industry. S.B. 2258 and

S.B. 2301 impose requirements on PBMs and third

party payers, which are entities engaged in the

business of health insurance, as discussed above.

Neither S.B. 2258 nor S.B. 2301 contain regulations

on entities outside the business of health insurance.

Accordingly, the Court alternatively finds that even

if S.B. 2258 and S.B. 2301 “relate to” ERISA, both

bills “regulate insurance” within the common-sense

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meaning and are thus saved by ERISA’s preemption

clause.

In evaluating PCMA’s likelihood of success on the

merits, the Court considered its responsibility to

“flexibly weigh the case’s particular circumstances to

determine ‘whether the balance of equities so favors

the movant that justice requires the court to

intervene . . . .” Calvin Klein Cosmetics, 815 F.2d

500, 503 (8th Cir. 1987). PCMA has not shown that

such intervention is warranted under the

circumstances. Preliminary injunctive relief is an

“extraordinary and drastic remedy.” Munaf, 553 U.S.

674, 689-90 (2008). Accordingly, the party seeking

such relief bears the burden of establishing its

propriety with “clear proof.” Frejlach, 573 F.2d 1026,

1027 (8th Cir. 1978). PCMA has not provided clear

proof it is likely to succeed on the merits of its claim

for a preliminary injunction. The Court finds that

this factor weighs in favor of the Defendants.

2. Irreparable Harm

PCMA alleges it will experience irreparable harm

if injunctive relief is not granted and that such harm

will not be compensable by an award of money

damages because the United States Constitution

grants states immunity from such damage claims.

See Docket No. 10-1, p. 19. PCMA alleges the State’s

bills impose “significant administrative, operational,

and financial burdens on PBMs and health plans,”

and that the enforcement of these laws “may cause a

loss of goodwill and injury to that PBM’s reputation.”

See Docket No. 10-1, p. 24-25. The Defendants argue

PCMA’s alleged harm is overstated because PCMA

will still have to comply with S.B. 2258 and S.B. 2301

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as to non-ERISA and non-Medicare Part D plans,

regardless of the outcome of this case. See Docket No.

22, pp. 7-8. Because PCMA will ultimately be forced

to comply with the State’s bills in some respects, the

State argues, any harm is not as perilous as PCMA

would lead the Court to believe. Both parties agree

that ERISA and Medicare Part D preemption applies

only as to ERISA and Medicare Part D plans, and

that PCMA’s members will be forced to comply with

the laws in some capacity, however the Court must

still make an independent finding regarding the

potential for irreparable harm.

“Irreparable harm occurs when a party has no

adequate remedy at law, typically because its

injuries cannot be fully compensated through an

award of damages.” General Motors Corp. v. Harry

Brown’s, LLC, 563 F.3d 312, 319 (8th Cir. 2009).

When the potential economic loss is so great as to

threaten the existence of the moving party’s

business, a preliminary injunction may be

warranted. Loss of consumer goodwill can be

irreparable harm, however, “[e]conomic loss, on its

own, is not an irreparable injury so long as the losses

can be recovered.” See id.; DISH Network Service

L.L.C. v. Laducer, 725 F.3d 877, 882 (8th Cir. 2013).

“[T]he absence of irreparable injury is by itself

sufficient to defeat a motion for a preliminary

injunction.” DISH, 725 F.3d at 882.

Here, PCMA asserts its members will experience

significant financial burdens and may experience a

loss of reputation. PCMA does not offer any

predictions or figures to demonstrate what its view of

what a “significant” financial burden might mean.

Neither does PCMA address how complying with the

87a

State’s bills as they relate to non-ERISA and nonMedicare Part D plans might mitigate any financial

burdens. PCMA also fails to explain the theory that

enforcement of the State bills may result in a loss of

reputation. It is not immediately clear why

complying with state law would be viewed so

negatively as to result in a loss of reputation. PCMA

does not allege S.B. 2258 or S.B. 2301 threaten the

existence of its members’ business and PCMA admits

its members will comply with the State’s laws as to

non-ERSA and non-Medicare Part D health plans.

The Court is not willing to find that this factor

weighs in favor of the Plaintiff, where Plaintiff has

failed to provide any evidence supporting its bare

assertions that its members will experience a

financial loss and may experience a loss of

reputation. Accordingly, the Court finds this

Dataphase factor weighs in favor of the Defendants.

3. Balance of the Harms

“Failure to show irreparable harm is an

independently sufficient ground upon which to deny

a preliminary injunction.” Watkins, Inc. v. Lewis,

346 F.3d 841, 844 (8th Cir. 2003). However, in the

interest of a thorough and meaningful review, the

Court next factors the balance between the movant’s

potential harm and any injury an injunction may

inflict on other interested parties. See Pottgen v. Mo.

State High Sch. Activities Ass’n, 40 F.3d 926, 929

(8th Cir. 1994). While the “irreparable harm” factor

focused on the potential harm to the plaintiff, the

Court balances the weight of plaintiff’s potential

harm against the potential harm to each party of the

dispute, as well as the potential harm to the public.

88a

See Dataphase, 640 F.2d at 114; Glenwood Bridge,

Inc. v. City of Minneapolis, 940 F.2d 367, 372 (8th

Cir. 1991).

The Court finds that any harm PCMA’s members

may experience resulting from S.B. 2258 and S.B.

2301 is outweighed by the potential harm and injury

a preliminary injunction may inflict on other

interested parties. Testimony before the North

Dakota Senate Industry, Business and Labor

Committee indicated PBMs increasingly engage in

anticompetitive or deceptive conduct that harms

consumers, health plans, and local pharmacies.

Testimony Before the S. Indus. Bus. & Labor Comm.,

65th Leg. Assemb., Reg. Sess. (N.D. 2017) (statement

of Mike Schwab, Executive Vice President of the

North Dakota Pharmacists Association).

For example, PBMs have the ability to prevent

local pharmacies from dispensing any prescription

drugs the PBM determines to be a “specialty drug,”

irrespective of what federal, state, and local

authorities have already determined. The PBM then

directs consumers to purchase the specialty drug

through PBM’s own mail-order pharmacies. In

addition to being anticompetitive, legislative history

indicates this practice can be wasteful as patients

have found their “specialty drugs” frozen on their

doorstep or baking in their mailbox. In those

instances, the PBM can provide an override code

permitting the local pharmacists to provide an

emergency refill or short-day supply of the

medication. Testimony Before the S. Indus. Bus. &

Labor Comm., 65th Leg. Assemb., Reg. Sess. (N.D.

2017) (statement of Mike Schwab, Executive Vice

President of the North Dakota Pharmacists

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Association). Such testimony is evidence of the

harms faced by other interested parties, including

consumers, who are limited by where they may

obtain their prescription drugs and how they obtain

them, and local pharmacies who are limited by what

prescription drugs they may provide and how and

when they provide them.

The Court has reviewed the legislative history of

both bills, including testimony from Howard

Anderson Jr. of the North Dakota Pharmacists

Association; Dr. Erik Christenson, Chief Professional

Officer at Heart of America Medical Center;

representatives

from

Workforce

Safety;

representatives from CVS health; local pharmacists;

and a public interest antitrust attorney. The

overwhelming majority of testimony to the

Committees indicated that consumers, pharmacies,

and plan sponsors all suffer when PBMs exercise

their power to restrict consumers to the PBM’s own

captive mail order and specialty pharmacy

operations by reducing the available choices for

accessing prescription drugs.12 Both S.B. 2258 and

Most of the testimony provided at the North Dakota State

Legislature

was

given

by

pharmacists,

pharmacy

representatives, and consumers. It does not appear to be

uncommon for plan sponsors to be absent from such a

discussion. For example, in 2011, Express Scripts Inc. (ESI) and

Medco Health Solutions Inc. (Medco) announced a merger

agreement. See Louisiana Mun. Police Employees’ Retirement

System v. Medco Health Solutions, Inc., 2011 WL 4386774, No.

2:11-cv-4211 (D.N.J. Sept. 19, 2011). At the time, ESI was “the

nation’s leading PBM provider with 90 million covered lives,

followed by CVS Caremark with 85 million, and Medco with 65

million covered lives.” See Dissenting Statement of

Commissioner Julie Brill Concerning the Proposed Acquisition

of Medco Health Solutions Inc. by Express Scripts, Inc., 2012

12

90a

S.B. 2301 seek to address these and the other issues

presented to the North Dakota State Legislature.

After completing its review, the Court finds that the

potential harm other interested parties would

experience by preempting these bills, outweighs any

potential harm PCMA may experience due to their

implementation. Accordingly, the Court finds that

the third Dataphase factor weighs in favor of the

Defendants.

4. Public Interest

The final Dataphase factor for the Court to

consider is the public’s interest in the outcome. For

the same reasons enumerated in the Court’s analysis

of the third Dataphase factor, the public’s interest in

the outcome of this case requires a finding that this

factor weighs in favor of the Defendants. The public

interests served by the implementation of S.B. 2258

and S.B. 2301 are those of transparency,

accessibility, and free and open markets for

WL 1141093 (April 2, 2012). The Federal Trade Commission

(FTC) began an investigation into the proposed merger. The

FTC ultimately determined the merger would not unduly

increase the merged entity’s bargaining power or harm the

consumer and accordingly ended its investigation. After the

merger of ESI and Medco, the merged entity became more than

five times larger than the third largest firm. Id. In response to

criticism during the merger that plan sponsors had not

expressed concern over the merger, Senator Herb Kohl stated

that “it is notable that no large employer who privately

expressed concerns to us wished to testify at today’s hearing,

often telling us that they feared retaliation from the large

PBMs with whom they must do business.” Statement of U.S.

Senator Herb Kohl on the Express Scripts/Medco merger

(12.6.2011). Id.

91a

prescription drugs. More specifically, the public has

an interest in a plan sponsor’s ability to obtain

information regarding the rate at which a PBM

reimburses a pharmacy and the rate at which the

PBM then bills the plan sponsor because this type of

transparency allows pharmacies and plan sponsors,

as well as PBMs, to evaluate, compare, and

determine fair values of the products and services for

which they are contracting.

The public also has an interest in encouraging as

many prescription drug providers to enter the

marketplace as federal, state, and local governments

will allow because the public values increasing

competition for products and services as a way to

lower costs. Additionally, increasing the number of

market participants serves the public interest by

allowing consumers the choice to obtain their

prescription drugs either over-the-phone, by mail, or

in-person at their local pharmacy. The choice of how

to obtain prescription drugs serves the public

interest of accessibility and safety because

consumers have more control of when and how to get

their medications, as well as the method by which

they will be taught to use them (either over the

phone or in person).

There is some evidence in the record that the

public interest in keeping health care costs low might

be injured by implementation of S.B. 2258 and S.B.

2301. Testimony Before the S. Indus. Bus. & Labor

Comm., 65th Leg. Assemb., Reg. Sess. (N.D. 2017)

(“They may tell you this bill is going to raise costs. To

be honest, that might be true in some circumstances.

However, if costs go up, overall there is a high

probability that it is because of the PBM not the

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pharmacy.” Statement of Mike Schwab, Executive

Vice President of the North Dakota Pharmacists

Association). However, in the aggregate, the Court

finds that the potential injury to public interests

caused by implementation of S.B. 2258 and S.B. 2301

pales in comparison to the actual injuries the

legislation seeks to remedy. Therefore, the Court

finds this Dataphase factor weighs in favor of the

Defendants.

Because the Court finds that all four Dataphase

factors weigh in the Defendants’ favor, PCMA’s

motion to preliminarily enjoin the State’s

enforcement of S.B. 2258 and S.B. 2301 as to ERISA

health care plans is denied.

B. MEDICARE PART D PREEMPTION

PCMA also requests this Court preliminarily

enjoin the State from enforcing S.B. 2258 and S.B.

2301 as they relate to Medicare Part D health plans

because PCMA believes a provision contained in

Medicare Part D preempts the State’s bills. The

Court will apply the same Dataphase factors to

PCMA’s Medicare Part D claim to determine whether

PCMA is entitled to a preliminary injunction on this

basis.

1. Likelihood of Success on the Merits

In regards to Medicare, Congress has proclaimed

that “[t]he standards established under this part

shall supersede any State law or regulation . . . with

respect to [Part D] plans which are offered by [Part

D] organizations under this part.” 42 U.S.C. § 1395w26(b)(3) (incorporating Part C’s preemption

93a

provision, 42 U.S.C. § 1395w-112(g)) (emphasis

added). A “standard within the meaning of this

preemption provision means a statutory provision or

a regulation promulgated under Medicare and

published in the Code of Federal Regulations. Do

Sung Uhm v. Humana, Inc., 620 F.3d 1134, 1148 n.

20 (9th Cir. 2010). The meaning of the phrase “with

respect to” is broad. For a law to act “with respect to”

a Medicare standard, it need not exclusively impact a

Medicare standard, and it need not be inconsistent

with a Medicare standard. Id. at 1149, 1150 n. 25.

But ultimately, preemption is found “only where it is

the ‘clear and manifest purpose of Congress,’” and

the plain language of the preemption clause offers

the best evidence of Congress’s preemptive intent. Id.

at 1148 (quoting Rice v. Santa Fe Elevator Corp., 331

U.S. 218, 230 (1947). “A clear demonstration of

conflict . . . must exist before the mere existence of a

federal law may be said to pre-empt state law

operating in the same field.” New York City Health

and Hospitals Corp. v. WellCare of New York, Inc.,

801 F.Supp.2d 126, 136 (S.D.N.Y. 2011).

PCMA first argues it is not obligated to show that

S.B. 2258 and S.B. 2301 regulate areas also

regulated by Medicare D, but this is plainly untrue.

See Docket No. 23, p. 2-4. Medicare Part D

preemption “operates only when CMS13 actually

creates standards in the area regulated.” Medicare

Program; Medicare Prescription Drug Benefit, 2005

WL 176041, p. 3, 70 Fed. Reg. 4194-01, 4320 (Jan.

28, 2005). CMS has instructed that “[t]o the extent

13 The Centers for Medicare & Medicare Services (CMS) is part

of the national Department of Health and Human Services.

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[it] do[es] not create any standards whatsoever in a

particular area, [it] do[es] not believe preemption

would be warranted.” Id. To overcome the

presumption against preemption, PCMA must show

S.B. 2258 and S.B. 2301 regulate “with respect to” a

“standard established under” Medicare Part D.

PCMA waited until its reply brief to attempt such a

showing and, even then, offered it only as an

alternative argument. See Docket No. 23, p. 4.

PCMA alternatively argues that if it is required

to show that there are provisions in S.B. 2258 and

S.B. 2301 that act with respect to Medicare Part D

standards that the State laws are still preempted.

PCMA offered a list of C.F.R. regulations, each

paired with a one-sentence legal conclusion

supporting its position and nothing more. See Docket

No. 23, pp. 4-6. PCMA left for the Court with the

task of finding and then analyzing any relevant

provisions within each cited C.F.R. regulation. This

Court is unwilling to do this, particularly when the

remedy sought by PCMA is one as “extraordinary”

and “drastic” as a preliminary injunction. Munaf v.

Geren, 553 U.S. 674, 689-90 (2008). The burden of

proof, i.e., the burden of establishing the need for a

preliminary injunction, rests on the shoulders of the

Plaintiff.

The Court has reviewed the nine C.F.R.

regulations listed by PCMA. Each regulation

contains numerous pages of text. Some portions of

text refer to additional regulations. Other portions of

text are merely definitions. The Court cannot and

will not guess at which portions PCMA finds relevant

or problematic in this matter. To do so would require

the Court to analyze an issue not properly presented

95a

and rule on an argument not sufficiently made.

Constructing a party’s argument for them is not

within a court’s purview. See Hopper v. Berryhill,

2017 WL 4236974 *15 (D.E.D. Mo. Sept. 25, 2017)

(“Plaintiff offers no argument or citation to the

record to specify or support this argument. It is not

[the] reviewing court’s function to construct an

argument for a party.”); Laborers’ Intern. Union of

North America, AFL-CIO v. Foster Wheeler Energy

Corp., 26 F.3d 375, 398 (3rd Cir. 1994) (“An issue is

waived unless a party raises it in its opening brief,

and for those purposes ‘a passing reference to an

issue . . . will not suffice to bring that issue before

this court.’”); Rotskoff v. Cooley, 438 F.3d 852, 854-55

(8th Cir. 2006) (observing that an issue is deemed

abandoned when it is not developed in brief);

McPherson v. Kelsey, 125 F.3d 989, 995-96 (6th Cir.

1997) (“[I]ssues adverted to in a perfunctory manner,

unaccompanied by some effort at developed

argumentation, are deemed waived. It is not

sufficient for a party to mention a possible argument

in the most skeletal way, leaving the court to . . . put

flesh on its bones.”).

In a preliminary injunction, the party seeking

relief bears the burden of establishing its propriety

with “clear proof.” Frejlach, 573 F.2d 1026, 1027 (8th

Cir. 1978). In analyzing the first Dataphase factor,

the Court cannot say there is clear proof PCMA is

likely to succeed on the merits. PCMA failed to point

to any specific text within its cited C.F.R.

regulations, either in its briefing or in its oral

arguments, that creates a preemption conflict with

the State’s bills. Pointing to a list of C.F.R.

regulations, without any explanation of their

relevance, is not enough. Plaintiff’s conclusory

96a

statements are not adequate for the relief sought.

Even if the Court was willing to guess which portions

of the text Plaintiff finds relevant, Plaintiff offered

no analysis for the Court to consider regarding what

the text means, how the text is similar, its practical

effects, or why preemption would exist in each

scenario. Without more from the party seeking such

“extraordinary” relief, the Court cannot find that

PCMA is likely to succeed on the merits. Accordingly,

the Court finds that this Dataphase factor weighs in

favor of the Defendants.

2. Irreparable Harm

As with its argument regarding ERISA

preemption, PCMA alleges it will experience

irreparable harm if injunctive relief is not granted.

PCMA alleges the state legislation ultimately

imposes “significant administrative, operational, and

financial burdens on PBMs and health plans,” and

that the enforcement of these laws “may cause a loss

of goodwill and injury to that PBM’s reputation.” See

Docket No. 10-1, p. 24-25. As previously discussed,

“[i]rreparable harm occurs when a party has no

adequate remedy at law, typically because its

injuries cannot be fully compensated through an

award of damages.” General Motors Corp., 563 F.3d

at 319. When the potential economic loss is so great

as to threaten the existence of the moving party’s

business, a preliminary injunction may be

warranted. “[L]oss of consumer goodwill can be

irreparable harm,” however, “[e]conomic loss, on its

own, is not an irreparable injury so long as the losses

can be recovered.” DISH Network Service L.L.C., 725

F.3d at 882.

97a

For the reasons enumerated in the Court’s

previous analysis of irreparable harm in considering

the ERISA claim, the Court is not inclined to find

that this factor weighs in favor of the Plaintiff when

the Plaintiff has failed to provide any evidence

supporting its bare assertions that it will experience

a financial loss and may experience a loss of

reputation. Such vague and unsubstantiated claims

will not suffice for an “extraordinary” and “drastic”

remedy. Accordingly, the Court finds that this

Dataphase factor weighs in favor of the Defendants.

3. Balance of the Harms

While “the absence of irreparable injury is by

itself sufficient to defeat a motion for a preliminary

injunction,” the Court notes that it finds the third

Dataphase factor weighs in favor of the Defendants

as well. See DISH Network Service L.L.C., 725 F.3d

at 882. The Court balances the weight of plaintiff’s

potential harm against the potential harm to each

party of the dispute, as well as the potential harm to

the public. See Dataphase, 640 F.2d at 114;

Glenwood Bridge, Inc., 940 F.2d at 372.

For the reasons enumerated in its above analysis,

the Court finds that any harm PCMA’s members

may experience resulting from S.B. 2258 and S.B.

2301 is outweighed by the potential harm and injury

a preliminary injunction may inflict on other

interested parties. PCMA’s bare assertions of harm,

without any supporting evidence, are outweighed by

testimony before the North Dakota State Legislature

detailing the harms that North Dakota consumers,

health plans, and local pharmacies experience when

PBMs engage in anticompetitive or deceptive

98a

conduct. Testimony Before the S. Indus. Bus. & Labor

Comm., 65th Leg. Assemb., Reg. Sess. (N.D. 2017)

(statement of Mike Schwab, Executive Vice President

of the North Dakota Pharmacists Association).

Accordingly, the Court finds that this Dataphase

factor weighs in favor of the Defendants.

4. Public Interest

The final Dataphase factor for the Court to

consider is the public’s interest in the outcome. For

the same reasons enumerated in the Court’s above

analysis of this Dataphase factor, and for the reasons

enumerated in the Court’s analysis of the third

Dataphase factor relating to the balance of harms,

the Court finds that the public’s interest in the

outcome of this case does not support preliminary

injunctive relief. The public interests served by the

implementation of S.B. 2258 and S.B. 2301 are those

of transparency, accessibility, and free and open

markets for prescription drugs. These and other

public interests listed previously require finding that

this Dataphase factor weighs in favor of the

Defendants.

Preliminary injunctive relief is an “extraordinary

and drastic remedy.” Munaf, 553 U.S. at 689-90. As a

result, the party seeking relief bears the burden of

establishing its propriety with “clear proof.” Frejlach,

573 F.2d at 1027. PCMA has failed to meet that

burden. As a result, PCMA’s motion to preliminarily

enjoin the State’s enforcement of S.B. 2258 and S.B.

2301 as to ERISA health care plans is denied.

99a

IV. CONCLUSION

The Court has carefully reviewed the parties’

briefs, the Court’s notes from the preliminary

injunction hearing, the entire record in this case, and

the relevant case law, including the Dataphase

factors, and finds that the Plaintiff has not met its

burden for establishing the necessity of a

preliminary injunction. Accordingly, the Court

DENIES the motion for a preliminary injunction

(Docket No. 10).

IT IS SO ORDERED.

Dated this 7th day of November, 2017.

/s/ Daniel L. Hovland

x

Daniel L. Hovland, Chief Judge

United States District Court

100a

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No: 18-2926

Pharmaceutical Care Management Association

Appellant

v.

Mylynn Tufte, in her official capacity as the State

Health Officer of North Dakota, et al.

Appellees

_________________________________________________

Appeal from U.S. District Court for the District of

North Dakota – Bismarck

(1:17-cv-00141-DLH)

_________________________________________________

ORDER

The petition for rehearing en banc is denied. The

petition for rehearing by the panel is also denied.

Judge Colloton and Judge Erickson did not

participate in the consideration or decision of this

matter.

September 02, 2020

Order Entered at the Direction of the Court:

Clerk, U.S. Court of Appeals, Eighth Circuit.

_________________________________________

/s/ Michael E. Gans

101a

N.D. Cent. Code § 19-02.1-16.1

19-02.1-16.1.

Pharmacy

claim

fees

and

pharmacy rights - Pharmacy benefits managers

- Penalty.

1. As used in this section:

a. “Pharmacy benefits manager” has the same

meaning as in section 19-03.6-01.

b. “Plan sponsor” has the same meaning as in

section 19-03.6-01.

c. “Third-party payer” has the same meaning as

in section 19-03.6-01.

2. A pharmacy benefits manager or third-party

payer may not directly or indirectly charge or

hold a pharmacy responsible for a fee related to a

claim:

a. That is not apparent at the time of claim

processing;

b. That is not reported on the remittance advice

of an adjudicated claim; or

c. After the initial claim is adjudicated at the

point of sale.

3. Pharmacy performance measures or pay for

performance pharmacy networks shall utilize the

electronic quality improvement platform for plans

and pharmacies or other unbiased nationally

recognized entity aiding in improving pharmacy

performance measures.

a. A pharmacy benefits manager or third-party

payer may not collect a fee from a pharmacy if

the pharmacy’s performance scores or metrics

102a

fall within the criteria identified by the electronic quality improvement platform for plans

and pharmacies or other unbiased nationally

recognized entity aiding in improving pharmacy performance measures.

b. If a pharmacy benefits manager or third-party

payer imposes a fee upon a pharmacy for

scores or metrics or both scores and metrics

that do not meet those established by the

electronic quality improvement platform for

plans and pharmacies or other nationally

recognized entity aiding in improving pharmacy performance measures, a pharmacy benefits

manager or third-party payer is limited to

applying the fee to the professional dispensing

fee outlined in the pharmacy contract.

c. A pharmacy benefits manager or third-party

payer may not impose a fee relating to performance metrics on the cost of goods sold by a

pharmacy.

4. A pharmacy benefits manager or third-party

payer may not charge a patient a copayment that

exceeds the cost of the medication. If a patient

pays a copayment, the dispensing provider or

pharmacy shall retain the adjudicated cost and

the pharmacy benefits manager or third-party

payer may not redact the adjudicated cost.

5. A pharmacy benefits manager or third-party

payer may not prohibit a pharmacist or pharmacy

from participating in a class action lawsuit. A

pharmacy or pharmacist may disclose to the plan

sponsor or to the patient information regarding

the adjudicated reimbursement paid to the

103a

pharmacy which is compliant under the federal

Health Insurance Portability and Accountability

Act of 1996 [Pub. L. 104-191; 110 Stat. 1936; 29

U.S.C. 1181 et seq.].

6. A pharmacist or pharmacy that belongs to a

pharmacy service administration organization

may receive a copy of a contract the pharmacy

service administration organization entered with

a pharmacy benefits manager or third-party

payer on the pharmacy’s or pharmacist’s behalf.

7. A pharmacy or pharmacist may provide relevant

information to a patient if the patient is acquiring

prescription drugs. This information may include

the cost and clinical efficacy of a more affordable

alternative drug if one is available. Gag orders of

such a nature placed on a pharmacy or pharmacist are prohibited.

8. A pharmacy or pharmacist may mail or deliver

drugs to a patient as an ancillary service of a

pharmacy.

9. A pharmacy benefits manager or third-party

payer may not prohibit a pharmacist or pharmacy

from charging a shipping and handling fee to a

patient requesting a prescription be mailed or

delivered.

10. Upon request, a pharmacy benefits manager or

third-party payer shall provide a pharmacy or

pharmacist with the processor control number,

bank identification number, and group number

for each pharmacy network established or

administered by a pharmacy benefits manager to

enable the pharmacy to make an informed

contracting decision.

104a

11. A pharmacy benefits manager or third-party

payer may not require pharmacy accreditation

standards

or

recertification

requirements

inconsistent with, more stringent than, or in

addition to federal and state requirements for

licensure as a pharmacy in this state.

12. A pharmacy benefits manager or other thirdparty payer that violates this section is guilty of a

class B misdemeanor per violation occurrence.

N.D. Cent. Code § 19-02.1-16.2

19-02.1-16.2. Specialty pharmacy services and

patient access to pharmaceuticals - Pharmacy

benefits managers - Penalty.

1. As used in this section:

a. “Pharmacy benefits manager” has the same

meaning as in section 19-03.6-01.

b. “Plan sponsor” has the same meaning as in

section 19-03.6-01.

c. “Specialty drug” means a prescription drug

that:

(1) Is not available for order or purchase by a

retail community pharmacy and long-term

care pharmacy, regardless of whether the

drug is meant to be self-administered; and

(2) Requires special storage and has distribution or inventory limitations not available

at a retail community pharmacy or longterm care pharmacy.

d. “Third-party payer” has the same meaning as

in section 19-03.6-01.

105a

2. If requested by a plan sponsor contracted payer, a

pharmacy benefits manager or third-party payer

that has an ownership interest, either directly or

through an affiliate or subsidiary, in a pharmacy

shall disclose to the plan sponsor contracted payer

any difference between the amount paid to a

pharmacy and the amount charged to the plan

sponsor contracted payer.

3. A pharmacy benefits manager or a pharmacy

benefits manager’s affiliates or subsidiaries may

not own or have an ownership interest in a

patient assistance program and a mail order

specialty pharmacy, unless the pharmacy benefits

manager, affiliate, or subsidiary agrees to not

participate in a transaction that benefits the

pharmacy benefits manager, affiliate, or

subsidiary instead of another person owed a

fiduciary duty.

4. A pharmacy benefits manager or third-party

payer may not require pharmacy accreditation

standards or recertification requirements to

participate in a network which are inconsistent

with, more stringent than, or in addition to the

federal and state requirements for licensure as a

pharmacy in this state.

5. A licensed pharmacy or pharmacist may dispense

any and all drugs allowed under that license.

6. A pharmacy benefits manager or other thirdparty payer that violates this section is guilty of a

class B misdemeanor for each violation occurrence.

106a

N.D. Cent. Code § 19-03.6-01

19-03.6-01. Definitions.

For the purposes of this chapter:

1. “Entity” means a managed care company, an

insurance company, a third-party payer, a

pharmacy benefits manager, or any other

organization that represents an insurance

company, a third-party payer, or a pharmacy

benefits manager.

2. “Insurance company” includes any corporation,

association, benefit society, exchange, partnership, or individual engaged as principal in the

business of insurance.

3. “Managed care company” is an entity that

handles both health care and health care

financing.

4. “Pharmacy benefits manager” means a person

that performs pharmacy benefits management

and includes any other person acting for such

person under a contractual or employment

relationship in the performance of pharmacy

benefits management for a managed care

company, nonprofit hospital or medical service

organization, insurance company, third-party

payer, or health program administered by a state

agency.

5. “Plan sponsor” means the employer in the case of

an employee benefit plan established or maintained by a single employer, or the employee

organization in the case of a plan established or

maintained by an employee organization, an

association, joint board of trustees, committee, or

107a

other similar group that establishes or maintains

the plan.

6. “Third-party payer” means an organization other

than the patient or health care provider involved

in the financing of personal health services.