Appeals court says Arkansas can enforce dispensing fee rule on PBMs

Federal law doesn’t prevent Arkansas from enforcing a rule requiring pharmacy benefit managers to include dispensing fees in their reimbursements to pharmacies for prescription drugs, an appeals court has ruled.

A three-judge panel of the 7th U.S. Circuit Court of Appeals on Wednesday upheld a federal judge’s dismissal of the lawsuit challenging the 2024 rule adopted by Arkansas imposing new requirements on pharmacy benefit managers, also known as PBMs. 

PBMs are companies that serve as middlemen to negotiate prescription benefits among manufacturers, distributors, pharmacies and health insurance providers. The companies rank prescription drugs, with the highest-tiered products costing consumers the lowest out-of-pocket costs.

Central States, Southeast and Southwest Areas Health and Welfare Fund, a nonprofit labor health fund that operates under the name TeamCare, challenged the rule and said it was preempted by a federal law that sets minimum standards for health plans. 

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Arkansas’ rule authorizes the state  to impose the additional fee if the commissioner determines the current reimbursements are not “fair and reasonable.”

The fund also challenged the rule imposing new requirements on information that health plans are required to report, including information about the total average percentage of pharmacy reimbursement above or relative to Medicaid pricing.

The three-judge panel agreed with a lower court judge that the requirements did not infringe on the federal law and did not intrude on how plans are administered.

An attorney for the fund did not respond to an email and call seeking comment Thursday.

Republican Attorney General Tim Griffin said the rule ensures that rural and independent pharmacies that are at risk of closure are being treated fairly.

“Insufficient compensation from pharmacy benefit managers has been one of the reasons many pharmacies, including rural and independent ones, have been forced to close,” Griffin said in a statement. “I am glad that Rule 128 can continue to be enforced to ensure that pharmacies receive fair and reasonable reimbursement for their dispensing services.”

Arkansas is among several states that has adopted new regulations on pharmacy benefit managers over concerns about the impact they have on independent pharmacies. 

A federal judge last year blocked Arkansas from enforcing its first-in-the-nation law that would have prohibited PBMs from holding a permit to operate a drug store in Arkansas. That ruling has been appealed to the 8th U.S. Circuit Court of Appeals, which is scheduled to hear arguments in the case next month.