A new lawsuit challenges Minnesota’s law for regulating pharmacy benefit managers, a group of companies that structure drug benefits within health insurance plans that critics have accused of inflating medicine prices and driving independent pharmacies out of business.
Plaintiffs in the case, filed in December in the U.S. District Court of Minnesota, argued the state’s regulation of pharmacy networks these companies — called PBMs, for short — created is not allowed under federal law for certain large employers.
Just more than five years ago, the Minnesota Legislature attempted to rein in the oft-critiqued PBM industry by passing a law that allowed the state to regulate the companies to protect consumers and small pharmacies. PBMs have pushed back, though, including in a case Minnesota Attorney General Keith Ellison has asked the U.S. Supreme Court to review, following an appellate court ruling in August 2023 that sided with PBMs in their challenge to state regulations in Oklahoma.
It’s a similar argument to what Cigna Group, a Connecticut-based company that runs a large national health insurer plus a PBM called Express Script, is alleging with this new lawsuit: That a decades-old federal law clearly specifies the design and administration of certain employee benefit plans is not something states can control. A trade group for employers and one for labor unions are also plaintiffs in the case.
“Despite assertions defendants may make to the contrary, granting the requested relief here would not mean that PBMs are free from regulation by Minnesota,” the lawsuit said. “The state has ample regulatory tools at its disposal ... that can be used effectively to challenge alleged misconduct by PBMs.”
The plaintiffs argued Minnesota rules on the PBM industry actually regulate employers who sponsor health plans and design and construct networks of pharmacies where workers can fill their prescriptions, as permitted under federal law.
The state law prevents PBMs from designing mail-order and specialty pharmacy networks that only include pharmacies affiliated with particular PBMs, according to the lawsuit. The statute also blocks PBMs from adopting a pharmacy network that requires patients to obtain maintenance medications from mail-order pharmacies, thereby letting patients use independent pharmacies.
“This kind of open-network law makes a number of commonly used quality control and cost containment measures impossible, thus effectively prohibiting employers and labor union health trust funds from using them,” the lawsuit said. “This kind of intrusive regulation of substantive benefit plan design is plainly preempted by the Employee Retirement Income Security Act of 1974 (ERISA).”