Prescription Drugs

In Rutledge v. Pharmaceutical Care Management Association the Supreme Court will decide whether states’ attempts to regulate pharmacy benefit managers’ (PBMs) drug-reimbursement rates are preempted by the Employee Retirement Income Security Act (ERISA).

PBMs are an intermediary between health plans and pharmacies. Among other things, they set reimbursement rates to pharmacies dispensing generic drugs. Contracts between PBMs and pharmacies create pharmacy networks. According to the Eighth Circuit, “[b]ased upon these contracts and in order to participate in a preferred network, some pharmacies choose to accept lower reimbursements for dispensed prescriptions.” So, in some instance pharmacies lose money.

Arkansas passed a law requiring that pharmacies “be reimbursed for generic drugs at a price equal to or higher than the pharmacies’ cost for the drug based on the invoice from the wholesaler.”

Merck v. Albrecht is a simple issue contained in a long story.

In 2009 in Wyeth v. Levine the Supreme Court held that federal law preempts state law failure to warn claims that a drug manufacturer failed to change a drug label if there is “clear evidence” the Food and Drug Administration (FDA) would not have approved the label change. In Merck v. Albrecht a unanimous Supreme Court held that a judge rather than a jury determines if the FDA would have approved the change.

The federal Food, Drug, and Cosmetic Act (FDCA) provides no federal remedy for unsafe and ineffective drugs but state law may in the form of a failure to warn claim. The FDA allows manufacturers to change warnings on drug labels when newer drug safety information becomes available. The Supreme Court has held if the FDA would not have approved a drug label change, which a state failure to warn law would have required, the FDCA preempts the state law claim.

The Supreme Court has long resolved whether and when state law claims against drug manufacturers are preempted by federal law. The Third Circuit ruling in Merck Sharp & Dohme Corp. v. Albrecht is very favorable to state-law claims and likely will be modified, if not reversed, by the Supreme Court.

The Food and Drug Administration’s (FDA) approval of a drug warning label does not necessarily insulate drug manufacturers from state-law failure-to-warn claims. In Wyeth v. Levine (2009), the Supreme Court held that state failure-to-warn claims are preempted when there is “clear evidence” the FDA would not have approved the warning a plaintiff claims was necessary. In Merck Sharp & Dohme Corp. v. Albrecht, Merck claims there was such “undisputed” evidence in this case but the Third Circuit improperly allowed the case go to a jury for “conjecture as to why the FDA rejected the proposed warning.”

In 2016, five states enacted legislation designed to mitigate a controversial health insurance procedure known as step therapy, which requires patients to try less expensive, often generic medications before being approved for costlier treatments. With the growing availability of generics step therapy, alongside prior authorization and benefit tiers, has emerged as a popular cost savings tool for private insurers, as well as Medicaid and Medicare programs.

Insurance companies and...

On July 5, 2016, Hawaii became the third state to require all public and private health insurance providers to cover 12 months’ worth of contraceptives at one time. Other states introduced similar legislation in 2016. Research has shown that this change could have enormous effects.

Kaiser Family Foundation has posted an excellent web panel discussion on drug pricing. Representatives from Pfizer, a large international pharmaceutical company; Express Scripts, and Aetna, a major health insurance carrier, talk with Larry Levitt, a Kaiser senior vice president.

Zubik v. Burwell, involving religious nonprofit objections to providing notice objecting to the Affordable Care Act’s (ACA) birth control mandate, does not directly affect state and local government. But it is one piece of a litigation puzzle over this law; most of the puzzle pieces do affect state and local government. In a three-page unauthored opinion the Court did not rule on the merits of the case leaving the lower courts to “resolve any outstanding issues.”

The ACA regulations requires employers offering health insurance to cover certain contraceptives unless employers object on religious grounds. Religious nonprofits claim that submitting a form to their insurer or the federal government saying they object to providing contraception coverage on religious grounds violates the Religious Freedom Restoration Act.