Top Federal Appeals Court Strikes Down D.C.'s Controversial PBM Fiduciary Law

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Merritt: ‘A Major Victory for Consumers and Payers Who Want Lower Prescription Drug Costs’

This ruling from one of the most respected Federal Appeals Courts in the country allows PBMs to continue to work aggressively to reduce the costs and improve the quality of prescription drug benefits for the 200 million Americans they serve.

In a major victory for consumers and payers, the U.S. Court of Appeals for the District of Columbia today struck down a District law that would have designated pharmacy benefit managers (PBMs) as "fiduciaries" (case number 09-7042). The Court found the key portions of the law, Title II of the DC AccessRx Act of 2004, unconstitutional. A three-judge panel unanimously affirmed a 2009 District Court ruling, finding that, since PBMs engage in claims administration for their clients and are regulated exclusively by Federal ERISA law, states and municipalities cannot impose such requirements.

“This ruling from one of the most respected Federal Appeals Courts in the country allows PBMs to continue to work aggressively to reduce the costs and improve the quality of prescription drug benefits for the 200 million Americans they serve,” said Pharmaceutical Care Management Association (PCMA) President and CEO Mark Merritt.

The D.C. law never went into effect, as a result of an immediate injunction issued by a lower court and subsequent Court rulings (case number 04-1082 RMU). The Court specifically rejected a contrary holding relating to a “nearly identical” Maine statute (First Circuit: 429 F. 3d 294(2005), case number 05-1606) issued by another Appeals Court, stating that “in our view the uniform administrative scheme encouraged by ERISA includes plan administrative functions performed by a third party on behalf of an EBP (employee benefits plan).”

Dozens of states have rejected legislation imposing similar requirements on PBMs upon realizing that such proposals inadvertently raise, not reduce, prescription drug costs.

PCMA represents the nation’s pharmacy benefit managers (PBMs), which improve affordability and quality of care through the use of electronic prescribing (e-prescribing), generic alternatives, mail-service pharmacies, and other innovative tools for 210-plus million Americans.

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