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AG Derek Schmidt to U.S. Supreme Court: States have a valid role in addressing rising cost of prescription drugs

Release Date: Mar 02, 2020

TOPEKA – (March 2, 2020) – States have authority to regulate and address the rising cost of prescription drugs, Kansas Attorney General Derek Schmidt has told the U.S. Supreme Court.

Schmidt, along with a bipartisan coalition of attorneys general from 44 other states and the District of Columbia, today filed a brief in the U.S. Supreme Court arguing that to protect the well-being of consumers, states must be allowed to regulate pharmacy benefit managers (PBMs). PBMs act as middlemen between pharmacies, drug manufacturers, health insurance plans, and consumers. Their position in the marketplace gives them power to manipulate the market as they develop and maintain prescription drug formularies, contract with pharmacies, negotiate discounts with drug manufacturers, and process and pay prescription drug claims.

“The rising cost of prescription drugs is an issue at the top of mind for many Kansans,” Schmidt said. “As we continue to face uncertainty from a gridlocked Congress in Washington, it is vitally important that states are not prevented from improving access to affordable prescription drugs – particularly in rural communities in states like ours.”

Today’s brief argues federal law does not prevent states from regulating PBMs. The brief argues that regulation of the prescription drug market, including PBMs, is a critical tool for states to protect residents and address the access and affordability of prescription drugs.

In 2015, Arkansas implemented a law that regulated the reimbursement rates PBMs pay to pharmacies. Under the law, PBMs must raise their reimbursement rate for a drug if that rate falls below the pharmacy’s wholesale costs. The law was challenged by a PBM trade association, which argues that the federal Employment Retirement Income Security Act prevents Arkansas from implementing the law. Arkansas has asked the Supreme Court to reverse a lower court judgment that held the state law preempted and thus invalid.

The attorneys general argue state regulation is critical to states' ability to improve the transparency of prescription drug marketplaces and to protect consumers’ access to affordable prescription drugs, especially in underserved, rural and isolated communities. To date, nearly every state, including Kansas, has enacted laws that regulate PBMs in some way, including 44 new or amended laws in the past five years. In addition, the attorneys general assert that the regulation of pharmacy benefit managers promotes healthcare access and affordability for residents, while taking away a state’s ability to regulate would create confusion and uncertainty in the market and harm patients.

A copy of the states’ brief filed in Rutledge v. Pharmaceutical Care Management Association, No. 18-540, is available at https://bit.ly/39hQlxk.  

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