Now that the stay has been lifted, the parties will proceed to litigate the issue of whether federal law preempts the Oklahoma state law.
On April 22, 2020, the U.S. District Court for the Western District of Oklahoma lifted a stay in a case regarding whether the Employee Retirement Income Security Act (ERISA) and Medicare Part D preempt an Oklahoma state law granting patients the right to choose their pharmacy provider and regulating pharmacy benefit managers (PBM), captioned Pharmaceutical Care Management Association v. Mulready et al., Civil Action Number 5:19-cv-00977. The parties previously agreed to pause the case to wait until the U.S. Supreme Court decided a similar case involving whether ERISA preempts an Arkansas law regulating PBMs, which was set to be decided by June of this year. However, the Oklahoma Insurance Department successfully argued to the Oklahoma federal court that the delay in the U.S. Supreme Court’s schedule caused by the COVID-19 pandemic significantly changed the need for the stay in the case. As a result, unless the Pharmaceutical Care Management Association (PCMA) moves for a preliminary injunction, the Oklahoma Insurance Department will begin enforcing the Oklahoma law within 21 days of the court’s order lifting the stay.
The Oklahoma law at issue, titled Patient’s Right to Pharmacy Choice Act, Okla. Stat. tit. 36, § 6958 et al., was signed by Governor Kevin Stitt on May 21, 2019. The law was set to become effective on November 1, 2019. The PCMA filed its ERISA preemption challenge on October 25, 2019, just days before the law was supposed to take effect. In turn, the parties agreed that PCMA would not move for a preliminary injunction and the Oklahoma Insurance Department would not enforce the law prior to the resolution of the case.
In support of its motion to lift the stay, the Oklahoma Insurance Department argued that the COVID-19 pandemic affects its need to enforce the law, stating that it was already receiving reports of certain PBMs abusing their market power. The law provides for heavy regulation of and enforcement power over PBM’s actions in order “to establish minimum and uniform access to a provider and standards and prohibitions on restrictions of a patient’s right to choose a pharmacy provider.” Okla. Stat. tit. 36, § 6959. Specifically, the law sets forth pharmacy network access standards for PBMs, prohibits a health insurer or PBM from restricting an individual’s choice of in-network providers for prescription drugs (whether a retail pharmacy or mail order pharmacy) and requires PBMs to reimburse other pharmacies at amounts equal to the rates at which PBMs reimburse their own affiliated pharmacies. Id. §§ 6961-63. The law also grants the insurance commissioner the power to examine and investigate the affairs of every PBM managing benefits in Oklahoma to ensure compliance with the law’s mandates. Id. § 6965.
Now that the stay has been lifted, the parties will proceed to litigate the issue of whether federal law preempts the Oklahoma state law. In addition, the Insurance Department has agreed to wait at least 21 days to begin enforcing the law. If PCMA moves for a preliminary injunction, the department has agreed to wait to enforce the law until the court rules on that motion.
Duane Morris attorneys will continue to monitor developments in this area and other related issues, and report on the key details for our clients and others in the industry.
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