By Camille Castro, Roberta Casper Watson and Stephen Wilkes
Whether serving as an ERISA Independent Fiduciary or as ERISA Legal Counsel, our firm is constantly facing the question of ERISA preemption of state legislative and regulatory activity affecting pharmacy benefit managers (“PBMs”). On June 30, 2025, the United States Supreme Court denied a request for certiorari in Pharmaceutical Care Management Association (PCMA) v. Mulready, leaving in place the 10th Circuit Court of Appeal’s decision that ERISA preempted provisions of an Oklahoma law regulating PBMs.
As PBMs have expanded their role in the healthcare industry, acting as an intermediary between health plans and pharmacies, states have attempted to regulate PBM practices through various state laws. The Mulready case involved the “Patient’s Right to Pharmacy Choice Act” (the “Act”) enacted by Oklahoma in 2019. PCMA challenged the Act in court, arguing that it was preempted by federal laws. The Western District of Oklahoma court issued a mixed judgment for both parties, finding that ERISA did not preempt the Act, but that parts of it were preempted by Medicare Part D.
PCMA appealed the decision, focusing its appeal on four sections of the Act requiring network access standards, a prohibition against using discounts as an incentive to choose between in-network pharmacies, required admission of “any willing provider” to the PBM’s preferred network if standards are met, and a prohibition against denying, limiting or terminating a contract based on the pharmacy’s employment of a pharmacist placed on probation status if the pharmacist still maintains an “active license to dispense” despite being on probation status
The 10th Circuit agreed with PCMA, overturning the lower court’s decision and holding that ERISA preempted these four provisions since they attempted to “govern a central matter of plan administration” and “interfere with nationally uniform plan administration.” The court found Medicare Part D also preempted one provision in the Act. Following this decision, Oklahoma filed a petition for writ of certiorari. The Solicitor General subsequently submitted an amicus brief expressing its view that the Court should deny the request, which it ultimately did.
Although it declined to hear this case, the Supreme Court has previously opined on ERISA preemption challenges to state PBM laws. In the 2020 Rutledge v. Pharmaceutical Care Management Association decision, the Court held that ERISA did not preempt an Arkansas law regulating pharmacy reimbursement rates, finding that the law was merely a cost regulation and did not require “plan administrators to structure their plans in a particular manner.” While Rutledge presents an example of the type of PBM regulations that may survive preemption claims, the Court’s refusal to grant certiorari in the Mulready case suggests laws regulating plan design requirements are preempted by ERISA and would not survive such a challenge in court. Other pending ERISA preemption challenges to state PBM laws may also provide some further clarification, such as McKee Foods Corp. v. BFP, Inc., in which a U.S. District Court invalidated Tennessee’s any-willing-provider requirement as well as prohibitions on incentivizing or disincentivizing the use of non-favored pharmacies. That case is on appeal in the 6th Circuit.
In addition to activity in the courts, future updates in this area are expected as PBMs continue to attract attention on both the state and federal levels. For example, the “Lowering Drug Prices by Once Again Putting Americans First” Executive Order issued in April 2025 directs the Department of Labor, by October 12, 2025, to propose regulations to improve transparency into the fees received by PBMs. We are monitoring these developments and will, of course, keep you informed.
Final thoughts: What Does This Mean for Employers Right Now?
The 10th Circuit’s position stands for now, since the Supreme Court has declined to hear the PCMA v Mulready matter. It will have a ripple effect on other states even though it is the law only for states within the 10th Circuit. Presumably, it means that ERISA does not preempt state rate/pricing mechanisms, but ERISA does preempt state level regulation of plan design or coverage requirements. That is a reasonable interpretation according to many. Employers should confer with legal counsel on the issue of which state laws, if any, might apply to fully insured versus self-insured plans, and whether there is a preemption strategy to follow.