WASHINGTON, D.C. (January 11, 2017) — International law firm McDermott Will & Emery LLP obtained a decisive victory today for client the Pharmaceutical Care Management Association (“PCMA”) in the United States Court of Appeals for the Eighth Circuit after a unanimous panel reversed the district court’s dismissal of PCMA’s complaint and entered judgment in favor of PCMA. The Eighth Circuit’s decision is of nationwide importance to the pharmacy benefit manager (“PBM”) industry and the broader health care industry.
The case arose out of a 2014 Iowa law that imposed onerous regulations on PBMs operating in Iowa. PBMs administer prescription drug benefits to over 220 million Americans covered by health benefit plans. The new law interfered with PBMs’ discretion to negotiate prices with retail pharmacies, required PBMs to report proprietary information on their pricing methodologies, and interfered with claims-processing procedures.
PCMA, the national trade association representing PBMs, retained McDermott to challenge the new law. PCMA’s federal court complaint alleged several theories, including preemption under the Employee Retirement Income Security Act of 1974 (“ERISA”). The district court later dismissed PCMA’s claims.
On appeal, a unanimous panel of the Eighth Circuit reversed the district court’s dismissal of PCMA’s ERISA preemption claims, holding that the Iowa law impermissibly interferes with the PBM function of ERISA plans operating in Iowa. The court explained that the Iowa law “imposes mandates and restrictions on a PBM’s relationship with Iowa and its pharmacies that run counter to ERISA’s intent of making plan oversight and plan procedures uniform.” Significantly, the Eighth Circuit also accepted PCMA’s invitation not only to reverse the district court’s dismissal but also to enter judgment for PCMA on its purely legal claims—terminating the litigation in PCMA’s favor in a single stroke.
The Eighth Circuit’s decision not only has significance because of its effects in Iowa, but also because of its national implications. Several other states are considering enacting legislation similar to the Iowa law. Today’s decision may help stem the advance of similar legislation in other states that would impermissibly encroach upon ERISA health plans.
McDermott’s team was led by health partner Joel Michaels and litigation partner Miller Baker, who argued in the Eighth Circuit, and included litigation associates Charlie Quigg and Matthew Girgenti. McDermott’s co-counsel was Jason Casini of Whitfield & Eddy, PLC in Des Moines.
The case caption is Pharmaceutical Care Management Association v. Gerhart, No. 15-3292 (8th Cir. Jan. 11, 2017).
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McDermott Will & Emery is a premier international law firm with a diversified business practice. Numbering more than 1,000 lawyers, we have offices in Boston, Brussels, Chicago, Dallas, Düsseldorf, Frankfurt, Houston, London, Los Angeles, Miami, Milan, Munich, New York, Orange County, Paris, Rome, Seoul, Silicon Valley and Washington, D.C. Further extending our reach into Asia, we have a strategic alliance with MWE China Law Offices in Shanghai.