Optum Rx and Emisar Pharma Services — two businesses that help UnitedHealth Group manage prescription drug plans — are fighting California's new PBM law in court.
California is trying to apply its new law to PBM efforts to serve self-insured employer health plans, as well as to PBM efforts to serve health insurers and government-run plans, such as public employee health plans.
Optum Rx and Emisar say the California approach violates the Employee Retirement Income Security Act provision that preempts state efforts to regulate large benefit plans.
The California law was created by state Senate Bill 41.
"ERISA reflects a recognition by Congress that imposing a patchwork of state laws on health plans would be ruinously complex and costly, and that health plan sponsors — not state government officials — are in the best position to decide how best to design and manage benefits for their members," Optum Rx and Emisar argue in a complaint filed Friday in the U.S. District for the Eastern District of California. "By imposing state-specific restrictions that undercut plans' choices, SB 41 is antithetical to ERISA's key goal of preserving national uniformity."
Optum Rx is a UnitedHealth PBM.
Emisar is a group purchasing organization. A GPO handles a PBM's negotiations with drug manufacturers and distributors.
The defendants named in the complaint are California Attorney General Rob Bonta; Mary Watanabe, the director of the California Department of Managed Health Care; and California Insurance Commissioner Ricardo Lara.
Representatives for UnitedHealth and the state of California could not immediately be reached for comment.
What it means: The Optum Rx-Emisar suit against California could create a high-profile test of how the federal courts will handle ERISA preemption fights.
Arkansas, Iowa and Tennessee are some of the other states involved in litigation over PBM laws that could affect ERISA plans.
The backdrop: The Pharmaceutical Care Management Association, a group for PBMs, has predicted that full enforcement of the California law could increase costs at a typical employer-sponsored health plan by about $1,800 per participant per year.
PBMs and some employers have argued that even well-intentioned, well-designed PBM legislation could hurt employers if each state sets somewhat different rules.
If California enforced its rules, an employer would have to develop California-specific rules for paying for PBM services in California, Optum Rx and Emisar say in their complaint.
"Other states could impose conflicting, alternative compensation schemes, requiring different formularies for PBMs that serve multi-state employers in every state [in which] those employers operate," the plaintiffs say. "ERISA was designed to prevent such a disuniform system, where the legality of plan administration practices stops and starts with state borders."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.