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Attorney General Hunter Joins Defense of States’ Authority to Limit the Rising Cost of Prescription Drugs

Attorney General Hunter Joins Defense of States’ Authority to Limit the Rising Cost of Prescription Drugs

OKLAHOMA CITY – Attorney General Mike Hunter has joined a bipartisan coalition of 46 attorneys general from across the country filing an amicus brief in the U.S. Supreme Court that supports the authority of states to address the rising cost of prescription drugs.

The brief is in support of the state of Arkansas’ 2015 law that sought to require Pharmacy Benefit Managers (PBMs) to raise their reimbursement rate for a drug if that rate were to fall below the pharmacy’s wholesale costs.

The Arkansas law was challenged by the Pharmaceutical Care Management Association (PCMA), a PBM trade association, and the U.S. Court of Appeals for the Eighth Circuit ruled in its favor, striking down the state law. The appeals court ruled that federal law within the Employee Retirement Income Security Act of 1974 preempted the Arkansas law.

PBMs act as intermediaries between pharmacies, drug manufacturers, health insurance plans and consumers.

“In their position as middlemen, PBMs have the power to manipulate the market as they develop and maintain prescription drug formularies, contract with pharmacies, negotiate discounts with drug manufacturers and process payments for prescription drug claims,” Attorney General Hunter said. “In order to protect the well-being of consumers, and address the skyrocketing cost of prescription drugs, states need to and have been attempting to exercise better oversight of PBMs. State laws holding these organizations accountable are critical to improving the transparency of prescription drug marketplaces. My colleagues and I urge the members of the U.S. Supreme Court to reverse this lower court decision, which would give Arkansas and other states the ability to protect their citizens.”

In the brief, attorneys general contend PBM business practices have harmed patients by contributing to rising drug prices and curtailing access to certain drugs. Total prescription drug spending in the United States reached $335 billion in 2018, approximately one-tenth of overall healthcare spending.

Evidence also indicates the rebates PBMs negotiate with drug manufacturers have contributed to rising drug prices. According to the brief, manufacturer rebates to PBMs more than doubled in just four years between 2012 and 2016, increasing from $39.7 billion to $89.5 billion. Those rebates have been linked to increased manufacturer list prices, and the savings are often not passed to customers.

Other PBM practices have also contributed to increased drug costs. Some PBMs, for instance, include “gag clauses” in their contracts with pharmacies, which prohibit the pharmacies from informing customers about less expensive alternatives.

In the brief, attorneys general argue that to date, nearly every state has enacted laws that regulate PBMs in some way, with a particular surge in in the last five years. Most recently, the Oklahoma Legislature passed the Patient’s Right to Pharmacy Choice Act last May. That bill was also challenged by the PCMA in federal court, and the case has been stayed pending the U.S. Supreme Court’s decision in the Arkansas case.

In addition, the attorneys general write that the regulation of PBMs promotes healthcare access and affordability for residents.

To read the brief, click here.