AHLA's Speaking of Health Law
AHLA's Speaking of Health Law
Federal Preemption of State Health Care Laws
Andrew London, Partner, Foley Hoag LLP, and Peter Fjelstad, Assistant Vice President, State Regulatory and Legal Affairs, Pharmaceutical Care Management Association, discuss the evolution of federal preemption of state health care laws, mainly pertaining to ERISA and Medicare, and the corresponding increase in state efforts to regulate the structure of health care benefits. They cover the 2020 Rutledge case, trends pertaining to state regulation of pharmacy benefit managers and Medicare Part C and D, issues related to conflicting state regulations, the impact of the fall of the Chevron doctrine, recent case law, the limits of federal-state partnerships, and how preemption will continue to evolve. Andrew and Peter spoke about this topic at AHLA’s 2024 Health Plan Law and Compliance Institute in Chicago, IL.
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Speaker 2:This episode of A HLA speaking of health law is brought to you by A HLA members and donors like you. For more information, visit american health law.org.
Speaker 3:Hi, everyone. Thank you for joining us today. My name is Andrew London. I'm a partner at Foley Hoag and chair of our Healthcare Litigation Practice Group , uh, where my practice is focused on disputes arising outta federal and state healthcare regulation, including enforcement actions from state ag and other enforcement agencies. I'm joined by , uh, Peter Felsted . Peter, I'll let you introduce yourself and, and , and tell you our to our audience.
Speaker 4:Thanks, Andrew. Peter Felsted , assistant , uh, vice president of , uh, state regulatory and , uh, legal Affairs at the Pharmaceutical Care Management Association. That's PCMA, the National Trade Association for Pharmacy Benefit Managers, otherwise known as PBMs.
Speaker 3:So, Peter and I are both making our podcast debut today, so, so please be a little forgiving in , uh, in , uh, how we roll on this. But , uh, hopefully you find this , uh, both entertaining and in informative. So, in May, Peter and I gave a presentation at ALA's Health Plan Law and Compliance Institute in Chicago, Illinois, on federal preemption of , of state healthcare laws. And , and that's gonna serve as the basis for our, our discussion today. Um, our , our goal is today is to have a kind of a free flowing discussion on these topics, but we wanted to at least level set a little bit at the beginning to give a little background to the audience about , um, these issues and , and kind of what we're talking about. So, over the past five years or so, there's been a significant influx in state regulation of health plans in areas that have historically been been within the federal domain. At a basic level, preemption, for those of you who may not be lawyers, is the idea that federal law takes precedence over state law. And this is rooted in the constitution's , uh, supremacy clause at h at the A HLA , uh, health Plans Institute. Uh, our co conversations focused largely on two areas , uh, where Congress through federal statute has expressly carved out , uh, certain areas for exclusive regulation. That is , uh, Congress has expressly preempted certain state laws relating to employee benefit plans under erisa , and Congress has also expressly preempted other state laws regulating Medicare Advantage and Medicare Part D plans under the , uh, Medicare statute. Uh, the standards by which courts determine whether a state law is preempted under ERISA is different than that, which they might , uh, make a similar assessment under Medicare. And some of those differences reflect the differences in the statutes themselves. So , while ERISA is intended to facilitate the ability of private employers to offer uniform employee benefits, nationwide, Medicare, as many of you know , is a federal program subject to extensive federal rules where the federal government, through private part D sponsors or Medicare Advantage plans, are paying for particular benefits . For this reason, ERISA preempts state laws that have a connection with, or a reference to ERISA plans, the saves those laws, state laws directed at entities engaged of insurance that is state insurance laws are , are saved from preemption, Medicare, and part C and D preemption looks more like what we might call field preemption, which is excluding from state regulation, any area in which C-M-S-H-H-S, the federal government enact , uh, that is , uh, agencies that are in charge with , uh, implementing the Medicare program, and where tho that agency may enact federal standards. Now, some of these difference will come up in our conversations today, which is why we want to , to lay that out to start with. In terms of the state laws that we've seen starting to encroach on this area of , of , uh, federal , uh, historical , uh, prevalence or federal preemption is first a lot of state laws regulating PBMs. And , and Peter, I know we'll have a , a fair amount to talk about on that, but we've also seen a few other areas. Some state laws are related to reproductive rights , uh, particularly those where , uh, states might be , uh, have laws preventing plans that are aiding and abetting abortion care or traveling to , uh, other states for abortion related care. Some state laws related to gender affirming care, and also some of this prescription drug affordability boards also have the potential to be state laws that start impeding on these areas of , uh, historic federal domain. Um, but with that, i , I , I think it's time we kind of get to the heart of the conversation. So, Peter, maybe I'll pick it off with the question to you. Um, I know you spend a lot of time, obviously looking at the, the state laws regulating PBMs. What are , from your perspective, are the biggest trends in , in those state laws? What , what are we seeing outta state legislature related to to PBM regulation?
Speaker 4:That's a good question. I wouldn't go back too far, but I'll back up maybe about four years. And of course, the Supreme Court and the Rutledge decision. Um, you know, when most states go into their , uh, legislative sessions in January, and especially in odd years after an election year, that's their big year, their big long year of their budget making . And in 2021 , um, because the Rutledge case was , uh, decided in late 2020, you saw a plethora of , um, anti PBM or anti payer , or just issues related to erisa . Not so much Medicare Part D yet, but , um, states attempting to regulate different aspects of ERISA plans through par , uh, through PBM laws. And , um, you know, initially the flood of these bills that's carried over from the 21 legislative session, 22, 23, and 24 , um, you know, there has been misinformation , um, by different stakeholders thinking that the relish decision allows for, you know, broad , uh, state regulation of ERISA plans. And that's simply not true. And as you, as you and I know, it's only specific instances related to costs , um, more specifically reimbursement as the , uh, Arkansas lot issue was about MAC reimbursement in Arkansas. So , um, you know, that's also that misinformation or misunderstanding of the Rutledge cases has led some cases to bad public policy and , uh, frankly, illegal public policy as legal law state laws as they're , uh, federally preempted. And so I think that , um, as far as erisa , um, some states explicitly go out and they say right away, yes, this applies to ERISA plans these PBM laws do, and , uh, you are to comply with them. And some other states , um, are, are more , um, silent or rely on what they think is the legislative intent through debate that happened in a state capital , um, even though it's not in the black letter law. Is that kind of what you think that your experience has been to over the last couple years?
Speaker 3:Yeah, no, Peter, you know, it's interesting that, that you , you raised the Rutledge decision, whi , which I think is, is really kind of the, the, the kickoff point for so much of the trends that we've seen, we've seen recently. So, you know, Peter, you referenced this a little bit, but background for our audience. So Rutledge was , uh, uh, I think a 2001 Supreme Court decision , uh, re uh, with respect to a specific PBM law in Arkansas that was related to , um, it , it set a , a , a minimum for , uh, MAC pricing in, in the state . So A PBM under a maxima maximum allowable cost , uh, model had to pay the , uh, pharmacy, the pharmacy's acquisition cost , essentially the , the amount that the pharmacy , uh, paid from their, for their , for the drug, from their wholesaler. And that decision, which was a unanimous decision of holding the , the Arkansas law , um, under ERISA preemption grounds , um, in , in many ways was very consistent with, with, you know, really a long history of ERISA preemption precedent at the Supreme Court. You know, the traveler's decision from about 20 years prior had already carved out from ERISA preemption those state laws that are primarily cost regulations. And , and that's what , um, you know, the Supreme Court in their decision, you know, they were, you know, the state of Arkansas made broader arguments. They made arguments that , um, PBM laws on their face are not preempted by , uh, uh, erisa . But the Supreme Court didn't take that path. The Supreme Court took a , a much narrower path, and , and one that's consistent with its, with its prior decisions that, that this was just , uh, a cost regulation no different than, than the Travelers case from, from about 20 years prior. Uh, and it was consistent with that and , and , and decided it on, on those really narrow grounds. Despite that, I agree that what we've seen is a lot of states using this as a floodgate to open up , uh, regulation of , uh, PBMs, but not just PBMs, but the plans that they're, they're contracted with , um, and that they're providing pharmacy benefits for in , in , in a range of areas, some of which look like the Mac law , uh, in , in Arkansas, but some of which are much more expansive, that deal with things like pharmacy networks , uh, that deal with , uh, the, the fiduciary duties that the plans have towards their members that , uh, deal with , uh, how plans select which drugs are , uh, on their formularies. And especially, you know, those, those network provisions. Those are things that I think look very different than, than the pricing laws , um, because in, in , in so many ways, right, they start to speak not to how much the plan is paying the pharmacy for a particular service, but what's the benefit, really? What, what is the benefit that , uh, is being offered by the plan by the employer in an ERISA case , uh, to their members? And once you just , you know, the network is a key part of that, where can you get your drugs at? What cost sharing , um, is , is , is really the key that most members wanna know about, about their pharmacy benefit. And once you start going into that area, it starts looking very different than , uh, what was under travelers and what was under Rutledge , uh, and what the Supreme Court has historically found to be be preempted.
Speaker 4:Yeah, I mean, you know, we talked about, I think Rutledge, and just looking at my notes October term of 2020, so decided at December of 2020, and then we were all in COV at that time. So advocacy efforts in a lot of these state capitals were all, were all virtual at least , uh, for the 2021 year. And so that, you know, led to an even , uh, more difficult , um, attempts to lobby for , um, on behalf of the PBM or the payer side of things, and, and set the record straight on what Rutledge had said. And as you noted , um, it was in keeping with the jurisprudence from travelers and going back to 1974 when ERISA was enacted , um, and it , you know, the intent or one of the intents for ERISA was to allow multi-state employers to offer the same set of benefits across state lines. I mean, we'd gotten to a point, I think, in the early seventies where there was lots of big employers and also unions that were offering, wanted to offer the same set of benefits to their employees or members across state lines. And now what we've seen is an erosion of, or an attempt to erode that over the last four years based on misinterpretation or , uh, misinformation. Um, and so, you know, I I think it's a , a lot of, a lot of businesses are starting to wake up, especially in the states where this is getting hot , um, as are the unions too, who have, you know, just by their nature, maybe taken on a more activist role , um, than a lot of the , um, the businesses that might be more conservative in the way that they engage with , um, state governments. But, you know, it's, it's been the vast majority of my work for the last, I'd say, three years. And , um, you know, concurrently with that, we've got Medicare Part D , uh, you know, that's become an issue. Um, we've had states trying to seek , um, you know, a joint partnership and regulation with CMS to jointly regulate Part D plans. And then of course, course you spoke in Chicago last month when we did a presentation about , um, Medicare Part D and part C preemption. And I mean, you know, what do you think is the impetus for these both happening at the same time, just changing, changing moods in the, in the, in in the economy and the population? Or what, why did the , why do these seem to happen at the same time? I, I don't know .
Speaker 3:Yeah, so I , I mean, some of it, I think it goes back to, to Rutledge and although, so Rutledge, and I think this comes to, to , uh, some of the misunderstandings about Rutledge out there, Rutledge didn't touch part D at all. Uh , so in , in , uh, the eighth circuit , uh, PCMA won on the Part D claim , uh, in , in Rutledge , uh, and then Arkansas didn't , uh, didn't appeal that to the Supreme Court that , so that that stance . So, and , um, you know, the, the Arkansas law is still preempted with respect to, to Part D plans , uh, as a result of that. Uh, but I think they started , uh, kind of seeing these , um, you know, running together. And I , I , I think, you know, part of it, right, is that , um, you know, I think in , not just in in this area, but in several, in several areas within the healthcare field , um, you know, due to to to gridlock in Congress , uh, there has been , uh, I think a movement among states to try to fill the gap, right? And , and , and , you know, where, where there's such , uh, inability to move federal legislation , um, you know, states are trying to fill in, even if it's an area where , um, they've historically been precluded from doing so in Medicare, in some ways it is the , the more , the more obvious example of that, right? Where Medicare is a federal program, this is federal dollars , uh, being spent to deliver services to senior citizens , uh, largely. And, you know, the , the, the origins of the preemption in the Medicare part C and D program , uh, originate from, from their predecessors, right? Medicare parts A and B, and the , the traditional , uh, inpatient outpatient services in the Medicare program where the , you know, the reason there, there's, you know, preemption there and there was gonna be preemption is it was all paid for by the federal government. It was the federal government directly making payments. But once the federal government decided to report C and d adopt a, a, a competitive market model where they were gonna use private payers as a vehicle to deliver these , uh, what is still a federal service, a federal benefit , um, there was need to specifically carve out , uh, the role that states could or could not have with respect to, to regulating these. But where, you know, again, where you see, you know, genuine concerns about , uh, prescription drug costs, and, you know, there's a lot of different factors that relate to that. You're gonna have states when the federal government is enacting kind of trying to jump into those gaps. And I think there , you know, Rutledge was, was one where area where they saw some flood gates open on the ERISA side and say, Hey, maybe we can just do it here too. And , and , and try , um, I'm , I'm curious from , from your perspective , um, you know, in your role, I , I know you're , you're , you know, work with, with , uh, state legislatures and , and, you know, state policy makers on these areas , uh, frequently where, you know, the challenge, right, of, in the purpose of preemption is so that , um, you know, these , uh, federal programs, or in the case of Medicare or these , uh, federally protected , uh, private benefits in the case of ERISA can operate in a somewhat uniform manner across the country, right? And so, as states have been taking more kind of aggressive approaches in kind of impeding in these areas, more what has been, you know, your experience, what , what's been the , the impact of these plans on the Medicare side or the risk side kind of facing conflicting state regulations? 'cause they're not, it's not like each state's , uh, passing the same thing, they're passing very different types of items here. What has the challenge been , uh, for , uh, the plans themselves? And then I guess the flip of that is, I'm curious to your thoughts on how receptive , uh, different state regulators have been, whether that's the enforcement agencies or the legislatures in , in understanding the challenge related to the , those conflicting state requirements.
Speaker 4:Yeah, I think that that's, I I think the quick answer to that is, is that , um, from talking to our members, it's , uh, the uncertainty and, you know, these members, these PBM members have to operate in a very regulatory, heavy environment. I mean, healthcare is maybe just next to utilities where people get their power and just the amount of federal and state and other regulations that they have to abide by. So, you know, there's never not a , a , a day or discussion that the people we talk to, and you probably do too with a lot of your clients, that they're not thinking about, how do we make sure that we're comply with this law? And , um, and so, so it's the uncertainty. It's what they can project as the amount of costs that either they're gonna have to eat or that, you know, operating for an ERISA plan as the administrator for that, that that ERISA plan, that self-funded plan, usually self-funded plan is gonna have to then decide, are we gonna pass these costs on to our employees , um, or our union members. And so , um, you know, that combined with , um, the fact that these laws, the onslaught that have gone on the last four years in each states, they've just piled on each year, and they haven't, the , the , the advocates for all these laws , um, piling on , uh, PBMs especially , um, to get ERISA plans through PBM laws, there's just no experience yet either to see what kind of detriment these might have, both on cost and in some cases potentially patient safety . So , um, you know, it's gonna be at least five, four or five more years, I think, just to see what's going on. I mean, we can't, you know, we had a lot of stuff passed in 23, and we don't know how, how that's gonna happen, and certainly how that 24 laws are gonna affect our members. But when you bring those types of issues to legislators , um, you know, sometimes they're , they're more interested in doing something rather than doing nothing, even if what they want to do is bad public policy or the laws of physics aren't thought about, you know, for every action, there's a opposite reaction, and sometimes it's unequal. Sometimes that reaction might make things worse. Um, and, you know, but, but there's just the piling on. And sometimes it's, you know, it's easier for somebody at a mom and pop pharmacy or a small chain to advocate for their point of view. Then it is a , a , a large company, despite the fact that, you know, we might have tens of thousands of employees in a , in a, in a, in a particular state. And then you, you know, going into talking about the regulators and, and talking to them about it, it really depends on the state. And really the, the person , and I don't know, we've talked about this before. A lot of times the personalities at play in those states are the history. Um, some of the people at these departments of insurance or other states are , um, nonpartisan , um, sometimes bureaucrats, career, career service, public service people, and sometimes they're political appointees , um, a lot of times. And they take , um, their marching orders from the governor's office, especially if they're appointed, and I think it's around maybe a dozen commissioners in the country that are elected statewide, the rest are appointed by the governor's office. And so there's that interplay too. Um, you know, we've seen, we've seen a lot of the times, the , the, the departments of insurance just say, Hey, we're just enforcing the law. But then you look at the rules that they promulgate and they go far beyond the scope sometimes or enough to make a big difference in the underlying statute . And then you also get , uh, real advocates that we've seen. Um, you know, and it's certainly not in their position, especially in this post chevron world of , um, of , of advocating for a certain position beyond what the statute said. And so, you know, I'll throw it back to you, and I know you've been immersed in this the last month. Do you think, you know, we , we talk about the fall of the Chevron Doctrine , doctrine from the , the latest release of , um, the Supreme Court's decisions. And certainly, you know, we think that that's gonna have an immediate near term in the next couple of years impact on rulemaking from CMS, perhaps. Um, and, and if you disagree with that, let me know. And then what kind of trickle down may that have on these state departments?
Speaker 3:Yeah, no, so it's, it's a , it's a good question. It's an interesting question, right? And , and I think one that a lot of people are, are , are thinking about. So I , I , I would say a a few things. Um, I , I obviously, as I think most people are in , in complete agreement that it will certainly have an impact on, on CMS rulemaking particularly , um, well , not particularly in the Part D plan, but certainly across the , the Medicare space. Um, I think you're gonna see the agency be , uh, more cautious in its , uh, promulgation of , of regulations and , and other rules with respect to , uh, the Medicare program , uh, and, you know, have to tie those rules more closely to the statutory authority. But, you know, in a, a program as complicated as Medicare, right? The statute is, is not specific in a lot of places, right? And so there's gonna be , um, I think a lot of uncertainty as , uh, both some existing rules that maybe were not previously subject to challenge, maybe get challenged , uh, and certainly as they, as they promulgate , uh, promulgate new rules. Um, the one thing I'll say though, from the, the preemption perspective is I think that the nature of Medicare part , uh, preemption part C and d preemption vis-a-vis and how it compares to, to ERISA preemption is kind of relevant here in how, at least in the , the very short term , uh, we could see some , some implications on , on these state laws. So as we talked about, I think in , in the intro, so the preemption provision in , in Medicare C and part D, the way courts have interpreted that I is, is much more like a field preemption. This idea that really any state law in an area where CMS may enact federal standards is preempted. And that's something that we saw , uh, recently outta the 10th circuit in , in the Mulready decision. Um, also , also the , the Rutledge decision in the eighth circuit had a , a similar , uh, uh, uh, application of, of Medicare part D uh, preemption. And then there was a , a circuit case in the first circuit of the Puerto Rico , uh, related to Medicare Advantage plans, that, that, again, took this kind of broad view that if you're in the area where, where the federal government , um, not the , where the agency may be regulating, where the federal government may be regulating , uh, issuing regulations with respect to, to part C or D plans, you're preempted. So because of that , um, the, the, the scope is broad and the areas where , um, whether or not a particular regulation , um, is upheld or not under a , a lo or bright standard , uh, doesn't necessarily correlate. It probably does around the edges, but not as directly with , um, you know, necessarily whether or not , uh, it's still in a field where , uh, there's a preemptive effect. So, you know, an example might be , um, you know , uh, this is kind of in the hypothetical, I haven't really looked specifically at, at a reg here, like you could have a reg , uh, with respect to pharmacy access standards, right? And ICMS has regs that articulate that, you know , uh, part D plants need to have a certain number of pharmacies in a certain geographic vicinity. I think the statute on that i i is broader. It speaks more like that. Uh, there not must be a , a more enough pharmacies in, in the network to provide convenient access or, or something like that. I'm paraphrasing don't, don't quote me on that. Exactly. And so there, there's I think, theoretically potential in an area like that where , um, the specifications that the agency is putting out are very different. That might be more subject to challenge than , uh, it had been in, in a , a , a chevron world as opposed to a , a lower bright world. Whereas from a state perspective, if you're deciding what's preempted on the state side, then , um, then I , I think, you know, we're still in an area where access to pharmacies and access to the drug is very clearly by statute still within , uh, the, the set of areas where CMS may issue standards, whether the particular policy choices that they made , um, in the, in the standard in in the regulation , uh, can be upheld is, is a different question than whether it's in an area where, where CMS regularly and such that I think those are , are still probably , uh, very safely preempted. It might be a little more complicated on the ERISA side, where you have the connection with or reference to , um, uh, provisions. And certainly on the connection with side, we've seen not the Supreme Court , uh, as a majority take this, but we've seen Justice Thomas in concurrence , uh, discuss it . It can a more narrow view of , of ERISA preemption that, again, the court hasn't really adopted, but really trying to tie it to the specific , uh, provisions and specific standards in erisa. Um, and so to the extent the court were to move in that more restrictive direction , uh, the scope of what the Department of Labor could , uh, issue rules on with respect to ERISA could start to have a more substantive , uh, impact on what states can do in terms of what's preempted. The other, I , to your point question, Peter, the other, I would say eventual trickle on effect that, that we may see, which I think we're still a ways away from that, is , uh, many states , uh, probably most states have , uh, essentially corollaries to Chevron in their state law that, that they interpret , uh, state laws in the same , uh, if it's a reasonable interpretation, give it deference standard. I would expect maybe not every state, but certainly the more conservative states may start to see their jurisprudence change . And they may start to follow more of a loper bright , uh, a philosophy , uh, in terms of how they interpret , um, their administrative laws. And , and that will have an impact on, you know, as we've talked about, you know, what regulators do versus what's in the , in the, in the state laws. And oftentimes, you know, these state legislators are not expert on pharmacy sales, and they're not experts on PBMs. And there's some broad language in a lot of these. And it really goes to these departments of insurers or attorneys general or whoever else is , is implementing these and , and putting kind of the , the color in the framework on that and deciding how they're gonna enforce it in a lot of ways. And if states start to go more in a , a lower bright direction as opposed to the Chevron like direction that most of them are in now, that's an area where I think you could see a , see a lot of narrowing.
Speaker 4:It's interesting because it, you know, the arguments sometimes if we, before we get into the real federal preemption part of it, but it , it doesn't matter with whether you're in a red state or a blue state a lot of times on these issues. Because if you tell a regulator or a legislator , well, you know, this is federally preempted , um, you know , know, and I'm very generalizing here , um, somebody in a red state or , or the more conservative might say, well, you know, they might make a federalism argument and they might say, this is, you know, we want the states, we don't want the federal government, you know, handing down an edict and somebody in blue state, a more liberal person might say, well, you know, we need certain progressive policies to, you know, reign in the costs of drugs or whatever , um, you know, more regulation in order to solve this issue, regardless of whether it's state or federal. And so it doesn't really matter when you're in this industry 'cause you're getting it from both sides quite a bit. Um, you know, and , and , and, you know, going back to talking about all this, it was, you know, pretty stable jurisprudence for 50 years on ERISA Medicare. Uh, I think you'd indicated it's pretty stable. And then you got, you know, at the end of 2020 Rutledge, and then you got wavy in the eighth circuit , um, a year later. And , um, you know, that made some nuances for Part D, but it says ex if there's a, a federal , um, standard or explicitly mentioned in federal Medicare law , uh, states hands off . So for those 6, 7, 8 states in the A circuit , uh, there you go, that's controlling law. And I didn't think in erisa they held that it was , um, I think it's just a benefit design, which you could really argue is just about anything a lot of these states try to do, especially North Dakota where the , the web K stem from, or wavy , some people pronounce it. And then you've got , um, also , um, I think if you try to add the individuals that some plan might have to cover, I think that that's still preempted. And then you got the 10th circuit with , um, with Mulready . And of course, one thing I want to add as we talk about this, and of course this might depend on where you are, if you're on the east or west coast, north or south of the Mason Dixon line, there's a 2016 case of Gobi or Goba , however you wanna pronounce it. And that has to do with , uh, federal preemption as well. And that's a case that we've had to reference a lot over the last couple years as states seek to compel , um, you know, broad reporting sometimes on proprietary and confidential information from PBMs or insurers on behalf for , for that health plan or , uh, information related to erisa self-funded plans. Um, and so, you know, you, you can just take a lot of these federal court cases and we'll see of course, if this Chevron has a trickle down and, and , um, you know, there's more of a deference to , um, the actual black letter of a statute. But , um, you know, nothing if you'd step back has changed that much. It's just all the noise has convinced a lot of people in state capitals that the floodgates are open and go after the PBMs. It's just, and , and ERISA health plans. Um, and to a lesser extent, maybe part D plans. And that's just unfortunately been the case.
Speaker 3:You know , I , I think it's funny that you mentioned that on , on the, the, the lack of partisan nature of it. I , I , you know, this is kind of a side point , but I feel like , uh, the one thing you can consistently get among , uh, you know, state lawmakers right, is the state should be able to do it, right. They , it's a , it is a pure territorialism right thing, right? Right. Where, where they, they want, they wanna to, to take action and, and show that they can do something regardless of, of how philosophically they, they get there. Uh , you know, you mentioned the Go Bay case, and I , I , I think that's interesting. Um, 'cause you know, in some of ways the Go Bay case speaks to some of the confusion around , uh, Rutledge , um, and we talked about this earlier, right? This idea that, that Rutledge , um, the incorrect idea that Rutledge just opened the , the floodgates up to , to , to PBM regulation when it, when it clearly , uh, had the option of doing so and , and didn't go that, that that argument, they, they went a different route. And the Go Bay case speaks a lot to the reason why, right? So the Go Bay case was case out of Vermont. Um, that was about, in all players , all payers claims database, I'm , I'm probably bungling that , um, and the state law only applied to the ERISA plan. It , it was a law that applied, you have to have a certain number of members before you provide certain reporting to the state of Vermont. And the law only applied to the ERISA plan in question because they used a third party administrator who the third party administrator had enough lives covered , uh, to, to be subject to the law. And , and you know, the clear takeaway from that , um, which is important, so much of this conversation is that the relevant for risk of preemption standards when we're thinking about , uh, PBMs or other TPAs is not whether or not it happens to be a TPA or a PBM, who the law is specifically, you know, discusses in in the statute , um, or might in the first instance provide its , uh, obligations on , um, the relevant question as , as the court looked at in Goba, it wasn't relevant that to go bay's dis uh , finding of ERISA preemption in that case that they were using a TPA, it was that the substantive effect of the law on the plan was still impermissible. And it's the same , um, you know, in, in the Mulready case that in the, in the 10th circuit, right? That , um, the, the 10th circuit there rejected that similar argument to , that we saw in Go Bay , the state of Oklahoma argued that , um, the , uh, the laws there were directed at PBMs, not the plans themselves. And that alone was , uh, sufficient to, to not have Aris preemption. But the court in , in the 10th circuit, and this is obviously , uh, subject to cert , uh, right now, but, but the , uh, or certain petition right now, but the 10th circuit decision was clear that i , i , in this case, that it's the nature of the regulation. And there it was the nature of regulations on the pharmacy networks, which , uh, restricted the way that the plans could design their benefits. And whether or not that was, because it was through the PBM that they had hired or on the plan themselves, it was the nature of that restriction that was impermissible not the , the , the subject of the , the , uh, restriction itself.
Speaker 4:You know, and you know this 'cause we've seen what they're , what they call, you know, it , the , the way to market it, I guess, of the state is they call it price transparency for prescription drugs when, you know, it might more , uh, be appropriate to call 'em reporting requirements or disclosure mandates. Again, sometimes of , uh, confidential proprietary information. And sometimes information's not an aggregate data, but you know, these will go to , um, you know, we've got a couple of states right now that are going the Vermont route of eight years ago now or, or more since that decision came down. But , um, they're going the route to try to compel ERISA plan data from both carriers and PBMs. Um, and then, but you also have states setting up specific offices of transparency, or you've got departments of insurance and , um, you know, we can use a lot of the same arguments because of what that case stated as you so , uh, put it out so well , um, that, you know, beyond the fact also that, you know, a lot of this data , um, even if it's in the aggregate and it's not proprietary confidential , um, you know, we, we ask around and we search and we try to find out what kind of value , um, interested parties might have. And those people are usually not gonna be the average Joe and Jane. They're gonna be , um, other entities in a sup pharmaceutical supply chain, whether they be manufacturers, wholesalers, p SSOs, or pharmacists. And they look at the data, and nobody that I've seen has testified in a state capital the last 10 years since these transparency or reporting programs have become a thing and said that any of it's really been helpful other than the fact that sometimes, you know, a state agency might put out a report that shows, oh, you know, such and such a generic drug was up over this time and it was down over this time and, and that, so , um, you know, it's just, it , it , it's just become an issue and I don't think it's gonna stop , um, going forward. I, I don't know if you , you know, I want to kind of go back to something we talked about before, unless you wanted to say more on Go Go Bay , but No , go ahead. Do you think that, you know, I , in , in , there was a state in particular that wanted to have a sort of a joint federal, state partnership with , um, with re regulatory purview over , um, part D plans. Is there anything, you know, when I think of a joint federal, state partnership in healthcare, I'm thinking of, you know, Medicaid, I'm thinking of the federal dollars that go to a state for the state manages the Medicaid plan. Other than that, what are any other examples that could ever see something like that come to fruition?
Speaker 3:Yeah. Uh , well, it's hard in , in the , the Medicare, I mean, I think there are probably other examples of, you know, federal state partnerships, but in the Medicare Part D program in particular, it , it , it's hard to see that , um, working effectively. I mean, part of it is that, right? Um, there's already limits, right? In terms of what , uh, even the federal government, you know, there's the , there's the non interference clause, right? Uh, that limits, you know, obviously that we have IRA Medicare price negotiation. But with that exception , um, you know, there's limits on what the federal government can do , uh, in terms of , uh, regulating negotiations between , uh, drug manufacturers, part D sponsors and their PBMs and , and , and pharmacies. Um, and so, you know, you have some limits built in there that when you combine that with the express preemption provision in , uh, in, in the , uh, Medicare Act and the Medicare Part D program, I think works in a way that precludes and I think pretty fairly works in a way that precludes , uh, Medicare Part D plans from being regulated by states in many of those same contexts. You know, the state, just because the , uh, you know, the federal government can't set a price outside of the, the drug negotiation program, at least from , you know, and now still for most drugs. Um, and so , um, you know, the state can't go in and fill that gap. That's not a gap in the statute that's just open for state negotiation, that that is , uh, a deliberate choice on the part of Congress when they passed the Part D program in , in 2003 to create a market based model where the comp competition between , um, different Part D plan sponsors and their negotiations with , uh, both pharmacies and , and manufacturers were intended to, to create the drug savings for , uh, for the beneficiaries. And that's how the program was created. And so a program that is , uh, by its structure intended to , uh, allow for market competition and where the federal government already , um, sets pretty strict parameters on , on what the guardrails of that is for where the, the , uh, the competition may be. It , it's hard for me to , to to think of an area where there's, you know, really significant room for the states to, to participate in that. I could see maybe on a narrow lens, you know, some agreement that , um, you know, states may be collect some information on the federal government's behalf or something like that, but even that might be be Ted , I have to think about that more. Um, but I think, you know, the way the the statute's structured, it really limits the way that a state could be involved in that. And again, logically, so it's a federal program that is intended to be a federal benefit using federal dollars, but which is using a market-based model. And between those two kind of competing factors of market-based model in , in a federal program with federal structure, it doesn't leave much room for a state to really , uh, kind of be involved in a way that I think would be , uh, you know, productive under the current statute. It would need a , I think, a pretty significant rewrite of , of how the , this statute and the , the program operates.
Speaker 4:And it'll be interesting to see, you know, there's been some pushes in recent years to, to change , um, federal ERISA law and , um, you know, Medicare part D's been on the books for since 2003, I think. And so , um, whatever way , way the , the political wind shift in the states and federally , um, and, and if the federal government continues that in 25 and beyond or something really happens, it'll be interesting to see. And , um, you know, whether state's , attorneys general or um, departments , um, get different issues on their plate because sometimes <laugh> , you know, other, other , uh, issues, whether it be in healthcare or elsewhere, steal the thunder of federal preemption. And that's both good and bad for our work.
Speaker 3:I wanna ask you one more question. Um, so , uh, and I think this , uh, pairs well with what, what you were just saying about both the election and , and what we're, where , where we're gonna be in 2025. So from your perspective, where, where, where are we going on this? What, what's kinda , um, not necessarily in the next three to six months, but where do you see this area being in in two to three years?
Speaker 4:I think that that's a , the question that any of the listeners of our podcast will wanna know, where is this, what's gonna happen with this preemption issue? And I think that , um, we've seen , um, some good dividends be paid for , um, and you know, about this, you know, educating attorneys, general, educating departments of insurance and educating legislators on any misinformation or misinterpretation of the floodgates of these bad laws that were opened after Rutledge in 2220 and Wavy in 2021. And , um, it's like the ti well, Titanic's maybe not a good , uh, uh, metaphor, but a , it's like a big ship and it's taking a while to turn it around and to turn it around and to get it sailing the right way is just taking time. And that's something we've really been working on a lot the last couple of years to educate that. Um, you know, the last thing you want to do is create bad public policy because who suffers in the end are , uh, the citizens of the country and every individual state. Um, and so I think the education that we can do in each individual state capital with key individuals and entities, departments is the best way to go about it. It's just gonna take maybe another couple of years to do.
Speaker 3:Well , we , we definitely wanna turn the boat around before it hits the iceberg, so , uh, <laugh> Oh ,
Speaker 4:Absolutely. And , uh,
Speaker 3:I dunno if it , maybe the Titan hand was a better example than we wanted, but it , what's the avoid the iceberg <laugh> ,
Speaker 4:Maybe it was.
Speaker 3:Um, well, Peter, thanks for, for doing this , uh, podcast with me and , and thanks for, for joining me in Chicago for the, the Health Plan Law and Compliance Institute, although , um, may in Chicago is like the best time to be there. So , uh, I think that was a , a good opportunity for both of us to see that city , uh, in the lake and the such nice weather. Uh, but with that, you know, we'll , thank our audience and listeners for, for joining with us. This has been a , a , a fun conversation. We hope it's been helpful for you, and have a great rest of your day.
Speaker 4:Thanks, Andrew. You too. Always fun to talk to you.
Speaker 2:Thank you for listening. If you enjoyed this episode, be sure to subscribe to a HLA speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org.