CVS and Express Scripts File Separate Suits Challenging Recent Amendments to Arkansas PBM Law

On May 29, 2025, two new complaints were filed in the U.S. District Court for the Eastern District of Arkansas challenging Arkansas Act 624 (Act), which effectively prohibits pharmacy benefit managers (PBMs) from owning or operating pharmacies in Arkansas. The Act requires the Arkansas State Board of Pharmacy to revoke or not renew pharmacy permits when the permit holder is an entity that is managed by a PBM or a subsidiary of a PBM or "[h]as a direct or indirect ownership interest" in a PBM, subject to the exception of a limited use permit for "certain rare, orphan, or limited distribution drugs." The Act was signed into law on April 16, 2025, and takes effect January 1, 2026. The Act states that its purpose is to "improve healthcare delivery in the pharmacy market for patients by eliminating certain anticompetitive business tactics." 

The lawsuits were filed by separate groups of PBM, pharmacy, and insurance entities. Express Scripts, Inc., et al. v. Richmond, et al., No. 4:25-cv-00520-BSM (E.D. Ark. May 29, 2025), challenges the Act on constitutional grounds as a violation of the Dormant Commerce Clause, the Privileges and Immunities Clause, and the Bill of Attainder Clause, as well as alleges that the Act is preempted by the Department of Defense's (DoD) TRICARE. CVS Pharmacy, Inc., et al. v. Arkansas State Board of Pharmacy, et al., No. 4:25-cv-00524-BSM (E.D. Ark. May 29, 2025), challenges the Act on constitutional grounds as a violation of the Dormant Commerce Clause, the Equal Protection Clause, and alleges that it is preempted by both ERISA and the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA). Both suits seek declaratory, preliminary, and permanent injunctive relief. 

As to ERISA preemption, CVS alleges that the Act is preempted under a "connection with" ERISA preemption theory because it "intrudes on substantive plan design decisions and interferes with nationally uniform plan administration" "by reducing the type of licensed pharmacies that are available in the State" including "pharmacy networks that include pharmacies (whether retail, mail-order, specialty, or all of the above) that are affiliated with their chosen PBM." The CVS complaint further alleges that plan choice " is attractive for plan sponsors because it can yield cost savings for both the plan sponsor and plan participants and beneficiaries." As to interfering with nationally uniform plan administration, the CVS complaint claims that "employers that provide coverage across the nation will need to either incur the administrability costs of carving out Arkansas or alter their plans and the terms or scope of the plans' existing service provider arrangements to fit the State's specifications" and that "if other States pass similar laws, it would become nearly impossible for plans to maintain the nationally uniform plan administration that is necessary for multi-state employers."

The CVS suit also challenges the Act on Medicare preemption grounds citing the MMA's "broad express preemption provision for state laws" with respect to Medicare Advantage (including Medicare Advantage Prescription Drug (MA-PD)) and Medicare Part D plans. Relying on PCMA v. Wehbi, 18 F.4th 956, 971 (8th Cir. 2021), the complaint states that there is field preemption by Medicare, which "sets forth a comprehensive, reticulated set of standards to govern the operation of MA-PD and Part D plans with respect to their administration of prescription drug benefits." According to the complaint, these standards "effectively compel MA-PD and Part D plan sponsors to function as, or to employ, PBMs as an essential part of their operations, and they do not preclude such sponsors from discharging these functions by integrating their operations—including by owning and operating pharmacies." The CVS plaintiffs assert that federal law permits what the Act prohibits, for example, the former "expressly adverts to MA-PD and Part D plans' provision of mail-order prescription options for beneficiaries," allows "Part D plans, upon waiver, to rely on wholly-owned pharmacies as the primary means of furnishing prescription drugs to beneficiaries, and exempts such plans form pharmacy access requirements," and contains pharmacy network contracting requirements, including any willing pharmacy requirements. The complaint alleges that "[b]ecause these standards touch on pharmacy ownership by Medicare plan sponsors in some circumstances," the Act is preempted by the MMA and goes beyond a mere licensing standard because it bears on the condition for an entity to keep a state license. Therefore, it impermissibly "regulate[s] the structure of MA-PD and Part D plans and their offerings in the Medicare marketplace by leveraging the State's licensing power."

The Express Scripts complaint does not bring ERISA or MMA preemption claims, but rather alleges, in addition to the constitutional claims, that TRICARE preempts the Act. Also of note, in Rutledge v. Pharm. Care Mgmt. Ass'n, 592 U.S. 80 (2020), the Supreme Court held that another provision of the Arkansas PBM law regulating the reimbursement of pharmacies by PBMs was not preempted by ERISA. 

As previously discussed, the jurisprudence in this area of ERISA preemption of state PBM regulation is evolving. Just recently, the U.S. filed a brief in Mulready v. Pharm. Care Mgmt. Ass'n, No. 23-1213 (U.S.), advising the Supreme Court that it should deny the petition for a writ of certiorari filed by the Insurance Commissioner of Oklahoma seeking to overturn the Tenth Circuit's 2023 decision holding that parts of Oklahoma's Right to Pharmacy Choice Act are preempted by ERISA and Medicare Part D. We are closely watching these and other cases shaping the contours of ERISA and Medicare preemption of state laws. 

Tri-Agencies Issue Guidance for Handling No Surprises Act IDR Errors

The U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued technical assistance, "Federal Independent Dispute Resolution (IDR) Technical Assistance for Certified IDR Entities and Disputing Parties (June 2025)," setting forth agency policy and operational guidance for the handling "clerical, jurisdictional, and procedural" errors that a No Surprises Act (NSA) Independent Dispute Resolution (IDR) entity makes, but that are not identified until after a dispute is closed. According to this guidance, the three types of errors should be corrected by reopening a closed dispute to ensure the results of the IDR process are aligned with the NSA and that an IDR entity complies with the NSA and its implementing regulations. 

Reopening of a dispute can be initiated at the request by either party or the IDR entity but must be approved by the Departments. The Departments can also reopen a dispute on their own. 

A clerical error is defined as "a typographical (typo), computational (user) error, or IT systems error impacting the operation or use of the Federal IDR portal made by the certified IDR entity." A jurisdictional error means "a situation when the certified IDR entity incorrectly determines that an item or service either is or is not a qualified IDR item or service eligible for the Federal IDR process." These errors include, among other things, situations where the claims involve programs (like Medicare) not covered by the NSA or are not covered benefits under the terms of the plan. A procedural error is one where "the certified IDR entity incorrectly determines the eligibility of an item or service for the Federal IDR process or incorrectly makes a determination because a disputing party satisfied, or failed to satisfy, a required procedural step to engage in the Federal IDR process, such as submitting required documentation or timely completion of a step in the process." Examples of procedural errors include situations where the IDR entity renders a determination when the initiating party failed to timely furnish the notice of initiation to the non-initiating party or without evaluating documentation indicating the dispute was subject to the 90-day cooling off period for similar claims.

The technical assistance also addresses the impact of a corrected error on administrative and IDR entity fees and identifies types of errors that may not be corrected after dispute closure. The Departments state that the technical assistance is not intended to have the force of law or to impose substantive requirements on parties to the IDR process or on IDR entities. The new guidance applies to requests to reopen IDR disputes received by the Departments on or after June 6, 2025, and any received earlier but not yet addressed by the Departments as of June 6, 2025. 

In the News

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