Washington, D.C., December 27, 2024 – The ERISA Industry Committee (ERIC) today filed a complaint in the U.S. District Court for the District of Minnesota (the court) against Minnesota’s Department of Commerce (MN-DOC) stemming from the Minnesota Pharmacy Benefit Manager Licensure and Regulation Act (the Minnesota Act).
The complaint alleges that two provisions of the Minnesota Act are invalid under the Employee Retirement Income Security Act (ERISA). ERIC member companies sponsor health and prescription drug benefit plans governed by ERISA, and the federal statute preempts or supersedes any state law relating to covered employee benefit plans. The complaint asks the court to permanently halt enforcement of the Minnesota Act because ERISA preempts it.
“ERIC and its member companies are keenly aware that action is necessary to bring down the cost of prescription drugs. Unfortunately, the Minnesota law is a step in the wrong direction. It does not do anything to improve affordability, and it directly interferes with employers’ adoption of employee benefit plan designs that can save employees money,” said Tom Christina, Executive Director of the ERIC Legal Center. “Employers that provide prescription drug coverage governed by ERISA work hard to design benefit plans that best serve the needs of their employees and the employees’ families. But the Minnesota Act prohibits employers from adopting plan designs that help their employees afford needed prescription drugs. Thankfully, Congress had the foresight to include a preemption provision when it enacted ERISA more than 50 years ago. The preemption provision gives the federal courts what they need to protect the system from a patchwork of different state laws that work against affordability.”
The Minnesota Act forbids employers from using benefit designs that are critical to keeping drug benefit costs manageable. Although the Minnesota Act describes its provisions as the regulation of pharmacy benefit managers (PBMs), the inevitable effect of the law is to close down the freedom and flexibility of employers and labor unions to design plans that make economic sense for plan participants. This severely limits an employers’ ability to work exclusively with pharmacy networks to capture cost savings. It also denies employers the ability to foster the use of pharmacy network mail-order programs to obtain three-month refills of commonly used maintenance medications, which save employees money and improve patient outcomes by making it easier and more convenient for patients to continue their medications without interruption.
“To compound the problem our lawsuit seeks to remedy,” Christina noted, “the Minnesota Act interferes with the design of prescription drug benefit plans that operate exclusively outside Minnesota if the plan sponsor contracts with a PBM licensed to operate within Minnesota. Casting such a wide net catches practically all PBMs, allowing Minnesota to govern plan designs everywhere in the United States.”
While ERIC recognizes the growing interest among state lawmakers in regulating the practices of PBMs, the organization is concerned that recent state proposals do not account for the critical role that ERISA plays in today’s health care landscape. Along this line, ERIC strives to provide state lawmakers with the insights to balance emerging policy objectives with the tenets of ERISA law. Simultaneously, ERIC advocates for federal PBM reform and leads initiatives involving employers and patient advocates to support federal solutions that complement state efforts on these topics.
McDermott Will & Emery prepared the complaint, which is available here.
