Pharmaceutical Care Management Ass'n v. Rowe

429 F.3d 294, 36 Employee Benefits Cas. (BNA) 1065, 2005 U.S. App. LEXIS 24032, 2005 WL 2981063
CourtCourt of Appeals for the First Circuit
DecidedNovember 8, 2005
Docket05-1606
StatusPublished
Cited by103 cases

This text of 429 F.3d 294 (Pharmaceutical Care Management Ass'n v. Rowe) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pharmaceutical Care Management Ass'n v. Rowe, 429 F.3d 294, 36 Employee Benefits Cas. (BNA) 1065, 2005 U.S. App. LEXIS 24032, 2005 WL 2981063 (1st Cir. 2005).

Opinions

ORDER

PER CURIAM.

The panel unanimously affirms the district court’s grant of summary judgment for defendant on all claims. On the ERISA preemption, due process, and Commerce Clause issues, the panel unanimously adopts Judge Torruella’s reasoning. As to the association standing, Takings Clause, and First Amendment issues, the joint concurring opinion of Chief Judge [298]*298Boudin and Judge Dyk represents the opinion of the court.

Affirmed.

TORRUELLA, Circuit Judge.

This appeal arises from an attempt by plaintiff-appellant Pharmaceutical Care Management Association (“PCMA”) to challenge the provisions of Maine’s Unfair Prescription Drug Practices Act (“UPD-PA”), Me.Rev.Stat. Ann. tit. 22, § 2699 (2005). PCMA brought suit against defendant-appellee G. Steven Rowe, Attorney General of the State of Maine, seeking to obtain an order enjoining enforcement of the UPDPA. The parties issued cross-motions for summary judgment, and the district court denied PCMA’s motion and granted the motion of the Attorney General. PCMA now appeals this decision. For the reasons hereinafter stated, we affirm the decision of the district court.

I. Factual Background

PCMA is a national trade association of pharmacy benefit managers (PBMs). PBMs are major players in the delivery of health care in the United States. They act as middlemen in the lucrative business of providing prescription drugs. They serve as intermediaries between pharmaceutical manufacturers and pharmacies on the one hand (as the district court noted, the “supply” side of the trade) and health benefit providers (e.g., insurers, self-insured entities, health maintenance organizations, and public and private health plans) on the other (the “demand” side). The services that PBMs extend are designed to facilitate the provision of prescription drug benefits to the people who utilize the services of the health benefit providers.

For example, PBMs often provide health benefit providers with access to an established network of pharmacies, where customers of the health benefit providers can obtain drugs at certain set prices. PBMs negotiate volume discounts and rebates with drug manufacturers by pooling substantial numbers of health benefit providers. This pooling gives the PBMs tremendous market power to demand concessions from the manufacturers. PBMs also provide drug utilization review services and “therapeutic interchange programs” (in other words, substituting a drug for the one actually prescribed by a doctor).

In this role as intermediary, however, PBMs have the opportunity to engage in activities that may benefit the drug manufacturers and PBMs financially to the detriment of the health benefit providers. For example, in cases of “therapeutic interchange,” a PBM may substitute a more expensive brand name drug for an equally effective and cheaper generic drug. This is done so that the PBM can collect a fee from the manufacturer for helping to increase the manufacturer’s market share within a certain drug category. Similarly, a PBM might receive a discount from a manufacturer on a particular drug but not pass any of it on to the health benefit provider, keeping the difference for itself. The health benefit provider, however, often has no idea that a PBM may not be working in its interest. This lack of awareness is the result of the fact that there is little transparency in a PBM’s dealings with manufacturers and pharmacies. As the district court noted, “fwjhether and how a PBM actually saves an individual benefits provider customer money with respect to the purchase of a particular prescription drug is largely a mystery to the benefits provider.” Pharm. Care Mgmt. Ass’n v. Rowe, No. 05-1606, 2005 WL 757608, at *2, 2005 U.S. Dist. LEXIS 2339, at *6 (D.Me. Feb. 2, 2005).

With the aim of placing Maine health benefit providers in a better position to determine whether PBMs are acting [299]*299against their interests, and correspondingly, to help control prescription drug costs and increase access to prescription drugs, the Maine Legislature enacted the UPD-PA in the spring of 2003. The UPDPA imposes a number of requirements on those PBMs that choose to enter into contracts in Maine with “covered entities”— meaning health benefit providers and including, in part, insurance companies, the state Medicaid program, and employer health plans. Such PBMs are required to act as fiduciaries for their clients and adhere to certain specific duties. For example, they must disclose conflicts of interest, disgorge profits from self-dealing, and disclose to the covered entities certain of their financial arrangements with third parties. Me.Rev.Stat. Ann. tit. 22, §§ 2699(2)(A-G) (2005). The disclosures made by the PBMs to the covered entities are protected by confidentiality. None of the disclosures are available to the public.

PCMA, on behalf of its member PBMs, challenges the UPDPA on five separate grounds. First, it claims that the Maine law was preempted by either the Employee Retirement Income Security Act of 1974 (“ERISA”) or the Federal Employee Health Benefits Act (“FEHBA”). PCMA’s second argument is that the UPDPA violates the Takings Clause of the Fifth Amendment because it conditions doing business in Maine upon the forced disclosure or taking of proprietary information. Third, PCMA states that the provisions of the UPDPA viólate due process because they provide no pre-deprivation hearing. Fourth, the association claims that the UPDPA disclosure provisions violate the First Amendment by compelling commercial speech in the context of a voluntary business relationship. PCMA’s final argument is that the UPDPA violates the Commerce Clause, either through its “extraterritorial reach” or by excessively burdening interstate commerce.1

In the proceedings below, the parties issued cross-motions for summary judgment. The magistrate judge responsible for the case recommended to the district court that summary judgment be entered in favor of the Attorney General on all claims. The district court agreed with this recommendation and upheld the UPDPA against all of PCMA’s challenges. Upon careful review, we now affirm.

II. Discussion

A. Standard of review

We review.a district court’s ruling on cross-motions for summary judgment de novo. Calero-Cerezo v. Dep’t of Justice, 355 F.3d 6, 19 (2004).

B. Preemption claims2

ERISA is “a comprehensive statute designed to promote the interests of [300]*300employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, 463 U.S. 85, 90, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). The statute includes a broadly-worded preemption provision, 29 U.S.C. § 1144(a) (2000), that Congress included “to afford employers the advantages of a uniform set of administrative procedures governed by a single set of regulations.” Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987).

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429 F.3d 294, 36 Employee Benefits Cas. (BNA) 1065, 2005 U.S. App. LEXIS 24032, 2005 WL 2981063, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pharmaceutical-care-management-assn-v-rowe-ca1-2005.