Subscribe
Share
Share
Embed
Health Affairs This Week places listeners at the center of health policy’s proverbial water cooler. Join editors from Health Affairs, the leading journal of health policy research, and special guests as they discuss this week’s most pressing health policy news. All in 15 minutes or less.
Hello and welcome to Health Affairs This Week. I'm your host, Jeff Beyers. We're recording on 08/25/2025. Just as a reminder, we are releasing a new theme issue next week on the opioid crisis. On September 3, we have a free issue briefing on the issue.
Jeff Byers:On September 17, we have a lunch and learn on the current opioids policy landscape and what's ahead. Hope you'll join us for that and check out the issue. Today on the pod to talk about, pharmacy benefit managers and, laws around it, we have Andrew Twinemasyko, from the O'Neill Institute for National and Global Health Law. Andrew, welcome back to the program.
Andrew Twinamatsiko:Oh, thank you, Jeff. It's always a pleasure talking to you.
Jeff Byers:So there've been a lot of PBM cases going on lately. What case are we discussing today and how might it differ from the others?
Andrew Twinamatsiko:Well, so today we are here to talk about the riveting case of Express Scripts versus Richmond, a case challenging Arkansas's recently enacted law prohibiting PBMs from owning operating pharmacies in Arkansas. As of today, the case has actually now gone to the Eighth Circuit Court of Appeals because the Arkansas District Court ruled against Arkansas and enjoined the law. And the statute in question in this case is the first to take this step that prohibits PBMs from owning operating pharmacies within a state.
Jeff Byers:So what is the Arkansas PBM law? What does it actually do? Why was this law made in the first place?
Andrew Twinamatsiko:Okay. So let's contextualize it like, so we all know that the price of prescription drugs in The United States is way higher than that in other peer economies. Drug prices in The United States triple the prices of comparable countries with US consumers paying almost $3 for every dollar spent by consumers in other countries. And of course The US drug market has very many stakeholders. We have manufacturers, distributors, insurers, pharmacies, PBMs and many others.
Andrew Twinamatsiko:And each of these players have a role in driving up the price of prescription drugs. There's been a lot of talk over the last few years about the unique role that pharmacy benefit managers have played in driving up the skyrocketing prices of prescription drugs. And I don't want to sound like it's solely PBMs responsible for this. What I'm saying is that they are part of this system. And today there are three PBMs, namely CVS's Caremark, Cigna's Express Scripts and UnitedHealth's Optum, which by the way the FTC has referred to as the big three.
Andrew Twinamatsiko:Maybe soon one of these big three will come out like Kendrick Lamar and say like, oh no, it's not the big three, it's big me. I don't know, but I digress. Anyway, the big three control 80% of the market. And more importantly here is that PBMs are part of vertically integrated organizations. They have relationships with insurers, with providers, with pharmacies, and actually have stakes in those establishments, which contributes to the opaqueness of the operations and how those relationships contribute to driving up prices.
Andrew Twinamatsiko:So for example, CVS owns CVS pharmacies, Caremark, a PBM and Aetna, an insurer. And so this is included in reports by FTC, The US House Committee On Oversight And Government and how they engage in anti competitive behaviors. So anyway, to address the anti competitive behaviors that the PBMs engage in, there've been a wide range of laws that are passed. But the Arkansas law that was passed this week takes a new approach. It prohibits PBMs from operating pharmacies and Arkansas is not actually not an outlier.
Andrew Twinamatsiko:There are other statutes of the sort that have been introduced in New York and in Texas and in Vermont. And so Arkansas takes that approach of trying to rein in their vertical integration of PBMs.
Jeff Byers:Why are we hearing more about the Arkansas law then versus, you know, the New York or the?
Andrew Twinamatsiko:Oh, the the New York, they have just been introduced, but Arkansas, they're still they haven't been passed, enacted so to speak. Okay. Arkansas just it was is the one that was the first one to pass this law and enact it. Other ones have just been introduced.
Jeff Byers:So what is the current status of Express Scripts versus Richmond?
Andrew Twinamatsiko:So there were actually four lawsuits that were filed, Express Scripts, CVS Pharmacy, Optum and the trade group that represents PBMs, PCMA, and they're all consolidated in one case. And they brought a wide range of challenges, mainly saying that the law violates the so called dormant commerce clause. And it's also preempted by several federal laws. It violates the equal protection clause, it violates the bill of attainder. And so like a wide range of cause of action and the court sided with the challenges on two grounds.
Andrew Twinamatsiko:One, found that the law likely violates the Dohman Commerce Clause and is likely preempted by TRICARE, and thereby, the court issued its order enjoining the the stat the the law on those two grounds.
Jeff Byers:Okay. So I'm not a lawyer. Chris Fleming's not on the call. What what does that mean? Like, when are you talking about the grounds and TRICARE and the dormant commerce clause?
Andrew Twinamatsiko:Yeah. And this actually might seem like arcane principles, but so let me break them down bit by bit. I'll start with the commerce clause. So the US constitution grants Congress the power to regulate commerce among the several states. In other words, it's only Congress that may regulate interstate commerce.
Andrew Twinamatsiko:And the Supreme Court has interpreted this affirmative grant of authority to Congress as also implicitly having a negative aspect. In other words, Congress has power that lies dormant even when it's not exercised and that power prohibits States from undertaking certain actions that might interfere with the national economy. So when you hear constitution lawyers talking about the so called dormant commerce clause, that's the part they're referring to. And so this, the dormant commerce clause is actually mainly aimed at guarding against economic protectionist laws. So when states engage in discriminatory behavior favoring in state business and disfavoring out of state businesses, that type of discrimination is impermissible under the dormant commerce clause.
Andrew Twinamatsiko:And there is another way through which states can violate the so called dormant commerce clause by imposing what is called an undue burden on interstate commerce. So if a state enacts a law that really it's kind of a balance what courts look at, they could have a balance like if the burdens that the state imposes on interstate commerce far outweigh the local benefits, then that law has to be validated. And so the court here said that the Arkansas law one, actually expressly and overtly discriminates against interstate commerce because it was passed with a protectionist intent to protect local pharmacies and local independent pharmacies. Then the court straight up said, you say this in the statute that you enacted this statute to protect local businesses and harm out of state businesses. So the court found that was impermissible.
Jeff Byers:So is what you're saying the potential for the Arkansas PBM law kind of enacts that dormant commerce clause to like wake up essentially?
Andrew Twinamatsiko:Yeah. So the Arkansas PBM law violates the dormant commerce clause. The PBMs said that by enacting this law, you are intruding in a space that involves Congress's power and you are discriminating against interstate commerce favoring in state businesses. So yes, that triggers the dohment commerce clause and thereby invalidate it.
Jeff Byers:So that's the big three's argument against the state law. Okay. So that's ground number one.
Andrew Twinamatsiko:Yeah. So the interesting thing is that the court found so a state law can violate the Dormant Commerce Clause in two ways. One, by discriminating and two, by unduly burdening interstate commerce. So the court found on both fronts, the Arkansas law likely violates the Dormant Commerce Clause. So the court said, even if you didn't discriminate against interstate commerce, there is another way you could have gone about achieving the goals of this legislation without necessarily prohibiting PBMs from owning and operating pharmacies in Arkansas.
Andrew Twinamatsiko:You could have, you already have actually, cannabis has three laws that already prohibit these conflicts of interests in a way. And the court said, you are really putting a huge burden on a national market to achieve specific state benefits that you have already achieved otherwise.
Jeff Byers:So they're just saying, like, come on, buddy?
Andrew Twinamatsiko:Well, yeah. I mean, yeah. Like, basically, I think the idea is that you have to show that there are huge benefits that this law brings that outweigh the burdens that you're putting on your own national operators.
Jeff Byers:So that's commerce clause, anything we wanna talk touch on with TRICARE, Prun?
Andrew Twinamatsiko:Yeah. So this, and I think, actually talking about the Commerce Clause and TRICARE preemption, they really all involve the same concerns about the power of the federal government. So there is this pesky thing called the supremacy clause and I'm being facetious there. But basically it's how the hierarchy of laws between federal and state laws. The supremacy clause dictates that federal law takes precedence over state law.
Andrew Twinamatsiko:When the two conflict, state law has to give way. And there are different ways through which a state law can be preempted. Congress can come and straight up say like, Hey, states, you can't do this. Hammer time, you can't touch this.
Jeff Byers:So,
Andrew Twinamatsiko:the court said, and also, so one is express, you can expressly preempt a state law or impliedly preempted. If the court finds that, for example, a state law stands as an obstacle in accomplishing federal objectives, then the state law has to give way in that context. So here, there is language in the TRICARE program, which is the program that provides through which the military gets its healthcare that says it preempts state laws that concern the delivery of healthcare. And because Tricare contracts with PBMs in delivering healthcare, the court found that this law expressly preempts that aspect.
Jeff Byers:So this is a preliminary injunction, if I'm understanding it, what might this mean for the future of the case?
Andrew Twinamatsiko:Well, so preliminary injunction means that the law Akela can't enforce the law for now. But before the court, and issuing a preliminary injunction is actually a big deal. A court just it's considered an extraordinary remedy, so you really have to convince the court on different fronts. One is that you are likely to win when the case is fully litigated and not only are you likely to win but also there isn't any other remedy available through which you can be compensated should you win. So like to really stop a duly enacted law of the state, the court has to weigh a lot of things.
Andrew Twinamatsiko:So what this means is that because the court has already projected that Arkansas is likely to win on these two fronts, this slot will likely not be enforced for the near future until the case goes all the way through the litigation process.
Jeff Byers:Okay. So but they are kind of signaling that there is good chance that the law could eventually get on the books.
Andrew Twinamatsiko:What the court is saying is that Arkansas is likely to lose when it all it's all said and done, at least likely to lose on those two grounds, Dohman Thomas Clause and TRICARE preemption.
Jeff Byers:So what does this mean for other states looking into this particular idea? What does it mean for the pharmaceutical industry in general?
Andrew Twinamatsiko:Well, I mean, least for other states, and I think, well, one thing is that Arkansas district court is a district court. It has jurisdiction within only Arkansas, and other courts aren't bound by that decision. So meaning, let's say Texas or Vermont or New York passed that law, those states can take their chances if those laws are challenged, states can take their chances before those courts. And it remains to be seen if they'll be persuaded by the reasoning that the judge in the Arkansas case did. But also one thing to notice is that there are specifics in this case.
Andrew Twinamatsiko:For example, the judge in the Arkansas case looked at the legislative history of this case, of this statute, and how the statute was designed. And so those specifics in various aspects tanked this case before this judge. Other states might take a different approach that might not necessarily be similar in those specifics with other in their legislation. So states can go ahead and do that. Of course, like as I said, until the Supreme Court says that this is how it is, we're going to have different legislation go through the states and see what really the status of the law is.
Jeff Byers:Final question is, are there particular healthcare law cases that you're keeping track of that you just would like the listeners to know about or that you find interesting?
Andrew Twinamatsiko:Yeah, I mentioned litigation over the Medicare drug negotiation program and sphing of states taking action. There are different states enacting laws curbing prescription drug prices. One particular litigation that we're watching is litigation over Colorado's Prescription Drug Affordability Board. Amgen sued Colorado claiming different, that it violates different constitutional guarantees and so that litigation is also going on. So we're keeping an eye on different litigation both at the federal and state levels challenging what this government can do to keep the price of prescription drugs down.
Jeff Byers:Well Andrew Toinomaseko, thanks again for joining us today on Health Fairs This Week. If you, the listener, enjoyed this episode, please send it to, the parachutes pants wear in your life, and we will see you next week.