Ken Paxton. Credit: Texas attorney general's office
Texas Attorney General Ken Paxton has explained why he thinks Texas can apply two new pharmacy benefit manager laws to PBMs working with self-insured health plans.
The federal Employee Retirement Income Security Act of 1974 normally cancels out, or "preempts," state laws that affect self-insured benefit plans. Congress included the ERISA preemption provision in an effort to hold down benefit plan sponsors' costs, by keeping states from imposing a "patchwork" of conflicting, potentially expensive requirements on the plans.
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The Texas PBM laws should escape ERISA preemption because the laws do not refer to ERISA plans, dictate ERISA plan choices or add requirements to ERISA plan beneficiary status, and ERISA plans are not "essential to the laws' operation," Paxton writes in a new opinion addressed to Texas state Sen. Charles Schwertner, R-Georgetown.
Related: Self-funded employer plan group asks Texas to respect ERISA
"Therefore, a court would likely conclude that ERISA does not preempt either subchapter," Paxton says.
The laws Paxton backed are similar to Oklahoma's PBM laws. The Supreme Court is now considering Glen Mulready et al. v. Pharmaceutical Care Management Association, a case that pits Oklahoma Insurance Commissioner Glen Mulready against a trade group that represents the PBMs.
The players: Schwertner helped write the bills that created the Texas PBM laws. He asked for Paxton's opinion to rebut employer groups and PBM groups that object to Texas' efforts to regulate PBMs' interactions with self-insured employer plans.
Paxton is one of the most visible government officials in the United States. He has led many multistate fights against the Affordable Care Act and abortion access laws.
The backdrop: PBMs help health insurers, government health programs, self-insured employer plans and other "payers" buy prescription drugs and run prescription drug plans.
The PBMs' critics contend that the big PBMs use their size, captive pharmacies and secretive strategies to get deals that increase their own revenue and hurt outside pharmacies without doing enough to help the payers or the patients.
The PBMs contend that they do a good job of holding down prescription costs for employer plans. They say drug manufacturers and pharmacies are fighting PBMs mainly because the PBMs have succeeded at squeezing costs out of the prescription benefits system and hurting other players' profits.
PCMA and some employer groups, such as the ERISA Industry Committee, have argued that the courts should be especially tough on state efforts to regulate PBMs' relationships with self-insured plans, to avoid weakening ERISA preemption.
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Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
