This decision is an important ruling that strengthens ERISA preemption and will be a significant factor in whether future state PBM laws will apply to ERISA-governed group health plans.

Background on state PBM laws and ERISA preemption

All states have passed laws to regulate PBMs. Generally, ERISA preempts state laws that relate to ERISA plans. Whether ERISA preempts all or part of these state laws has been a key issue for sponsors of group health plans.

In 2019, Oklahoma passed the Oklahoma Patient’s Right to Pharmacy Choice Act (the Act), that took several steps to regulate PBM behavior. The PBM industry challenged the Act. In 2023, in Pharmaceutical Care Management Association (PCMA) v. Mulready, the 10^th Circuit Court of Appeals held that ERISA and Medicare preempted the state law.

The 10^th Circuit found the Oklahoma law to be preempted by ERISA because its provisions regulated central matters of plan administration and interfered with nationally uniform plan administration. The court also held that Medicare Part D preempted portions of the Act that were already regulated by the Part D prescription drug program.

The provisions held to be preempted under ERISA were:

• Network restrictions that mandated access to brick-and-mortar pharmacies based on where individuals reside, which could be different than the pharmacy networks applicable for a group health plan’s participants
• Prohibitions on restricting an individual’s choice of in-network provider (e.g., retail or mail order) and promotion of network pharmacies by using cost-sharing and copayment reductions — prohibitions that were generally interpreted to prohibit mail-order pharmacy benefit incentives
• Any-willing-provider provisions that require plans to accept any provider into a pharmacy network who meets network standards
• Prohibitions on basing a pharmacy license on the probation status of a licensed pharmacist

In February 2024, Oklahoma filed a petition for a writ of certiorari requesting that the U.S. Supreme Court review the 10^th Circuit decision. On May 27, 2025, the U.S. Solicitor General filed a brief arguing that the petition should be denied. On June 30, 2025, the Supreme Court dismissed Oklahoma’s petition, thus ending any review of the decision and allowing the 10^th Circuit decision to stand.

The 10^th Circuit opinion is binding on states in that circuit: Colorado, Kansas, New Mexico, Oklahoma, Utah, Wyoming and portions of Montana and Idaho. Although the appellate court’s decision is not binding in other circuits, it and the fact that the Supreme Court refused to review it could be persuasive in other jurisdictions.

Implications for plan sponsors of the Supreme Court’s decision not to take the Mulready case

State efforts to regulate PBMs have taken a variety of approaches. Based on the Mulready decision, it appears attempts to force plans to eliminate incentives for mail-order programs, accept any pharmacies into their networks and abide by state regulations to determine network adequacy would not survive an ERISA preemption challenge. This would likely apply to any state regulations that interfere with plan operations or administration.

However, other state laws affecting PBMs could survive preemption. In Rutledge v. PCMA, the PBM industry challenged an Arkansas law that required that the reimbursement rates that PBMs pay to pharmacies be tied to the pharmacy’s acquisition costs. In December 2020, the U.S. Supreme Court held that the Arkansas law was merely a cost regulation, and did not impact plan administration. Consequently, the Arkansas law was not preempted by ERISA. Although the Arkansas law had the effect of changing the costs plans paid for prescription drugs, it did not affect their benefits or plan operations.

Based on the two court decisions, it appears that while states may be able to enact legislation that regulates payment or compensation for prescription drugs, they may not require that ERISA plans adopt certain benefit designs, network rules, administration or plan operations requirements.

However, there may be some state law PBM regulations that are in a gray area. For example, one state law has prohibited PBMs from owning a pharmacy. Another would prohibit spread pricing agreements. While the Supreme Court has provided an answer in the Oklahoma case, it is likely that there will continue to be litigation addressing the issue of ERISA preemption and how states can regulate PBMs.

Plan sponsors should continue to monitor both state PBM laws and federal efforts to enact PBM regulation as this area of law continues to develop. Plan sponsors should consult with their legal counsel on whether and how these decisions apply to their plan.