Arkansas PBM Reimbursement Rules: What the Preemption Decisions Actually Cover

Arkansas’s PBM reimbursement rules survived an ERISA preemption challenge: the Supreme Court held that the Employee Retirement Income Security Act did not displace the state’s pharmacy acquisition-cost protections. Its December 10, 2020 reimbursement decision addressed what the PBM pays the pharmacy. Rural and independent pharmacies risked losing money on prescriptions reimbursed below what the medicine cost them. The pharmacy’s purchase price, its reimbursement and the plan’s bill can all be different amounts for the same prescription.

The Pharmacy’s Cost and the Plan’s Bill

A pharmacy benefit manager sits between the prescription-drug plan and the pharmacy, with a separate payment arrangement on each side. The pharmacy checks the patient’s coverage and copayment through the PBM. The PBM pays the pharmacy for the prescription, less the patient’s copayment, and the plan pays the PBM.

Those payments follow different contract promises. The Supreme Court described pharmacy reimbursement based on maximum allowable cost lists, usually developed by the pharmacy benefit manager itself. What the plan pays the PBM comes from its own agreement. The Court explained that the plan’s payment often exceeds the PBM’s payment to the pharmacy, generating a profit for the PBM.

Meanwhile, the pharmacy has already bought the medicine. Its wholesaler invoice records that purchase. A reimbursement schedule sets what the pharmacy receives for dispensing it. Putting those documents beside each other exposes the practical question behind the Arkansas dispute: does the payment cover what this pharmacy paid for this drug?

For comparison, the federal NADAC acquisition-cost methodology uses invoice surveys from independent and chain retail community pharmacies. It excludes closed-door pharmacies such as specialty pharmacies primarily dispensing through mail. The benchmark’s purchasing population matters when someone uses it to describe a particular pharmacy’s costs.

What Arkansas Changed About Pharmacy Reimbursement

Arkansas adopted Act 900 in 2015 to address reimbursement that fell below pharmacies’ costs. The Supreme Court described the concern plainly: pharmacies, particularly rural and independent ones, risked losing money and closing. The law tied reimbursement to what the pharmacy paid its wholesaler. The Court’s account of the law identifies the mechanisms that made that protection work: updating prices, allowing pharmacies to challenge underpayment, correcting affected claims and allowing a pharmacy to decline a below-cost sale.

Maximum Allowable Cost Lists Have to Follow Rising Wholesale Prices

The law required pharmacy benefit managers to update their MAC lists promptly when wholesale drug prices increased. That connects the reimbursement schedule to the pharmacy’s acquisition cost. A price list can otherwise keep paying the old amount while the wholesaler charges the pharmacy more.

For an employee handling pricing, the list’s effective date and the purchase records explain the mismatch. The problem is the stale list, reaching beyond one underpaid claim.

Pharmacy Appeals Can Change the Payment

PBMs had to provide a process for pharmacies to challenge MAC reimbursement below acquisition cost. If the pharmacy could not have bought the drug for less from its usual wholesaler, the PBM had to increase reimbursement to cover that cost.

The law also required the PBM to let the pharmacy reverse and rebill each affected reimbursement claim. That connects the appeal result to the payment history. An appeal decision, the original claim and the corrected remittance show different stages of the same underpayment and correction.

This is why pharmacy audits and later payment adjustments matter alongside the price at the counter. The final remittance shows what the pharmacy ultimately received, including adjustments and recoupments. We connect that payment to the contract and the reason it changed.

A Pharmacy Could Decline a Below-Cost Sale

The law allowed a pharmacy to decline to dispense when reimbursement would fall below its acquisition cost. The Pharmaceutical Care Management Association argued that this interfered with plan benefits by allowing a pharmacy to refuse the prescription. The Court answered that responsibility lay first with the PBM offering payment below acquisition cost.

We see the problem with the industry’s framing. The PBM offers less than the medicine cost, and the pharmacy that refuses to lose money on the sale gets blamed for denying benefits.

Why ERISA Did Not Displace the Reimbursement Rule

The Supreme Court treated the Arkansas law as cost regulation. It raised the floor for what a PBM paid a pharmacy without requiring the plan to offer a particular benefit to a particular patient in a particular way. The industry association argued that basing reimbursement on acquisition cost dictated the plan’s pricing method. The Court had a shorter description:

ERISA protects the administration of employer benefit plans from conflicting state requirements. The Court distinguished rules that tell a plan what to cover or how to run its benefits from rules that make those benefits cost more. State-specific costs can change a plan’s purchasing decisions while leaving the plan free to choose its benefits.

Higher Costs Did Not Dictate Coverage

The Court accepted that PBMs might pass higher pharmacy payments on to their plan customers. That could make prescription benefits more expensive in Arkansas than elsewhere. The added cost did not, in the Court’s analysis, force a particular coverage design.

The Rule Applied Beyond ERISA Business

The law regulated pharmacy benefit managers whether or not their customers’ plans were covered by ERISA. The Court noted that PBMs also contract with Medicaid, Medicare, military and marketplace plans.

For an insider, the customer relationship therefore matters. The PBM’s pharmacy agreement and the sponsor’s benefit arrangement identify separate responsibilities. A PBM can serve an employer plan and a public program through different contracts, with different payment and reporting obligations.

Reprocessing a Claim Was Still Part of the Price Dispute

The industry association also objected to the appeal process and its administrative burden. A successful pharmacy appeal could require a plan to recalculate what it owed, depending on its contract with the PBM.

The Court compared that recalculation to what happens in other disputes over the cost of medical benefits. Updating the list, reviewing the appeal and correcting the payment gave the reimbursement floor practical effect.

Network Design and Pharmacy Ownership Raise Different Questions

Pharmacy network rules concern which pharmacies a plan includes and how its benefit arrangements direct patients. A reimbursement floor concerns the payment to the pharmacy. Later cases came out differently because the rules and the plans involved were different.

In a November 17, 2021 North Dakota decision, the Eighth Circuit rejected ERISA challenges to the provisions before it, while reaching mixed results under Medicare Part D’s separate rules. The same state law could therefore survive one federal challenge while particular provisions failed another.

In its August 15, 2023 Oklahoma decision, the Tenth Circuit held that specified network and benefit-design requirements conflicted with ERISA. Medicare Part D separately blocked the challenged pharmacy-admission requirement. The actual network obligation mattered, as did the federal program involved.

Arkansas’s pharmacy-ownership litigation addressed another subject. A July 28, 2025 preliminary injunction blocked the challenged ownership law based on likely conflicts with interstate-commerce protections and TRICARE. We examine the actual contract and payment obligation with you before attaching a reimbursement decision to your concern.

What the Payment Records Can Show

The useful comparison connects the contract, the acquisition cost, the claim and the final payment. Pharmacy purchasing staff may see the wholesaler invoice and acquisition credits. A network-contracting employee may know the reimbursement schedule. A claims or appeals employee may know why a challenged payment changed.

The sponsor agreement, sponsor invoice and year-end reconciliation show the other side of the transaction: what the customer paid the PBM. Keeping those records connected helps us trace who bore a pharmacy reimbursement adjustment and how the PBM accounted for it.

PBM and plan-sponsor insiders can also know what the payment report leaves out. Medicare Part D sponsors report payment data and reconcile payments with the federal government. For that business, we trace a pharmacy adjustment through the sponsor’s payment reports and reconciliation, connecting what changed inside the PBM to what the government was told.

The False Claims Act reaches knowingly false claims for government money and false records that matter to those claims. We build that connection with you. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Why the Payment Changed

If you know how a PBM chose a reimbursement rate, handled an appeal or reported an adjustment, speak with our whistleblower experts about the payment trail. We build your strongest PBM whistleblower case around what you know and how it affected government payments. We bring in PBM fraud whistleblower lawyers who understand pharmacy reimbursement and stay with you throughout the case.