A federal district court judge found that portions of a Tennessee law regulating pharmacy benefit managers (PBMs) conflict with the Employment Retirement Income Security Act (ERISA). Therefore, the court ruled that Tennessee is permanently barred from enforcing those portions of the law against McKee Foods Corporation or other benefits plans governed by ERISA.
The case is McKee Foods Corporation v. BFP Inc., Case Number 1:21-cv-00279, U.S. District Court for the Eastern District of Tennessee.
In May 2021, the Tennessee legislature passed Public Chapter (PC) 569, which set new rules for prescription drug programs. One of the provisions of the law bars PBMs or covered entities from interfering with a patient's right to choose a contracted provider or pharmacy. In April 2022, Tennessee passed PC 1070, which mirrored PC 569 and expanded the definition of "covered entities" to include ERISA-governed plans.
McKee Foods, a national snack food company based in Tennessee, accused Thrifty MedPlus Pharmacy, a/k/a BFP Inc., of misconduct and excluded it from its employee benefit plan's network. In response, BFP claimed that McKee Foods had illegally excluded it from the company's employee benefit plan's network based on the state law requiring PBMs to allow "any willing pharmacies" to participate in a network as a provider if they agree to the plan terms. BFP filed three administrative complaints with the Tennessee Department of Commerce and Insurance, which the state dismissed in fall 2021.
However, just before the state dismissed the third complaint, BFP McKee Foods filed suit against BFP to prevent it from rejoining the network, arguing that ERISA preempted the Tennessee PBM law.
The court initially dismissed McKee's claims, finding that the claims were moot since the state had already dismissed BFP's administrative complaints. McKee disagreed and appealed to the U.S. Court of Appeals for the Sixth Circuit, which revived the suit in March 2024, ruling that PC 1070 did not substantially and materially amend the relevant language of PC 569. Since PC 1070 did not affect the "any willing pharmacies" provisions in PC 569, and PC 1070 functioned similarly to PC 569, the court found that McKee still could suffer potential harm.
Upon the case's return to the district court, McKee amended its complaint to include the Tennessee Department of Commerce and Insurance commissioner as a defendant. McKee also broadened its claims to include the 2022 amendments in PC 1070.
The district court granted McKee's motion for summary judgment, finding that ERISA preempted the Tennessee state law based on the Sixth Circuit's opinion in Kentucky Association of Health Plans Inc. v. Nichols. The court also permanently enjoined the state from enforcing the portions of the law that interfered with a patient's right to choose a contracted provider or pharmacy.
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