What Happened: On August 26, 2026, the Seventh Circuit Court affirmed in Central States SE & SW Areas Health & Welfare Fund v. McClain that the Employee Retirement Income Security Act of 1974 (ERISA) does not preempt an Arkansas insurance regulation designed to regulate how pharmacy benefit managers (PBMs) compensate pharmacies.
Why It Matters: This decision is the latest in a growing body of case law determining which state laws and regulations for PBMs are preempted by federal law.
The Details: The following is a brief background and summary of the Seventh Circuit’s reasoning in Central States.
Background
In 2015, Arkansas passed “Arkansas Act 900,” which required PBMs to reimburse pharmacies at a price equal to or higher than what the pharmacy paid the wholesaler. In Rutledge v. PCMA, the US Supreme Court held that Arkansas Act 900 is not ERISA preempted. Building on that law, in September 2024, the Arkansas Legislative Council passed a temporary emergency rule to ensure that PBM reimbursements for pharmacy services were “fair and reasonable” (“Rule 128”). Rule 128 was fully adopted in December 2024…