## Facts

- Pharmaceutical Care Management Association (PCMA), a trade association for pharmacy benefit managers (PBMs), challenged a Maine statute regulating PBMs’ conduct toward client health plans.
- PBMs function as intermediaries between drug manufacturers and pharmacies on one side and health benefit providers on the other, and may receive rebates and other payments from manufacturers.
- Maine’s Unfair Prescription Drug Practices Act (UPDPA) required PBMs, among other things, to:
  - Act as fiduciaries for covered health plans.
  - Disclose certain financial arrangements (including rebates, discounts, and other payments) and pass through benefits as required.
  - Disclose specified information about drug substitutions and financial incentives to clients and, in some circumstances, to prescribing physicians.
- PCMA sued to enjoin enforcement, asserting federal preemption and multiple constitutional violations.
- The parties filed cross-motions for summary judgment; the district court entered summary judgment for the Attorney General and upheld the statute.
- PCMA appealed to the First Circuit.

## Issues

1. Whether the UPDPA is preempted by ERISA because it impermissibly “relates to” ERISA-governed employee benefit plans.
2. Whether the UPDPA violates due process under rational-basis review.
3. Whether the UPDPA violates the dormant Commerce Clause by regulating extraterritorial conduct or imposing undue burdens on interstate commerce.
4. Whether PCMA has associational standing to sue on behalf of its PBM members.
5. Whether mandated disclosure of PBM financial arrangements effects an uncompensated taking of property.
6. Whether the UPDPA’s disclosure requirements constitute unconstitutional compelled speech under the First Amendment.

## Decision

- The First Circuit affirmed summary judgment for the Attorney General on all claims.
- ERISA did not preempt the UPDPA because the law regulated PBMs’ business practices as service providers and did not dictate ERISA plan structure or core plan administration.
- The UPDPA satisfied due process because Maine had a rational basis to address conflicts of interest and protect health plans and beneficiaries through fiduciary duties and transparency requirements.
- The UPDPA did not violate the dormant Commerce Clause because it regulated PBMs operating with a sufficient in-state nexus and did not control commerce wholly outside Maine; any incidental interstate burden was justified by legitimate local interests.
- PCMA had associational standing because member PBMs could sue individually, the claims were germane to the association’s purpose, and the requested relief did not require individual member participation.
- The statute did not effect a taking because it did not appropriate PBMs’ property for public use; it imposed disclosure and conduct obligations as conditions of doing business in a regulated market.
- The disclosure requirements did not violate the First Amendment because they compelled factual, non-ideological commercial information reasonably related to regulating economic conduct and preventing deception.

## Legal Principles

- ERISA preemption is not triggered merely because a state law affects entities that contract with ERISA plans; regulation of third-party service providers may avoid preemption when it does not mandate plan benefits, administration, or relationships among core ERISA entities.
- Economic and social welfare regulation generally satisfies due process if supported by any conceivable rational basis related to legitimate state interests.
- A state law does not violate the dormant Commerce Clause where it applies to in-state market participation, does not regulate wholly out-of-state transactions, and any incidental interstate burdens are not clearly excessive relative to legitimate local benefits.
- An association may sue on behalf of its members when members would have standing, the interests are germane, and neither the claim nor the relief requires individual member participation.
- Mandatory disclosures in a regulated commercial setting typically do not constitute a compensable taking when the government does not appropriate property but regulates the terms of market participation.
- Compelled disclosure of factual commercial information, tied to regulation of economic activity and consumer protection, generally does not violate the First Amendment absent ideological compulsion or unjustified burdens.

## Conclusion

The First Circuit upheld Maine’s PBM fiduciary and disclosure regime, holding that it was not preempted by ERISA and did not violate due process, the dormant Commerce Clause, the Takings Clause, or the First Amendment, while also recognizing PCMA’s associational standing to bring the suit.


Pharmaceutical Care Management Ass’n v. Rowe, 429 F.3d 294 (1st Cir. 2005)