PBM Preemption Arguments: How ERISA, Medicare Part D, and their New “Mandate” Smokescreens Keep States from Cleaning Up the PBM Mess

Every time a state passes a law to hold pharmacy benefit managers (PBMs) accountable — whether it’s banning spread pricing, requiring fair reimbursement, or protecting patient choice — you can bet the PBM lawyers are already in the wings, sharpening their favorite legal sword: preemption.

The two blades they use most often? ERISA and Medicare Part D.

But lately, the PBM lobby has added a new buzzword to the mix, and it’s showing up everywhere: Mandates. They’re using it like pepper spray — throw it in the air and hope lawmakers flinch before reading the fine print. It’s all part of their playbook: confuse the issue, cry “federal overreach,” and keep the money flowing.

Let’s examine what ERISA and Medicare Part D were actually designed for, how they’ve been twisted beyond recognition, and how this “mandate” messaging is being used to block even the most basic reforms that protect small businesses and patients.

ERISA — Employee Retirement Income Security Act of 1974

ERISA was passed to protect workers’ pensions and ensure benefits were handled responsibly. Tucked inside is a clause that preempts state laws that “relate to” self-funded employer plans. Sounds benign, right? But PBMs have turned that clause into a bludgeon. Most large employers self-fund their health insurance, which means PBMs claim any law that touches their operation — pricing, networks, transparency — somehow “relates to” plan design and is therefore invalid.

Translation: If your state tries to stop a PBM from reimbursing pharmacies below cost, the PBMs cry “ERISA!” and head straight to court. They’ve been doing it for years, and many courts — until recently — bought it.

Medicare Part D, the federal prescription drug program for seniors

PBMs love Medicare Part D because it’s federally controlled, opaque, and largely insulated from state regulation. Any time a state tries to pass a law affecting how Part D PBMs operate — like requiring pharmacy choice, banning DIR clawbacks, or protecting community access — PBMs cry foul: “That’s a federal program. States can’t touch it.” They argue that federal supremacy “preempts” state efforts, even when the law doesn’t interfere with Medicare coverage — just the abusive tactics of PBMs behind the scenes. States, indeed, have a regulatory role in ensuring these companies follow state insurance laws.

The New Kid On the Block (and PBMs’ latest rhetorical shield), Mandates

I can’t count how many times in the 2025 State legislative sessions a bill to require fair pharmacy reimbursement, ensure timely access to local pharmacies, or give patients a choice in where they fill their prescriptions; PBM lobbyists wailed about “government mandates.” They say it like it’s a dirty word. But let’s be clear: when a state tells a PBM, “You can’t pay a pharmacy $4 for a drug that costs $80,” that’s not a mandate. That’s basic regulation of abusive pricing. When a state requires PBMs to allow patients to choose a local pharmacy over a mail-order warehouse? That’s patient protection. Not a mandate — a right.

In classic form, PBMs are lumping all of it — pricing rules, access laws, transparency requirements — under the label of “pharmacy mandates” to scare off legislators who don’t want to look anti-business or pro-regulation. It’s messaging over substance, and it’s working in some rooms.

Rutledge v. PCMA (2020) shattered the “Preemption Armor” and changed everything. The U.S. Supreme Court ruled that states can regulate PBMs — even in the context of ERISA — because they’re third-party administrators, not the plans themselves.

That decision opened the door for states to take real action. But PBMs didn’t stop. They’re still running to court with ERISA and Medicare Part D arguments. Now they’re stacking “mandate” rhetoric on top to muddy the waters, hoping lawmakers won’t realize the Supreme Court already gave them a green light to regulate PBM behavior.

If PBMs succeed in weaponizing ERISA, Part D, and the “mandate” narrative, here’s what happens: States lose the ability to protect their own pharmacies, patients lose the right to choose where to fill their prescriptions, and PBMs keep reimbursing themselves more than they pay independents, unchecked.

Worst of all? Small businesses lose — while PBMs call it a win for “efficiency.”

Don’t Buy The Scare Tactics

Hey Lawmakers — here’s your free tip: Don’t fall for it. “Mandate” is just the new scare tactic to stop lawmakers from realizing how badly this system needs reform. “Mandates” are being used as a catch-all smear for laws that are actually about fairness, access, and transparency. Push back on preemption. ERISA and Part D and do not give PBMs a blank check. Target the behavior — not the benefit plan — and your law will stand.

Use the Rutledge ruling. The courts have spoken. States can regulate PBMs. It’s time to act like it.

PBMs want lawmakers confused, courts tied up, and the public misinformed. That’s why they’re clinging to ERISA, hiding behind Medicare Part D, and painting every reform as a scary “mandate.”

Don’t buy it.

This isn’t about burdensome regulation — it’s about saving local pharmacies, restoring patient choice, and stopping a handful of middlemen from controlling 90% of the prescription drug market while pretending to be the victim. This messaging and new buzzword is nothing more than a manipulation of the facts. Educate and communicate with your legislators and community. And that messaging should be clear: “It’s time to break through this racket and regulate the industry.”

Brandi Chane, PUTT Board Member