the court act nine hundred of the arkansas code is preempted by the medicare modernization act because it acts with respect to part d plans in respects one it mandates a minimum of reimbursement for pharmacies if they are for interferes with part d rowley's access to negotiated prices to it authorizes pharmacies to refuse to dispense part d covered medications to party enroll leaves if therefore interferes with congress intent to ensure enroll these with convenient access to covered medications is their place in the record where i could find the precise provisions of act nine one hundred if you are challenging yes they are attached a specific task are you are you invoking some sort of global thing that if we can knock out one provision the holes that it goes in fact the statute is key to a key term called acquisition and under state law the provisions are interrelated can you give me or give me your authority that the work where you can identify a court identifies an overriding purpose and therefore the entire statutes unconstitutional in the supreme court of arkansas case u s term limits first as hill three sixteen our time in a federal case they were talking about preemption where they well the issue is whether under state law there would  you've got a problem there but cut back nine hundred has a key provision which is the pharmacy acquisition cost that provision is the key to the remaining provisions it's a definitional provision and the other provisions particularly in c four of the act provide that if a pharmacy receives a reimbursement from a pharmacy benefit manager on behalf of a plant then that is less then the acquisition costs then the pharmacy under act nine hundred has a number of rights it can appeal the  on a statute that was very similar important respects to act nine hundred and for the same reasons act nine hundred should be preempted under riseth just as the iowa the court rested its decision on multiple grounds on not the grounds how did it work here what happened after what what was knocked out and what was the the statu  and the statute involved there is similar to exactly like the one that we're dealing with it is similar to and similar in the following respects like act nine hundred the aisle code ha a provision which entitle and directed pharmacy benefit managers in terms of how they should handle appeals of challenges to the rate of reimbursement like act nine hundred you have a provision which directed is that the statute would be preempted as to a risk of plans and as to medicare part d plants and that's consistent with the arista judgment below that's how the court framed obligations that it puts upon the p b m to make certain disclosures to pharmacies and finally acknowledge hundreds like the i will code applies solely to pharmacy benefit managers and so for all those reasons we think so the statute can exist outside of plans that are governed by those two provisions as a matter of fact on this record the t otal number of plans in arkansas are covered by a risk is one point two six new one point two five million individuals in a total population of approximately three million are covered  plans and there's approximately another four hundred thousand arkansas residents that are covered by part d plans of p b s only cover approximately one point seven million of the residents so you below determined that the reason that that the act was not preempted was because the negotiated price standard which is at the heart of our argument has an exception and the court focused on that exception to determine that act nine hundred did not touch negotiated prices we suggest that the court was in error for three reasons in reaching that conclusion it focused solely on the appeal provision of act nine hundred and the exception that it relied upon which is within the regulatory definition of  of a negotiated price holds that three conditions must be true for the exception one that the price cannot be reasonably be determined at the point of sale the second that the price that the alternative pricing has any impact on efficiency it improves and fish and sea and therefore lowers the price the court focused on the appeal because it saw that is post sale but in fact all the elements of the appeal can be determined at the time of sale the acquisition price is the invoice price from the from the wholesaler so it's known to the pharmacist the reimbursement rate is communicated to the pharmacist at the point of sale and the only third element for the calculation is whether the pharmacist is getting the wholesaler's best price and again in most instances it is and that also would be no but in any event the court below only focused on the appeals and didn't focus on the other provisions of act nine hundred where there is clearly knowledge at the time of sale for example the decline to dispense provision allows the pharmacist to deny a drug the covered drug to an individual stands before them based on the information that the pharmacist has at the sale the court did not consider that additionally act nine hundred sixty four of the provision has a provision that allows for the preemptive challenging of pharmaceutical of the reimbursement prices again the court didn't consider that either and third provision that says that after an appeal if the pharmacy wins then the p b m bust disseminate that price broadly to others even though there hasn't been a challenge so didn't consider any of those at the bottom line as i understand some of your briefing the firmest the benefit manager can negotiate deals that are money losing propositions to a pharmacy and the pharmacist has to fulfill those deals and if state law says no that's that's a man thing or the choices regarding that and the way that the pricing mechanism that is used by p b s work is based on an average of acquisition cost so when it's based on an average that means some pharmacies receive are able to buy the pharmaceutical for less some for more and so it's a risk sharing provision which incentivizes the pharmacist to look for the best price and that kind of provision has been have been held a sustained by this court has preempted a similar state provision which interrupted the incentivizing of providers was upheld in the st mary's case yesterday so if the stance you provide is that maybe we don't have a preemption problem maybe we have a constitutional problem or other proportions in this thing lurks in here well we get it the di interferes with the negotiated price standard and also the pharmacy access to entered which is intended to provide enrollees with certainty when they go to a pharmacy and to make sure that the pharmacist lives up to the contractual obligations that they have of if they have made in their agreements with the p d ems turns that and makes the visit to the pharmacist a uncertain adventure not knowing whether they will be served at the point of sale similarly under a recent analysis we believe that these two provisions intrude upon the central features of plan of ministration because he dictated i'm still i still don't understand how this works and then go shoot a price that's in a contract between the pharmacy and the and the p p m by which the the state replaces that with the price set between the wholesaler and the and the pharmacy and says that the invoice price will serve the why does the truck the truck work focuses on the appeal that makes it makes it sound like the negotiated price under under the private contract still applies but if the pharmacy chooses to appeal answer that act nine hundred supplies the the controlling said follow their contracts like the rest of the world right are they now under act nine hundred till it's knocked out are they replacing their negotiated prices as a practical matter day by day with the pharmacies with the act nine hundred price cut the who the record reflects if that is happening that as an accommodation to what the law is they are complying with a lot but they kalina state argues that the cock of the congress has nothing do with pricing and so there's no problem here that's really not true because because act nine hundred is replacing a price not just on appeal but but at the at the top point of sale at the time of sale that's correct your honor and again the best example of that is the authorization of the to the pharmacist that they can decline to serve someone they are contractually obligated to tell her that but that's a different that's a it's not as overriding fact is as the goetia to price goes away i mean this is i grew up in what they ultimately paid pharmacists and they suggest based on where they are different countries but they are definitely different contracts your honor and what the record reflects here is that the world  competitive and so it's competitive at the level of obtaining clients that they can serve and so if a p p m offers a health plan a better rate for accordingly court the program preempt the act similarly the decision of the airport controls and therefore the judgment below should be affirmed as to a risk and reversed as two party johnson may it please the court states have traditionally been regulating health care in the dispensing of prescription drugs since time immemorial neither risk nor medicare part d changes this will prevent states from doing so your honour's the p c a may ask this court to find for a very broad far reaching preemption doctrine that would eliminate virtually every type of health care regulation in the states as if to a recess heart should not be relied upon by this court now wait a minute it's controlling authority counsel one don't when you say should that that telling me that you think it was wrong i'm sure you think it was wrong but it's controlling save your argument for the bank court or distinguish it one poor that's what i was moving to your honor it is distinguishable it was distinguished looked like at the reasoning across the board it was distinguishable your honor because act nine hundred does not include the express the in the prevention versus national part medical center this court made it plain that when an express reference exists it will find the law to be preempted but in this in this want the converse to apply converses don't heart judge loken the court continued on to a connection with analysis even though it need not do so and that's what rendered the connection with analysis of the decision which the court recognized when it acknowledged that it need not proceed that's what made that section of the decision dicta but even if your heart was wrong this panel as a subsequent panel under our rules is bound by  now respectfully no your honor this court is not bound by non controlling dicked when because it isn't simply non controlling in this situation when the court proceeded on to the connection with analysis the care her panel admitted honor the iowa law it at issue and gary hart included very comprehensive reporting requirements it required p b m to report the proprietary pricing method of methodologies to the iowa insurance commissioner this was very intrusive act nine hundred requires no such reporting obligations it also does not involve the calculating of benefit levels the gearhart panel assumes that what abe benefit plan does is calculate benefit levels but calculating benefit levels is actually a measure of pension administration not welfare planted ministration as the administration of a welfare plan is not what a p b m does at all and this is what goes that is to say the of the decision and your heart your honors it went very clearly through the analysis discussing the benefit level analysis and so it's in at the bottom line saying what and saying that what the i will measure was doing was requiring the or interfering with planet ministration risk specifically with respect to determining planned benefit levels and that simply is not something that is present in act one hundred it is quite different here on ars it is a garden variety cost regulation and in that event with a state garden variety cost regulation on health care the court should follow the supreme court's precedent on such claims such as travelers dillingham and blown up if this court argument what what's the significance of the of the part b issue part d your honor follows within medicare which in its capstone headings rick declares that the federal government would not supersede state laws that regulate health care now that's important here because when the part d program started the congress then declared that federal part the standard supersedes state laws and regulations with respect to a plan and this court must necessarily determine what with respect to means and this is the test of the sacred ask the practical significance nobody nobody in this case wants to talk about the practicalities and that's where we want to start discriminate on what basis what legal regime applies to it it simply requires that the p b m reimburse it fair rates and this applies to any manner of delivery mechanisms for example arkansas laws health related cash discount cards these cards aren't health insurance plans at all they're not a ressa they're not part b plans these are simply cards that one that a pharmacy distributes at the tail of their register at their pharmacy and they give the consumer immediate relief those cards on the go she added through p b s and the same act here would act with respect to those programs as well it simply doesn't discriminate and one of your arguments in favor of what you are saying is the demise of the numbers of rural pharmacies yes you're right and as i recall that was over a period do to over sixteen years of the period that you talked about ten years your hon ok the i think if you apply the migration of people off the farm because farm operations have been bigger and bigger and two people operate what eight or ten people did before the population in those areas has gone away and that may be the probably is the reason for them to go out of business rather than the result of this that the record simply reflects your honor that pharmacies have been closing and the pharmacies are in peril small businesses have been closing in cultural areas all over america and perhaps at a higher rate i was surprised it was that few actually what you're under it does represent ten percent of our consoles pharmacies there were four hundred fifty five beginning in two thousand and five and then fifty seven of them close during the following ten years this is an issue that affects the public health in arkansas to a significant degree because it prevents consumers from having access to the to the vital medications should their pharmacy close and they have to go somewhere else that if a pharmacy goes through the appeal process price act according to act nine hundred thirty always get they always win is that fair no your honor if the p b m can demonstrate to the pharmacy that there's an available source for that drug at the price that supports the reimbursement from the p b m then the pharmacy loses the pharmacy should have bought it at that price i thought i thought it was the pharmacists wholesalers prize drove the drug drives the appeal under only if the p p m cannot demonstrate that there isn't a source for that drug that is available you see as a factual matter what was happening was pharmacies were going and getting their inventories ahead of time and then being reimbursed at a lower amount with the ghost so what the pharmacies needed was some objective criteria and on which to base that appeal and this was the only way to do it why didn't they go to congress and amend the federal legislation you have they wouldn't have to worry about them would they as the state of the state wouldn't have to be in the act with them that's right your honor but congress was silent here on this particular point that with respect to medicare part d congress did not regulate state drug prices that is to say that it did not prohibit the state from doing so but it authorized the agency to set up the m h c negotiated price it can't do it which i think is is not logical to me your honor the prices negotiated between pharmacies and p b s are not set prices they are fluid and so when a design by regulate the regulatory federal regulatory design and arkansas steps in and says no you can't have a negotiated price system you will function by our prices your honor congress is to say that that isn't in conflict with with the federal regina just doesn't compute to me your honor the congress has declared that the the federal government shall not that the state regulation must impose a duty on a part b plan as as a point number one and number two that that duty overlaps with the part b standard here with respect to this discussion judge loken there is no overlap between act nine hundred and that federal standard negotiated prices because negotiators prices only guarantees access to some sort of a price that's not a cash price it guarantees them to the amount that the pharmacy would otherwise received from the p b m on the transaction so when the sr hits the benefit cap they don't have to pay the full cash when i federal and trust law is all about but your honor to prevent anyone from dictating the price so that the marketplace provides the consumer the best price but your honor the federal government doesn't dictate the exact price and all that's right it's just like dislike that don't fix prices and trust laws the government is saying no governments neither statute of preemption issues are never that cut and dried but the medicare preemption issue your honor is quite specific and it looks at that federal standard to determine whether or not there is some overlap i thought it was with respect to it is with respect to your  respect to couldn't be broader your honor with respect to means when it when it refers to a standard it means it has to act with respect to something that is a confined standard and that confined standard here we have a marketplace standard and  being replaced by a state dictated the end that strikes me as with respect to respectfully no your honor the the federal part the standard only supersedes state laws with respect to a part of the plan and what that means is that there has to be some standard that actually it acts within the confines of here less there be any confusion that c m s is final rule determining in two thousand and nine defining what negotiated prices means it stated specifically in the code of federal regulation that the definition of negotiated prices would not interfere with the goshi ation between part b sponsors p b s and pharmacies it didn't limit the states from doing so and even c m s itself has remained free from interfering in that negotiation for that reason states exercised this space because it is a traditionally regulated area for states the dispensing of drugs and the regulation of health care on the pharmacy network standard the same the same analysis applies there is simply no overlap between part d and the declined to dispense provision of act nine hundred honor there is a difference between the function of a p b m and a health plan and that's something that even in the heart decision what the court did on here are talked about in the third party administrators of the pharmacy benefits aspect of health plan  right your honor referred to them as planned administrators and what that allowed the court to do was then proceed on to a connection with analysis simply by finding the expressed reference existed at the top of page eleven when the court acknowledged that this argument is foreclosed by our discussion above the court determined that p b s and plans were the same because the law in iowa regulating p b s included a reference to a ressa and by doing so it proceeded to connect them words should be interpreted for exactly what they mean when it put the requirement on a part d plan sponsor for network standard then that's exactly what congress intended here the district court rightly found that declining a prescription doesn't remove the pharmacy from the network either under the current regime if you have a sponsor that delegates everything administrative and benefit dispensing to third parties there's there's no way that not under the express intention of congress your honor it's in the black and white language of the statute and that's why it only applies the part the sponsors state should have the ability to regulate this largely unregulated area of pharmacy benefits management but i can see they can regulate sponsors and so you're but you're saying that that because of your notion of what expressive language means they can regulate everybody everybody at auburn but anybody that the sponsor delegates through its responsibilities own or the state does not concede that they can't regulate sponsors either known or under part d there might be some situations where there is no overlap that is true but under arrest whenever we're dealing with a cost regulation  this under part d there are situations so long as there is no overlap between the standards that is true but your honour's this largely unregulated area has found pharmacy benefits management has found itself free from general jurisdiction of the courts by claiming that they are prevented from common law claims and whenever states try to regulate them they claim preemption additionally in their contracts with their health health duties and what that means is that a person who sues under a wrestler would likewise not be able to bring a claim against a pharmacy benefit manager being free from regulation free from suit p p m's have been able to reimburse unfairly pharmacies for years and it is leading to this crisis in arkansas as pharmacy health care delivery system in arkansas dr robert guy or one of the clerics in this case he is a pharmacy in a community of six thousand people in mena arkansas in three months the last one thousand eight hundred twenty nine dollars to negative reimbursements that's just the amount under under for the under reimbursement it does not include what it takes for him to pay as light bill his water bill overhead and everything else but less we think that it only affects the small pharmacy even wal mart in a second quarter earnings report in two thousand and fifteen acknowledged that the three loss leaders for wal mart were under reimbursement by pharmacy benefit managers inventory shrinkage and unexplained declines in gross margin they specifically identified that as a major problem your honour's to preempt in this case is to intrude on traditional states rights to regulate health care and pharmaceutical dispensing and i present to you this idea this is actually a quite simple page despite all of the code of federal regulation all of the medicare laws that we've had to look at that where a state measure acts independently of health plans and only upon servicing entities there is no preemption of state based garden variety regulation thank your honour's i ask you to find in favor of the district court's