United States Court of Appeals

For the Eighth Circuit

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No. 15-3292

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Pharmaceutical Care Management Association

lllllllllllllllllllll Plaintiff - Appellant

v.

Nick Gerhart, In his official capacity as Insurance Commissioner of the State of

Iowa; Thomas J. Miller, In his official capacity as Attorney General of the State of

Iowa

lllllllllllllllllllll Defendants - Appellees

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National Community Pharmacists Association; Iowa Pharmacy Association

lllllllllllllllllllll Amici on Behalf of Appellees

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Appeal from United States District Court 

for the Southern District of Iowa - Des Moines

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 Submitted: June 14, 2016

 Filed: January 11, 2017

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Before MURPHY and SHEPHERD, Circuit Judges, and PERRY , District Judge. 1

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PERRY, District Judge.

This case involves the question of whether the Employee Retirement Income

SecurityAct of 1974 (ERISA), 29 U.S.C. §§ 1001, etseq., expressly preempts section

510B.8 of the Iowa Code. The district court determined that it did not and dismissed

Pharmaceutical Care Management Association’s (PCMA’s) complaint seeking a

declaration of preemption. We reverse and remand with direction that judgment be

entered for PCMA.

Iowa Code § 510B.8 regulates how pharmacy benefits managers (PBMs)

establish generic drug pricing, and requires that certain disclosures on their drug

pricing methodology be made to their network pharmacies as well as to Iowa’s

insurance commissioner. Shortly after the statute went into effect, PCMA brought

this action against Iowa’s insurance commissioner and its attorney general

(collectively, “the State”), seeking a declaration that the statute placesrestrictions and

requirements on PBMs that impermissibly reference or are connected with ERISA

plans, thus making the statute expressly preempted by ERISA. PCMA further sought

a declaration that the statute violates the dormant Commerce Clause of the United

States Constitution.

The district court granted the State’s motions to dismiss these claims under

Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, and PCMA

The HonorableCatherine D. Perry, UnitedStatesDistrict Judge for the Eastern 1

District of Missouri, sitting by designation.

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appeals. We review de novo the district court’s grant of a Rule 12(b)(6) motion to

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dismiss, accepting the facts alleged in the complaint as true. Gorog v. Best Buy Co.,

760 F.3d 787, 792 (8th Cir. 2014); Hafley v. Lohman, 90 F.3d 264, 266 (8th Cir.

1996). We also review de novo the question of whether ERISA preempts a State law,

given that it is a matter of federal law involving statutory interpretation. See Shea v.

Esensten, 208 F.3d 712, 717 (8th Cir. 2000).

I. 

PCMA is a national trade association representing PBMs. PBMs are thirdparty plan administrators who manage and administer prescription drug benefits on

behalf of health plans subject to ERISA, as well as for non-ERISA plans.

The retail pharmacies in a PBM’s network fill prescriptions of health plan

participants with drugs the pharmacies purchase from wholesalers or manufacturers. 

When a plan participant fills a prescription at a pharmacy, the pharmacy checks with

the PBM to determine coverage and obtain copayment information. After the

pharmacy fillsthe prescription, the PBM reimbursesthe pharmacy at a contractuallyagreed rate, minus the copay collected by the pharmacy from the plan participant. 

The PBM then separately bills the health plan at the rate negotiated between the PBM

and the health plan. 

Contracts between PBMs and their network pharmacies contain agreements

about the maximum amount that the PBM will reimburse a pharmacy for generic

drugs. To determine this maximum amount, PBMs use what is called a “maximum

allowable cost” (MAC) methodology. Each PBM uses its own methodology and

The district court also dismissed PCMA’s due process and conflict preemption 2

claims, as well as its Takings claims under the United States and Iowa constitutions,

and the clerk entered judgment on the case in favor of the State. PCMA does not

appeal the district court’s dismissal of these other claims.

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develops its own price list for generic drugs. PCMA claims that the reimbursement

limits established by the PBMs through their MAC price lists motivate pharmacies

to seek and purchase generic drugs at the lowest available prices, which ultimately

results in a cost-effective benefit to health plans. 

In early 2014, the Iowa General Assembly passed an “Act Relating to the

Regulation of Pharmacy Benefits Managers.” The Act wassigned into law on March

14, 2014, and became effective July 1, 2014. The Act added a new section to Chapter

510B of the Iowa Code, namely section 510B.8, which provides as follows:

1. The commissioner may require a pharmacy benefits manager to

submit information to the commissioner related to the pharmacy benefits

manager’s pricing methodology for maximum reimbursement amount. 

2. For purposes of the disclosure of pricing methodology, maximum

reimbursement amounts shall be implemented as follows: 

a. Established for multiple-source prescription drugs prescribed after

the expiration of any generic exclusivity period. 

b. Established for any prescription drug with at least two or more Arated therapeuticallyequivalent,multiple-source prescription drugs with

a significant cost difference. 

c. Determined using comparable prescription drug prices obtained

from multiple nationally recognized comprehensive data sources

including wholesalers, prescription drug file vendors, and

pharmaceutical manufacturers for prescription drugs that are nationally

available and available for purchase locally by multiple pharmacies in

the state.

3. For those prescription drugs to which maximum reimbursement

amount pricing applies, a pharmacy benefits manager shall include in a

contract with a pharmacy information regarding which of the national

compendia is used to obtain pricing data used in the calculation of the

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maximum reimbursement amount pricing and shall provide a process to

allow a pharmacy to comment on, contest, or appeal the maximum

reimbursement amount rates or maximum reimbursement amount list. 

The right to comment on, contest, or appeal the maximum

reimbursement amount rates or maximum reimbursement amount list

shall be limited in duration and allow for retroactive payment in the

event that it is determined that maximumreimbursement amount pricing

has been applied incorrectly.

Iowa Code § 510B.8. In short, Subsection 1 requires PBMs to provide information

regarding their pricing methodologies to Iowa’s insurance commissioner at the

commissioner’s request; Subsection 2 limits the types of drugs to which a PBM can

apply MAC pricing and limits the sources from which a PBM may obtain pricing

information; and Subsection 3 requires PBMs to provide information regarding their

pricing methodologies in their contracts with pharmacies and to provide procedures

by which pharmacies can comment on and appeal MAC price lists or rates, with

potential retroactive payment to pharmacies for incorrect pricing.

Two months after § 510B.8 went into effect, appellant PCMA brought this

declaratory judgment action seeking, inter alia, a declaration that the statute is

expressly preempted by ERISA. The State moved to dismiss PCMA’s claim of

express preemption under Fed. R. Civ. P. 12(b)(6), arguing that the claim failed to

state a claim upon which relief can be granted. The district court granted the motion

after concluding that, while the statute “does regulate an area of ERISA concern by

regulating PBMs” in the manner prescribed, it does not unduly restrict the

administration of any ERISA plan, require a particular price or pricing methodology

for drugs, or mandate the provision of any benefits. Because PBMs continue to have

“sufficient choice and control,” the district court found the statute not to have an

impermissible connection with ERISA. 

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The district court also found the statute not to impermissibly reference ERISA,

concluding that the existence of ERISA plans is not essential to the law’s operation

and, further, that the statute does not act “immediately and exclusively” on ERISA

plans. The district court further found that, while the definitions portion of the statute

makes a specific and express reference to ERISA, the reference is too far removed

from § 510B.8 to find that § 510B.8 itself references ERISA. 

III.

ERISA preempts “any and all State laws insofar as they may now or hereafter

relate to any employee benefit plan[.]” 29 U.S.C. § 1144(a). A State law “‘relatesto’

an ERISA plan and is preempted if it has ‘a connection with or a reference to such a

plan.’” Express Scripts, Inc. v. Wenzel, 262 F.3d 829, 833 (8th Cir. 2001) (quoting

New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,

514 U.S. 645, 656 (1995)). A State law need not act directly on an ERISA plan in

order to be preempted. Id. (citing Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,

139 (1990)). Where a State law indirectly forces a plan administrator to make a

particular decision or take a particular action, the law may be held to “relate to”

employee benefit plans. Id. (citing Metro. Life Ins. Co. v. Massachusetts, 471 U.S.

724, 739 (1985)). 

A State law has an impermissible “reference to” ERISA plans where it “acts

immediately and exclusively upon ERISA plans . . . or where the existence of ERISA

plans is essential to the law’s operation[.]” Gobeille v. Liberty Mut. Ins. Co., 136 S.

Ct. 936, 943 (2016) (internal citation and quotation marks omitted). A State law has

an impermissible “connection with” ERISA plans where it “governs . . . a central

matter of plan administration” or “interferes with nationally uniform plan

administration.” Id. (internal citation and quotation marks omitted). ERISA

expressly preempts the law if it either refers to or has an impermissible connection

with ERISA. Section 510B.8 does both. 

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A.

A State law has a prohibited “reference to” ERISA or ERISA plans when that

law (1) imposes requirements by reference to ERISA-covered programs, (2)

specifically exempts ERISA plans from an otherwise generally applicable statute, or

(3) premises a cause of action on the existence of an ERISA plan. Prudential Ins. Co.

of Am. v. Nat’l Park Med. Ctr., Inc., 154 F.3d 812, 822 (8th Cir. 1998) (quoting

California Div. of Labor Standards Enf. v. Dillingham Constr., N.A., Inc., 519 U.S.

316, 324-25 (1997)).

The parties do not dispute that § 510B.8 regulates the manner by which PBMs

manage and administer prescription drug benefits by overseeing their MAC pricing

methodologies, limiting the drugs subject to MAC pricing, and dictating the manner

by which PBMs contract with pharmacies regarding MAC pricing. Although §

510B.8 does not appear on its face to impermissibly refer to ERISA when read alone,

we may not look only at an isolated provision of a statute to construe its meaning. 

Gustafson v. Alloyd Co., 513 U.S. 561, 568 (1995) (citing Philbrook v. Glodgett, 421

U.S. 707, 713 (1975); Kokoszka v. Belford, 417 U.S. 642, 650 (1974)). Instead, we

must construe a statute “‘so that effect is given to all of its provisions, so that no part

will be inoperative or superfluous, void or insignificant . . . .’” Corley v. United

States, 556 U.S. 303, 314 (2009) (quoting Hibbs v. Winn, 542 U.S. 88, 201 (2004)). 

Terms should be construed to have consistent meaning throughout a statute. 

Gustafson, 513 U.S. at 568. 

Iowa Code § 510B.1 contains definitionsfor terms “as used in” Chapter 510B,

which necessarily includes § 510B.8. A “pharmacy benefits manager” is defined as

“a person who performs pharmacy benefits management services,” § 510B.1(9),

which, by definition, is “the administration or management of prescription drug

benefits provided by a covered entity under the terms and conditions of the contract

between the pharmacy benefits manager and the covered entity.” Iowa Code §

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510B.1(8). A “pharmacy benefits manager” includes persons “acting on behalf of a

pharmacy benefits manager in a contractual or employment relationship in the

performance of pharmacy benefits management services for a covered entity.” Iowa

Code § 510B.1(9). “Covered entity” is defined as:

a nonprofit hospital or medical services corporation, health insurer,

health benefit plan, or health maintenance organization; a health

program administered by a department or the state in the capacity of

provider of health coverage; or an employer, labor union, or other group

of persons organized in the state that provides health coverage. 

Iowa Code § 510B.1(2). 

Section 510B.1 also contains specific exclusions from what is considered a

“covered entity” for purposes of Chapter 510B: 

“Covered entity” does not include a self-funded health coverage plan

that is exempt from state regulation pursuant to the federal Employee

Retirement Income Security Act of 1974 (ERISA), as codified at 29

U.S.C. § 1001, et seq.; a plan issued for health coverage for federal

employees; or a health plan that provides coverage only for accidental

injury, specified disease, hospital indemnity, Medical supplemental,

disability income, or long-term care, or other limited benefit health

insurance policy or contract.

Iowa Code § 510B.1(2). Accordingly, when Chapter 510B’s defined terms are

considered in toto, it is apparent that § 510B.8 applies to only those PBMs who

administer or manage benefits provided by a “covered entity,” which, by definition,

specifically excludes certain plans under ERISA. Because by its express terms, the

statute cannot reach PBMs who manage benefits for certain exempted ERISA plans,

§ 510B.8 specifically exempts certain ERISA plans from its otherwise general

application. If the effect of a State law is to exclude some employee benefits plans

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from its coverage, that law has a prohibited reference to ERISA and is preempted

under 29 U.S.C. § 1144(a). Prudential Ins. Co. of Am., 154 F.3d at 823-24 (quoting

Ingersoll-Rand, 498 U.S. at 140).

In addition to this express reference to ERISA, the Iowa law also makes

implicit reference to ERISA through regulation of PBMs who administer benefits for

“covered entities,” which, by definition, include health benefit plans and employers,

labor unions, or other groups “that provide[] health coverage.” These entities are

necessarily subject to ERISA regulation. Prudential Ins. Co. of Am., 154 F.3d at 824-

25; 29 U.S.C. §§ 1002(1), 1003(a). Because benefits affected by § 510B.8 are

provided by ERISA-covered programs,the requirements imposed for the management

and administration of these benefits necessarily affects ERISA plans. “Thus, it

cannot be said that the [Iowa law] ‘functions irrespective of . . . the existence of an

ERISA plan.’” Prudential Ins. Co. of Am., 154 F.3d at 825 (quoting Dillingham, 519

U.S. at 328). 

Section 510B.8 applies to only those PBMs who administer prescription drug

benefits for plans subject to ERISA regulation, and specifically exempts certain

ERISA plans from its application. Because of thisimpermissible reference to ERISA

or ERISA plans, Iowa Code § 510B.8 is preempted under 29 U.S.C. § 1144(a). 

B.

Where a State law is preempted because it has a prohibited “reference to”

ERISA or ERISA plans, we need not reach the question of whether it is also

preempted under the “connection with” prong of the analysis. Prudential Ins. Co. of

Am., 154 F.3d at 825. Nevertheless, our review of § 510B.8 shows it to have a

prohibited connection with ERISA. 

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A State law “has an impermissible ‘connection with’ ERISA plans” when it

“‘governs . . . a central matter of plan administration’ or ‘interferes with nationally

uniform plan administration.” Gobeille, 136 S. Ct. at 943 (quoting Egelhoff v.

Egelhoff, 532 U.S. 141, 148 (2001)) (omission in Gobeille). Obligations undertaken

with plan administration include “determining the eligibility of claimants, calculating

benefit levels, making disbursements, monitoring the availability of funds for benefit

payments, and keeping appropriate records in order to comply with applicable

reporting requirements.” Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 9

(1987). 

The most efficient way to meet these responsibilities is to establish a

uniform administrative scheme, which provides a set of standard

procedures to guide processing of claims and disbursement of benefits. 

Such a systemis difficult to achieve, however, if a benefit plan issubject

to differing regulatory requirements of differing States. A plan would

be required to keep certain records in some States but not in others; to

make certain benefits available in some States but not in others; to

process claims in a certain way in some States but not in others; and to

comply with certain fiduciary standards in some States but not in others.

Id. Where a State’s law creates the prospect that a plan’s administrative scheme will

be subject to conflicting requirements, ERISA’s preemption provision is enforced. 

Id. at 10. “Preemption ensures that the administrative practices of a benefit plan will

be governed by only a single set of regulations.” Id. at 11. These oversight systems

and other standard procedures “are intended to be uniform.” Gobeille, 136 S. Ct. at

944 (citing Travelers, 514 U.S. at 656).

PCMA argues that, contrary to ERISA’s intent to maintain a uniform scheme

of plan administration, all facets of § 510B.8 interfere with the structure and

administration of ERISA plans in Iowa and require administrative processes unique

to that State. The State and its amici argue that the statute regulates interactions

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between PBMs and pharmacies only and does not involve ERISA plans or their

beneficiaries. This argument is foreclosed by our discussion above. They further

argue that the mere possibility that the statute may indirectly increase costs to health

plans is an insufficient basis for preemption. Economic cost to a plan, however, is not

the only measure of a law’s connection with ERISA. See Gobeille, 136 S. Ct. at 945. 

“[R]eporting, disclosure, and recordkeeping are central to, and an essential part of,

the uniform system of plan administration contemplated by ERISA. . . . [I]n fact, . .

. these requirements are integral aspects of ERISA.” Id. Direct regulation of these

fundamental aspects of ERISA necessitates preemption. Id. at 946.

Here, Iowa’s law compels PBMs as third-party administrators to report to the

commissioner and to network pharmacies their methodology for establishing

reimbursement amounts paid to pharmacies for providing certain generic drugs to

plan participants. Requiring reports and disclosures to a State official and to private

enterprise about the economic bases for a plan’s provision of prescription drug

benefits in that State intrudes upon a matter central to plan administration and

interferes with nationally uniform plan administration. See Gobeille, 136 S. Ct. at

945. Iowa’s law also restricts the class of drugs to which these third-party

administrators mayestablish maximumreimbursement amounts and limits the sources

from which they may obtain pricing information, implicating another area central to

plan administration – that is, the calculation of prescription benefit levels and making

disbursements for these benefits. See Coyne, 482 U.S. at 9. Finally, the law requires

these third-party administratorsto include in their contracts with network pharmacies

provisions that allow pharmacies to contest and appeal reimbursement rates and to

“allow for retroactive payment in the event that it is determined” that the

reimbursement rates were applied incorrectly. Not only does this provision restrict

an administrator’s control in the calculation of drug benefits, it also removes their

ability to conclusively determine final drug benefit payments and monitor funds. In

addition, while Iowa’s insurance commissioner presumably has the duty to determine

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whether reimbursement rates are applied “incorrectly,” see Iowa Code § 510B.3(1),3

there is nothing in the statute identifying the yardstick against which any measure of

“correctness” is made – further exacerbating the administrator’s lack of control over

the calculation and disbursement of benefits. 

ERISA’s central design “isto provide a single uniform nationalscheme for the

administration of ERISA plans without interference from the laws of the several

States[.]” Gobeille, 136 S. Ct. at 947. Section 510B.8 imposes mandates and

restrictions on a PBM’s relationship with Iowa and its pharmacies that run counter

to ERISA’s intent of making plan oversight and procedures uniform. “Requiring

ERISA administrators to master the relevant laws of 50 States and to contend with

litigation would undermine the congressional goal of minimizing the administrative

and financial burden[s] on plan administrators – burdens ultimately borne by the

beneficiaries.” Gobeille, 136 S. Ct. at 944 (internal quotation marks and citations

omitted) (alteration in Gobeille). 

Because the duties and restrictionsimposed by § 510B.8 on PBMs in their role

as third-party administrators for ERISA plans are inconsistent with ERISA’s central

design, ERISA’s express preemption clause requires invalidation of the statute as

applied to PBMs in their administration and management of prescription drug

benefits for ERISA plans. Gobeille, 136 S. Ct. at 947. We therefore reverse the

district court’s finding that the statute is not expressly preempted under ERISA.

IV.

We may reverse any judgment or order of a district court lawfully before usfor

review and “remand the cause and direct the entry of such appropriate judgment . .

. as may be just under the circumstances.” 28 U.S.C. § 2106. Directing the entry of

“The commissioner shall enforce the provisions of this chapter.” 3

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judgment is appropriate where no relevant factual dispute exists, the record on the

issue is sufficiently developed, and the parties had a fair opportunity to dispute and

develop the issue before the district court. Union Elec. v. Southwest Bell Tel. L.P.,

378 F.3d 781, 786 (8th Cir. 2004); Fabric v. Provident Life & Accident Ins. Co., 115

F.3d 908, 915 (11th Cir. 1997) (cited approvingly in Union Elec., 378 F.3d at 786). 

This is so even in circumstances where a party did not move for entry of judgment in

the district court. Fabric, 115 F.3d at 914-15 (and cases cited therein).

Here, although there was no development of a factual record in the district

court, the issue of express preemption in this case involves pure statutory

interpretation with no factual matters to be considered other than the text of the

statute itself. There simply is no factual record to be developed. Further, the parties

had a fair opportunity to dispute and develop the issue before the district court, and

they fully developed the issue on appeal. Indeed, the issue of whether to direct the

entry of judgment has itself been developed before us in this appeal. Given all of

these considerations, there is no prejudice to the State by our directing the district

court to enter judgment on PCMA’s claim of express preemption, which we find to

be appropriate and just under the circumstances. 

V.

For the foregoing reasons, the judgment of the district court isreversed and the

case is remanded for entry of judgment in favor of PCMA on the issue of express

preemption. In view of our holding, we do not reach the dormant Commerce Clause

issue raised by PCMA in this appeal.

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