Weekly Health Compliance Briefing

July 22, 2026

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Health Notes

 

ERISA Preempts Arkansas PBM Geographic Coverage Rules
In Flowers v. Caremark PCS Health, LLC, the Eighth Circuit U.S. Court of Appeals held that Arkansas regulations requiring pharmacy benefit managers (PBMs) to satisfy specific geographic network adequacy standards are preempted by ERISA.

Background
Flowers was a participant in an ERISA plan that included prescription drug benefits administered by Caremark. Flowers filed a class action lawsuit, alleging the prescription drug plan violated two Arkansas laws: first, a mail-order provision restricting certain PBM-affiliated pharmacies from requiring participants to receive maintenance (i.e., ongoing) prescriptions through home delivery; and second, a network adequacy provision requiring PBMs to maintain a reasonably adequate and accessible pharmacy network. The network adequacy implementing rules imposed geographic coverage standards that required PBMs to ensure that specified percentages of covered plan participants in urban, suburban, and rural areas lived within set distances of a network pharmacy. For example, PBMs were required to ensure that 90 percent of urban covered individuals lived within two miles of a network pharmacy, 90 percent of suburban covered individuals lived within five miles, and 70 percent of rural covered individuals lived within 15 miles.

Court Decision
The Eighth Circuit affirmed the district court’s dismissal of both of Flowers’ claims. First, the court quickly rejected the mail-order claim because Flowers did not plausibly allege that Caremark required participants to use home delivery exclusively. Rather, the plan design allowed participants to fill maintenance prescriptions either through mail order or at CVS retail pharmacies. The court then turned to Arkansas’ network adequacy rules. The Eighth Circuit concluded that the geographic coverage requirements had an “impermissible connection” with ERISA plans because they would require PBMs to “tailor and continually adjust” pharmacy networks to satisfy state-specific standards. In the court’s view, those ongoing network changes would interfere with ERISA’s goal of allowing plan sponsors to administer benefit plans under a nationally uniform framework. As a result, the court held that the geographic coverage requirements are preempted by ERISA. However, the court left open whether Arkansas’ broader network adequacy statute, standing alone and without the implementing geographic regulations, would also be preempted.

Takeaways
Employers should be aware of this decision as states continue to adopt laws regulating PBMs and pharmacy access. This decision reinforces that state PBM laws are more likely to face preemption when they affect plan design, network structure, or nationally uniform plan administration, rather than merely regulating reimbursement rates or other cost-related terms. Employers should continue to monitor state PBM developments, coordinate with PBMs and other service providers, and consult with legal counsel, as necessary, to assess whether state requirements could affect plan operations or participant access to prescription drug benefits.