Sixth Circuit Holds Tennessee PBM Network and Steering Rules Are ERISA-Preempted

The Sixth Circuit held that two Tennessee PBM laws are preempted by ERISA as applied to self-funded plans. The any-willing-provider provisions require PBMs and covered entities to admit any licensed pharmacy willing to accept network terms, including in preferred networks. The incentive/steering provisions prohibit higher copays, fees, or penalties when members use certain in-network pharmacies and ban financial incentives to steer members to PBM-owned pharmacies. The court found both provisions have an impermissible connection with ERISA plans because they mandate benefit structures and dictate plan choices rather than merely regulating costs.

Employers sponsoring self-funded ERISA plans and their PBMs benefit from this ruling as it protects their ability to design pharmacy networks and cost-sharing structures without state mandates. Plan fiduciaries may challenge state PBM regulations before facing enforcement actions. The ruling does not affect state authority to regulate PBM reimbursement rates. The decision applies to the Sixth Circuit states (Michigan, Ohio, Kentucky, Tennessee) but may influence other circuits.