United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 15, 2009 Decided July 9, 2010
No. 09-7042
PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION,
APPELLEE
v.
DISTRICT OF COLUMBIA AND ADRIAN FENTY, IN HIS OFFICIAL
CAPACITY AS MAYOR OF THE DISTRICT OF COLUMBIA,
APPELLANTS
Appeal from the United States District Court
for the District of Columbia
(No. 1:04-cv-01082-RMU)
James C. McKay, Jr., Senior Assistant Attorney General,
argued the cause for appellants. With him on the briefs were
Peter J. Nickles, Attorney General, Todd S. Kim, Solicitor
General, and Donna M. Murasky, Deputy Solicitor General.
Melissa Bowman, Attorney, U.S. Department of Labor,
argued the cause for amicus curiae Secretary of Labor in
support of appellants. With her on the briefs were Carol A.
De Deo, Deputy Solicitor, Deborah Greenfield, Deputy
Solicitor, and Nathaniel I. Spiller, Counsel.
2
Jan May, Stacy J. Canan, and Michael Schuster were on
the brief for amici curiae AARP et al. in support of
appellants.
Paul J. Ondrasik, Jr. argued the cause for appellee
Pharmaceutical Care Management Association. With him on
the briefs were Martin D. Schneiderman, Linda S. Stein, and
Eric G. Serron. Alice E. Loughran entered an appearance.
Robin S. Conrad and William G. Schiffbauer were on the
brief for amici curiae America's Health Insurance Plans, Inc.
and Chamber of Commerce of the United States of America
in support of appellee.
Before: GINSBURG, BROWN, and KAVANAUGH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
GINSBURG, Circuit Judge: The District of Columbia
appeals the judgment of the district court holding Title II of
the Access Rx Act of 2004, D.C. Code § 48-832.01 et seq., is
pre-empted by the Employee Retirement Income Security
Act, 29 U.S.C. § 1001 et seq. (ERISA). Pharm. Care Mgmt.
Ass'n v. District of Columbia, 605 F. Supp. 2d 77, 84–88
(2009). We agree with the district court that §§ 48-832.01(a),
(b)(1), and (d) of Title II are pre-empted by ERISA insofar as
they apply to a pharmaceutical benefits manager (PBM) under
contract with an employee benefit plan (EBP) because they
―relate to‖ an EBP. Sections 48-832.01(b)(2) and (c) are not
pre-empted by ERISA, however, because each may be waived
by an EBP in its contract with a PBM. Accordingly, we
affirm in part and reverse in part the judgment of the district
court, and remand this matter for the district court to consider
the Pharmaceutical Care Management Association‘s (PCMA)
3
constitutional challenges to the provisions not pre-empted by
ERISA.
I. Background
Access to prescription drugs is an increasingly
important — and expensive — benefit for a health care plan
to offer its beneficiaries. Instead of themselves developing a
list of covered prescription drugs, purchasing those drugs
from pharmaceutical manufacturers, establishing a network of
pharmacies to fill prescriptions, and otherwise administering
the prescription drug benefit, many health care plans,
including many EBPs, contract with a PBM to perform these
functions. A PBM offers not just administrative convenience,
however; by aggregating the purchasing power of numerous
health care plans, a PBM can get greater volume discounts
from drug manufacturers and provide access to a larger
network of pharmacies than an EBP could do on its own.
That the vast majority of insured Americans receive their
pharmaceutical benefits through a PBM is, therefore, not
surprising.
Title II imposes a number of requirements upon PBMs
and, in one respect, upon any health care plan that contracts
with a PBM and thus becomes a ―covered entity,‖ § 48-
831.02(4)(A). These requirements are summarized in the
following table.
Provision Summary Requirement
§ 48-832. Fiduciary duty A PBM ―owes a fiduciary duty
01(a) to a covered entity. In
performance of that duty [it]
shall adhere to the practices in
this section.‖
4
§ 48-832. Fiduciary A PBM ―shall . . . Perform its
01(b)(1)(A) standard duties . . . in accordance with
the standards of conduct
applicable to a fiduciary.‖
§ 48-832. NA Repealed, 53 D.C. Reg. 6899,
01(b)(1)(B) 6966 (2006).
§ 48-832. Disclosure of A PBM shall ―notify the
01(b)(1)(C) conflicts covered entity in writing of . . .
any conflict of interest with the
duties imposed by‖ Title II.
§ 48- Usage pass A PBM ―that receives from any
832.01(b)(2) back drug manufacturer or labeler
any payment or benefit of any
kind in connection with the
utilization of prescription
drugs‖ by the beneficiaries of a
covered entity ―shall pass that
payment or benefit on in full to
the covered entity. This
provision does not prohibit the
covered entity from agreeing by
contract to . . . return[] a portion
of the benefit or payment to the
[PBM].‖
§ 48-832. Disclosure of ―Upon request by a covered
01(c)(1)(A) purchases entity‖ a PBM shall disclose
―the quantity of drugs
purchased by the covered entity
and the net cost to the covered
entity for the drugs.‖
5
§ 48-832. Disclosure of ―Upon request by a covered
01(c)(1)(B) terms entity‖ a PBM shall disclose the
―terms and arrangements for
remuneration‖ between the
PBM and a drug manufacturer
or labeler.
§ 48- Confidentiality ―Information designated [by a
832.01(c)(2) PBM] may not be disclosed by
the covered entity . . . ‖
§ 48- NA Repealed, 53 D.C. Reg. 6899,
832.01(d)(1) 6966 (2006).
§ 48- Disclosure of A PBM that dispenses a
832.01(d)(2) substitution substitute drug that ―costs more
than the prescribed drug shall
disclose to the covered entity
the cost of both drugs and any
benefit or payment . . . to the
PBM as a result of the
substitution.‖
§ 48- Substitution A PBM ―shall transfer in full to
832.01(d)(3) pass back the covered entity any benefit
or payment received . . . as the
result of [such] prescription
drug substitution.‖
§ 48-832.02 Compliance ―Compliance with the
requirements of [Title II] is
required in all contracts
between a [PBM] and a covered
entity entered into in the
District of Columbia . . .
executed after May 18, 2004.‖
§ 48-832.03 Enforcement ―A violation of [§ 48-832] is a
violation of [the District of
Columbia Consumer Protection
Procedures Act], for which a
6
fine of not more than $10,000
may be adjudged.‖
The PCMA, a national trade association representing
PBMs, filed suit arguing Title II is pre-empted by ERISA. It
also argued Title II is pre-empted by the Commerce Clause,
and violates the First Amendment and the Takings Clause of
the Fifth Amendment, of the Constitution of the United
States. We held in PCMA v. District of Columbia, 522 F.3d
443 (2008), the Association is not collaterally estopped from
bringing this suit by the decision of the First Circuit in PCMA
v. Rowe, 429 F.3d 294 (2005), which rejected its argument
that a similar Maine statute was pre-empted by ERISA. On
remand the district court held Title II is pre-empted in its
entirety by ERISA, and granted summary judgment for the
PCMA, which the District now appeals.
II. Analysis
ERISA expressly pre-empts ―any and all State laws
insofar as they ... relate to any employee benefit plan.‖ 29
U.S.C. § 1144(a). Although ―clearly expansive,‖ N.Y. State
Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins.,
514 U.S. 645, 655 (1995), this provision is nonetheless
subject under the Supreme Court‘s ERISA precedents to ―the
starting presumption that Congress does not intend to supplant
state law,‖ particularly in ―fields of traditional state
regulation,‖ such as health care. Id. at 654–655.
A state law ―relates to‖ an EBP ―if it [1] has a connection
with or [2] reference to such a plan.‖ Egelhoff v. Egelhoff,
532 U.S. 141, 147 (2001) (quoting Shaw v. Delta Air Lines,
Inc., 463 U.S. 85, 97 (1983)). This appeal primarily concerns
the ―connection with‖ path to pre-emption because the district
court held Title II ―has an impermissible connection with
7
ERISA and is therefore pre-empted.‖ 605 F. Supp. 2d at 88.
The District challenges that holding on the grounds that Title
II does not regulate ―relationships among ERISA entities‖ but
merely ―giv[es] rights and benefits to plans,‖ and is ―not
qualitatively different from [] state laws [regulating lawyers,
accountants, and securities dealers].‖
A. ―Connection with‖ an EBP
In addressing whether a state law has a ―connection with‖
an EBP, the Supreme Court noted that term ―is scarcely more
restrictive than [the statutory term] ‗relate to,‘‖ and
―cautioned against an ‗uncritical literalism‘ that would make
pre-emption turn on ‗infinite connections.‘‖ Egelhoff, 532
U.S. at 147 (quoting Travelers, 514 U.S. at 656). Instead we
must ―look both to ‗the objectives of the ERISA statute as a
guide to the scope of the state law that Congress understood
would survive,‘ as well as to the nature of the effect of the
state law on ERISA plans.‖ Id. (quoting Cal. Div. of Labor
Standards Enforcement v. Dillingham Constr., 519 U.S. 316,
325 (1997) (quoting Travelers, 514 U.S. at 656)). Therefore,
we consider first whether the provisions of Title II affect an
area of ERISA concern, and then evaluate the nature of any
such effect.
1. Objectives of ERISA
The PCMA argues Title II ―intrudes into areas of express
ERISA concern‖ because it regulates a PBM‘s administration
of benefits on behalf of an EBP. The administration of
employee benefits clearly is an ―area of core ERISA
concern,‖ Egelhoff, 532 U.S. at 147: ―One of the principal
goals of ERISA is to enable employers ‗to establish a uniform
administrative scheme, which provides a set of standard
procedures to guide processing of claims and disbursement of
8
benefits.‘‖ Id. at 148 (quoting Fort Halifax Packing Co. v.
Coyne, 482 U.S. 1, 9 (1987)). Plan administration includes
―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, 482 U.S. at 9.
We also agree with the PCMA, and with the district
court, 605 F. Supp. 2d at 86–87, that the provisions of Title II
regulate a PBM‘s administration of benefits on behalf of an
EBP. The disclosure and pass back provisions of Title II, §§
48-832.01(b)(1)(C), (b)(2), (c)(1)(A), (c)(1)(B), (d)(2), and
(d)(3), each regulate the administration of employee benefits
by requiring a PBM to follow a specific practice in
administering pharmaceutical benefits on behalf of an EBP.
Likewise, by specifying the standard of conduct to which a
PBM must adhere, i.e., that of a fiduciary, §§ 48-832.01(a)
and (b)(1)(A) also regulate the administration of employee
benefits. Indeed, the obvious purpose of Title II, as
effectuated through these provisions, is to prescribe the way
PBMs decide which pharmaceuticals to provide to plan
beneficiaries and to prevent PBMs from inflating the price the
plan pays for those pharmaceuticals.
The District does not deny the administration of
employee benefits is an area of core ERISA concern or that
PBMs administer benefits on behalf of EBPs; indeed at oral
argument it conceded as much. Oral arg. at 4:00, 16:55.
Rather, the District argues the various provisions of Title II
nonetheless fall within the scope of state law the Congress did
not intend to pre-empt with ERISA because they do not
regulate ―relationships among ERISA entities,‖ such as a plan
and an ERISA fiduciary or a plan and its beneficiaries. The
District points to no support for this limitation upon pre-
9
emption either in ERISA itself or in any Supreme Court case
interpreting it. Instead, the District relies upon decisions of
other circuits holding ERISA did not pre-empt breach of
contract or professional malpractice claims against third-
parties who provided services to an EBP.
As the PCMA points out, in none of the cases cited by the
District did the state law regulate a third party who
administered employee benefits on behalf of a plan. Those
cases therefore suggest only that the relationship among
ERISA entities is an area of ERISA concern, not that the
objective of uniformity in plan administration is for some
reason inapplicable simply because a plan has contracted with
a third party to provide administrative services. Indeed, dicta
in two cases central to the District‘s argument suggest a state
law regulating a third party‘s performance of administrative
functions on behalf of a plan could be pre-empted. See
Gerosa v. Savasta & Co., 329 F.3d 317, 324 (2d Cir. 2003)
(noting that although courts are ―reluctant to find that
Congress intended to preempt state laws that do not affect the
relationships among [ERISA entities]‖ they have ―typically‖
held ERISA pre-empts ―state laws that would tend to control
or supersede central ERISA functions—such as state laws
affecting the determination of eligibility for benefits, amounts
of benefits, or means of securing unpaid benefits‖); Airparts
Co. v. Custom Benefit Servs. of Austin, 28 F.3d 1062, 1066
(10th Cir. 1994) (holding claims for negligence, indemnity,
and common-law fraud not pre-empted where defendant ―was
simply an outside consultant which did not directly perform
any administrative act vis-à-vis the plan‖). Furthermore,
when actually confronted with a malpractice claim
challenging a third party‘s performance of administrative
services on behalf of a plan, the Third Circuit held the claim
was pre-empted by ERISA. See Kollman v. Hewitt Assocs.,
487 F.3d 139, 148 (2007) (holding ERISA pre-empts
10
malpractice claim against non-fiduciary service provider
responsible for plan administration; goal of uniformity
reflected in ERISA is ―equally applicable to agents of
employers ... who undertake and perform administrative
duties for and on behalf of ERISA plans‖).
In sum, §§ 48-832.01(a), (b)(1)(A), (b)(1)(C), (b)(2),
(c)(1)(A), (c)(1)(B), (d)(2), and (d)(3) touch upon ―a central
matter of plan administration,‖ Egelhoff, 532 U.S. at 148, and
are pre-empted if they also have an impermissible effect upon
an EBP. Whether § 48-832.01(c)(2), the provision requiring
that a covered entity keep certain information confidential,
regulates an area of ERISA concern, is not so clear. We need
not resolve the question, however, because, as we conclude
below, that provision does not have an impermissible effect
upon an EBP.
2. Effect upon EBPs
The precise point at which a state law so constrains an
ERISA plan‘s choices as to undermine the goal of uniformity
in plan administration is uncertain. Shaw, 463 U.S. at 100
n.21 (―Some state actions may affect employee benefit plans
in too tenuous, remote, or peripheral a manner to warrant a
finding that the law ‗relates to‘ the plan. ... [W]e express no
views about where it would be appropriate to draw the line.‖).
For example, in Travelers the Supreme Court considered a
state law that imposed a larger hospital surcharge upon
patients insured by a commercial insurer than upon patients
insured by a Blue Cross/Blue Shield plan. 514 U.S. at 649–
50. The Court held the law was not pre-empted because it did
not ―force an ERISA plan to adopt a certain scheme of
substantive coverage or effectively restrict its choice of
insurers,‖ id. at 668, but exerted merely an ―indirect economic
influence ... that can affect a plan‘s shopping decisions.‖ Id.
11
at 659–60. ―[C]ost uniformity,‖ the Court held, ―was almost
certainly not an object of pre-emption.‖ Id. at 662. On the
other hand, in Metropolitan Life Insurance Co. v.
Massachusetts, 471 U.S. 724 (1985), the Court held a state
law mandating mental health benefits be covered in certain
health insurance contracts related to an EBP notwithstanding
the possibility the EBP could self-insure or purchase a policy
not affected by the law. The Court noted the law ―bears
indirectly but substantially on all insured benefit plans, for it
requires them to purchase the mental-health benefits specified
in the statute when they purchase a certain kind of common
insurance policy.‖ Id. at 739.
The District argues Title II does not have an
impermissible constraining effect upon EBPs because the
statute offers ―clear benefit[s]‖ that an EBP may ―simply
decline.‖ In this regard the District relies upon Rowe, in
which the First Circuit held a substantively identical Maine
statute was not pre-empted because, ―[a]lthough the ERISA
plans can re-evaluate their working relationships with the
PBMs if they wish in light of the [state law], nothing in [that
law] compels them to do so. ... The plan administrators here
have a free hand to structure the plans as they wish in Maine.‖
429 F.3d at 303.
The District‘s point is well-taken with regard to the usage
pass back provision, § 48-832.01(b)(2), because it expressly
provides that it ―does not prohibit the covered entity from
agreeing by contract to compensate the [PBM] by returning a
portion of the benefit or payment,‖ and with regard to § 48-
832.01(c), which requires disclosure (and imposes a
corresponding duty of confidentiality) only ―[u]pon request
by a covered entity.‖ Those provisions are in essence
voluntary provisions for the covered entity.
12
To be sure, the procedure for opting out of a state law
may so affect plan administration as not to save the statute
from pre-emption. See Egelhoff, 532 U.S. at 150 (―Plan
administrators must either follow [the state‘s] beneficiary
designation scheme or alter the terms of their plan so as to
indicate that they will not follow it. The statute is not any less
of a regulation of the terms of ERISA plans simply because
there are two ways of complying with it.‖). The procedure for
opting out of §§ 48-832.01(b)(2) and (c) does not have that
untoward effect, however. First, it imposes no meaningful
burden at all. Cf. id. at 151 (burden was ―hardly trivial‖
because it required plan to maintain familiarity with state law
and make ongoing amendments to plan documents). A plan
need only include in its contract with a PBM a waiver of those
provisions — for which it may be able to obtain something in
return, but that is neither here nor there for the purpose of the
present analysis. We note also that, because Title II applies
only to contracts entered after the effective date of the statute,
no EBP has been required either to amend an existing contract
or to alter its plan documents. Cf. id. at 150–51 (opt out
required amendment of already-issued plan documents).
Second, negotiating a waiver of those provisions does not
itself involve the administration of benefits. Therefore, we
conclude §§ 48-832.01(b)(2) and (c) do not ―relate to‖ an
EBP.
At oral argument the District took the position for the
first time that an EBP can also waive the other provisions of
Title II. In the supplemental brief we requested, the District
backtracked, conceding § 48-832.01(b)(1)(C) (disclosure of
conflicts of interest) and (d)(2) (disclosure of PBM‘s gains
from substituting drugs) cannot be waived, arguing § 48-
832.01(d)(3) (substitution pass back) can be waived, and
remaining silent as to whether §§ 48-832.01(a) (fiduciary
13
duty) and (b)(1)(A) (fiduciary standard of conduct) can be
waived.
The District‘s belated interpretation of Title II is
inconsistent with both the text and the declared purpose of
that statute. As for text, none of the provisions the District
now argues may be waived says or implies anything about the
possibility of waiver. When contrasted with the provisions
that expressly allow for waiver, that silence presumably
bespeaks the intent of the D.C. Council to make the other
provisions non-waivable. See Russello v. United States, 464
U.S. 16, 23 (1983) (―Where Congress includes particular
language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate
inclusion or exclusion‖ (internal quotation marks omitted)).
The District offers nothing with which to rebut that
presumption.
As to purpose, this interpretation is bolstered by § 48-
832.03, which provides a violation of Title II is a violation of
the District of Columbia Consumer Protection Procedures
Act, D.C. Code §§ 28-3901 to -3913, enforceable by the
Attorney General, § 28-3909, or by any ―person, whether
acting for the interests of itself, its members, or the general
public,‖ § 28-3905(k)(1). If §§ 48-832.01(a), (b)(1), and (d)
could be waived by an EBP, then they would not protect the
interests of third parties, such as plan beneficiaries, and it
would be anomalous to provide for enforcement by anyone
other than the covered entity with which the PBM contracts
— let alone by any person whatsoever. We think it obvious
the D.C. Council, concerned that contracts between an EBP
and a PBM should adequately protect the interests of plan
beneficiaries, enacted Title II in order to protect those
beneficiaries with rules that, except as expressly provided,
14
could not be waived by contract. This purpose is confirmed
in the ―Findings and declaration of intent‖ that begin both the
Access Rx Act and the District‘s statement of facts in its
opening brief:
Affordability is critical in providing access to
prescription drugs for District of Columbia residents.
Access Rx enables the District to take steps to make
prescription drugs more affordable for qualified
District residents ....
§ 48-831.01(1)–(2). If Title II could be waived in its entirety
by an EBP, then the District would not be able to ―take steps‖
on behalf of plan beneficiaries in precisely those
circumstances at which the statute is aimed, i.e., where the
contract between the EBP and the PBM is, in its view,
insufficiently protective of the beneficiaries.
Although the District argues ambiguity in a state law
should be resolved against pre-emption, here the D.C. Council
has sounded no ―uncertain trumpet,‖ Vote Choice, Inc. v.
DiStefano, 4 F.3d 26, 41–42 (1st Cir. 1993). Sections 48-
832.01(a), (b)(1), and (d) are clearly meant to govern the
relationship between a PBM and an EBP regardless whether
their contract provides otherwise.
The District argues §§ 48-832.01(a), (b)(1), and (d)
nonetheless leave plan administrators with ―a free hand to
structure the plans as they wish,‖ Rowe, 429 F.3d at 303,
because ―Title II does not force plans to do anything. Plans
remain free to employ PBMs in any manner they see fit.‖
That is just not so, even as a formality. Title II constrains an
EBP by forcing it to decide between administering its
pharmaceutical benefits internally upon its own terms or
15
contracting with a PBM to administer those benefits upon the
terms laid down in §§ 48-832.01(a), (b)(1), and (d).
The Supreme Court has not prescribed a standard for
determining whether a state law sufficiently constrains an
EBP‘s decision-making in an area of ERISA concern that the
law is pre-empted, but it has indicated a law that ―bind[s] plan
administrators to any particular choice‖ is pre-empted.
Travelers, 514 U.S. at 659. We need go no further: Sections
48-832.01(a), (b)(1), and (d) bind plan administrators because
the ―choice‖ they leave an EBP between self administration
and third-party administration of pharmaceutical benefits is in
reality no choice at all. For most if not all EBPs, internal
administration of beneficiaries‘ pharmaceutical benefits is a
practical impossibility because it would mean forgoing the
economies of scale, purchasing leverage, and network of
pharmacies only a PBM can offer. By imposing requirements
upon third-party service providers that administer
pharmaceutical benefits for an EBP, §§ 48-832.01(a), (b)(1),
and (d) ―function as a regulation of an ERISA plan itself.‖
Travelers, 514 U.S. at 659. Because these provisions also
regulate an area of ERISA concern, they are pre-empted.
The District would have us abjure this conclusion on the
ground that ―the[] standards of conduct, requirements of
transparency, and restrictions on self-dealing [imposed upon a
PBM by Title II] are not qualitatively different from‖ laws
regulating others who provide services to an EBP, such as
accountants, lawyers, and securities dealers; its point is that if
Title II is pre-empted by ERISA because it has a ―connection
with‖ an EBP, then those implicitly benign regulations of
professionals must also be pre-empted. Not to worry: A law
regulating a third party‘s performance of services on behalf of
an EBP cannot have a ―connection with‖ an EBP unless those
services involve an area of ERISA concern and the law has a
16
regulatory effect upon the EBP. See De Buono v. NYSA-ILA
Med. and Clinical Servs. Fund, 520 U.S. 806, 808 (1997)
(holding state law ―imposing a gross receipts tax on the
income of medical centers‖ not pre-empted as applied to
centers ―operated by ERISA funds‖); Dillingham, 519 U.S. at
330 (indicating ERISA does not pre-empt state law ―in those
areas where ERISA has nothing to say‖); Travelers, 514 U.S.
at 661–62 (state law with mere ―indirect economic effect‖ not
pre-empted). Thus it is that ERISA does not pre-empt ―run-
of-the-mill state-law claims such as unpaid rent, failure to pay
creditors, or even torts committed by an ERISA plan.‖
Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S.
825, 833 (1988).
A dictum in Egelhoff suggests there may be an exception
to pre-emption under ERISA for long-standing and widely
observed state laws. 532 U.S. at 152 (statutes providing ―a
murdering heir is not entitled to receive property as a result of
the killing‖ might not be pre-empted because ―the principle
underlying the statutes — which have been adopted by nearly
every State — is well established in the law and has a long
historical pedigree predating ERISA‖); see also Custer v.
Sweeney, 89 F.3d 1156, 1167 (4th Cir. 1996) (ERISA does
not pre-empt malpractice claim against attorney representing
EBP because ―ERISA does not evince a clear legislative
purpose to pre-empt such traditional state-based laws of
general applicability‖). Such an exception would seem to
protect from pre-emption long-accepted laws regulating
accountants, lawyers, and dealers in securities, but it would
not save Title II because laws regulating PBMs are not the
embodiment of long-standing and widely observed principles.
17
B. PCMA‘s Other Arguments
The PCMA raises two alternative statutory grounds for
affirming the judgment of the district court as to the
provisions of Title II that an EBP can waive, viz., §§ 48-
832.01(b)(2) (usage pass back) and (c) (disclosures upon
request). Specifically, it argues every part of Title II is pre-
empted by ERISA both because Title II has a ―reference to‖ a
plan and therefore ―relates to‖ an EBP and because it creates
an enforcement mechanism alternative to that provided in
ERISA itself. Although the district court did not reach these
arguments because it held Title II was pre-empted in its
entirety by reason of a ―connection with‖ an EBP, 605 F.
Supp. 2d at 88, we reach them — as applied to the two
provisions we have not already held are pre-empted by
ERISA — because the arguments are fully briefed by the
parties and their resolution is clear and does not depend upon
further factual development. See EEOC v. Aramark Corp.,
Inc., 208 F.3d 266, 268 (D.C. Cir. 2000) (―because we review
the district court‘s judgment, not its reasoning, we may affirm
on any ground properly raised‖).
As the Supreme Court has explicated the phrase, a law
makes ―reference to‖ a plan ―[w]here [it] acts immediately
and exclusively upon ERISA plans ... or where the existence
of ERISA plans is essential to the law‘s operation.‖
Dillingham, 519 U.S. at 325. Because Title II applies to any
PBM that contracts with a ―covered entity,‖ defined as ―[a]ny
hospital or medical service organization, insurer, health
coverage plan, or [HMO] ... that contracts with another entity
to provide prescription drug benefits for its customers or
clients,‖ § 48-831.02(4)(A), sections 48-832.01(b)(2) and (c)
do not act exclusively upon EBPs; ―the existence of ERISA
plans ... is [not] essential to [their] operation,‖ Dillingham,
18
519 U.S. at 325. Therefore, neither provision has a ―reference
to‖ a plan.
Nor does either provision create an enforcement
mechanism for the rights provided by ERISA. Rather, each
creates an enforceable but ―independent legal duty‖ — to pass
back or upon request to disclose certain information —
separate from any duty created by ERISA. Aetna Health Inc.
v. Davila, 542 U.S. 200, 210 (2004). Therefore §§ 48-
832.01(b)(2) and (c) are not pre-empted by ERISA.
III. Conclusion
Sections 48-832.01(a), (b)(1), and (d) of Title II require
an EBP that outsources the administration of its
pharmaceutical benefits in the District of Columbia do so in a
particular way. Those provisions have a ―connection with‖
and therefore ―relate to‖ an EBP and are pre-empted by
ERISA.* Because an EBP readily may avoid the default
terms of §§ 48-832.01(b)(2) and (c) by contract, and because
those provisions do not make ―reference to‖ ERISA plans or
create an enforcement mechanism for the rights provided by
ERISA, they are not pre-empted by ERISA.
The PCMA raised several constitutional arguments for
pre-emption not reached by the district court. Because the
parties have not briefed them at any length, we leave those
issues, as they relate to the provisions we have held are not
pre-empted by ERISA and the application of Title II to
*
This holding differs from that of the First Circuit in Rowe, which
held no part of a nearly identical Maine statute was pre-empted by
ERISA. See 429 F.3d at 303. In our view the uniform
administrative scheme encouraged by ERISA includes plan
administrative functions performed by a third party on behalf of an
EBP.
19
covered entities that are not EBPs, for the district court to
consider in the first instance. Accordingly, the judgment of
the district court is affirmed in part and reversed in part, and
this matter is remanded to the district court for further
proceedings consistent herewith.
So ordered.