Tomorrow, the Supreme Court will continue with the broadcast of the “live” audio portion of its hearings, with an eight-Justice Court. It is unclear whether it will be broadcast on any TV station. An audio broadcast is expected on the Supreme Court page of C-SPAN LIVE at this link: https://www.c-span.org/supremeCourt/ Both of the hearings held on Monday are still available at that site.
First case, starting at 10 a.m.:
Rutledge v. Pharmaceutical Care Management Association
Background: Few things about life are more frustrating, especially for older Americans, than the high price of prescription medicines. As the Court hears this case, it will seem more complex than it really is, because the legal issue turns on the meaning of a highly technical 1974 federal pension and workers’ benefit law, the Employee Retirement Income Security Act.
For most people listening to the lawyers and the Justices, however, the important fact is that this case turns on whether state governments have the power to pass laws to keep “middlemen” in the drug industry from jacking up the price of medicines. They reimburse drug stores for the prices the stores charge to patients, but do so at a fairly low rate, and make money by increasing what they charge to the health plans that provide drug insurance to the patients.
Depending upon how an insurance plan works, the higher price – or part of it – may have to be covered by the patient personally. Critics also claim that the practice is driving small drug stores out of business, especially in rural areas, because of low reimbursements.
One example of the practice cited in the new Supreme Court case involved a drug that a “middleman” billed at $215 to a health plan, but reimbursed the drug store that actually filled the prescription only $15.
The “middlemen” are called “pharmacy benefit managers.” Perhaps many TV viewers have seen an ad that shows one of these managers hanging up the phone on a woman who asks why patients do not get the benefit of the managers’ dealings with the drug stores.
The case before the Court arises because 36 of the states (including Arkansas in this case) have passed laws to restrict this method of drug pricing. In response, the managers’ trade group, the Pharmaceutical Care Management Association, has filed a series of court cases across the country to challenge those laws.
The managers’ legal claim is quite simple. It argues that the 1974 ERISA law forbids states from passing such laws, because health plans that are charged the higher prices are regulated by the federal government. (The ERISA law, seeking to assure that regulation of worker benefit plans is uniform across the country, generally forbids states to pass laws that “relate to any employee benefit plan.” Under the Constitution, if a federal law covers the regulation of a field or activity, and a state law conflicts with that regulation, the state law must yield.)
One federal appeals court ruled that ERISA does not prohibit states from regulating the rates reimbursed or charged by the middlemen, but a different appeals court ruled in the Arkansas case that ERISA “preempts” such state laws, thus blocking their enforcement. The Supreme Court stepped in to settle the dispute.
The question before the Court: Since the ERISA law itself does not define how an economic activity “relates to” an ERISA plan, but the Court seemed to say in a 1995 decision that ERISA does not regulate the price of medical care, are states still free to pass laws to limit the manipulation of drug pricing by jacking up what is charged to health plans while reimbursing drug stores at lower rates?
Significance: Any time the Supreme Court answers a significant legal question about the ERISA law, it potentially has a massive impact on the nation’s health care system. In one estimate, the U.S. Labor Department said that there are more than 2 million ERISA-covered health plans, providing coverage for nearly 140 million people.
When the Supreme Court began interpreting the scope of the 1974 law, it quickly became clear that the Court would have difficulty sorting out the meaning of a particular clause in the law – the so-called “preemption clause.” Congress added that clause to the law specifically to protect the primary role of the federal government in regulating worker benefit plans covered by ERISA by declaring off-limits efforts by states to regulate covered benefit plans. In fact, the Court remarked in frustration in 1995 that, if that clause were applied literally, there would be no stopping place on what laws would have to be scuttled.
The particular significance of this new case is that the role of the “middlemen” has grown enormously in recent years. Almost every major health insurance company has hired a “pharmacy benefit manager” to act as a go-between among drug manufacturers, the health insurers, and the drug stores. These managers have lately taken an increasing role in establishing the pricing structure for prescription drugs, and critics complain that the result has added to the steady rise in the prices of such drugs.
While the appeal of the Arkansas governor heavily emphasizes the negative influence that the states feel the managers have, the managers responded by contending that their role has allowed them to gain buying power and that helps bring down drug prices in general. The Court will not decide whether the role managers play is harmful or beneficial, since the sole legal question is whether the role the managers play has turned them, in effect, into forbidden regulators of ERISA health plans.
Second case, starting at about 11 a.m.:
Tanzin v. Tanvir
Background: The Court’s conservative majority in recent years has shown increasing sympathy for the claims of religious individuals and organizations that governments exercise too much control over how people conduct their lives as they act according to their beliefs. An example was the Justices’ decision last term that largely exempted religious employers, like hospitals, charities and colleges, from having to obey the Obamacare mandate that employers provide free birth control to female workers or students of child-bearing age.
The law involved in cases like that is the Religious Freedom Restoration Act, first enacted in 1993 to impose limits on government action that imposes a “substantial burden” on a person’s practice of their faith. Originally passed to apply to all levels of government, it now only restricts the federal government because the Court ruled in 1997 that the law interfered too greatly with states’ rights.
The law is again at issue in this new case involving claims that federal agents violated the religious beliefs of a group of Muslim men by putting them on the government’s “No Fly List” forbidding air travel in the U.S. The men, who live in the U.S. legally, contend that several FBI agents tried to recruit them to become informants in terrorism investigations, and that the agents put them on that list to retaliate after the men had refused for religious reasons to inform on others.
In suing the agents under RFRA, the Muslim men asked the courts to assess money damages against the agents, to be paid out of the agents’ own pockets, not by the government.
When Congress passed RFRA, it said only that those who won religious freedom cases under the law would be entitled to “appropriate relief” as a remedy. It did not spell out what would be “appropriate.” In this case, a federal appeals court ruled that money damages would be a proper remedy. Because that conflicts with rulings by other appeals courts, the Supreme Court agreed to resolve the dispute when the Trump Administration filed an appeal.
The question before the Court: if a federal official, such as an FBI agent, violates the religious rights of an individual, does the Religious Freedom Restoration Act allow as a remedy an assessment of money damages that the official would have to pay personally?
Significance: As a general rule, if a federal official violates someone’s rights, the courts usually order a remedy against that official’s agency, if the violation occurred while the official was performing regular duties. If, however, the violation was the result of personal conduct by that official, not authorized, then the official can be sued “in his individual capacity” – that is, his responsibility was personal.
In this case, that was one of the claims that the Muslim made against the FBI agents, and they would be entitled to a court order spelling out money damages, if the Supreme Court were to overturn the appeals court ruling. In that event, the Supreme Court would not decide itself how much the payment would be; it would send the case back to lower courts to calculate that.
While claims of government misconduct most often are made against officials for the way they carry out their official duties or tasks, and winning such a case can produce strong court orders against repeating the challenged conduct, it can be a stronger remedy if officials have to hand over their own money to compensate for their misconduct.
The Trump Administration claims in this appeal that, while the issue is still open as to what remedies are available under RFRA, the Supreme Court has already ruled in another federal civil rights law that is patterned after RFRA that money damages are not allowed as a remedy. The Muslim men claim that the courts regularly rule that, when Congress authorizes “appropriate relief” for violations of federal laws, that usually is understood to mean all forms of relief, including money damages.
The Court will not be ruling on whether the agents did act illegally, but only on the remedy issue.
Two more hearings Wednesday. A description of them will appear here on Tuesday, in advance.
