Latest news with #DormantCommerceClause
Axios
14 hours ago
- Business
- Axios
PBMs fight back against state restrictions
Drug price middlemen are going to court to fight a first-in-the-nation effort to police their ownership of retail pharmacies as more state legislatures and Congress crank up scrutiny of their influence on the cost of medicines. Why it matters: Large pharmacy benefit managers like CVS Caremark, Express Scripts and Optum Rx are increasingly being blamed for higher drug prices and the outsize role they play in the pharmaceutical supply chain. But major changes could be slow to materialize because of the complex system and the pivotal role the middlemen play negotiating drug purchases for commercial health plans and employers. State of play: CVS Health and Cigna, which owns Express Scripts, filed lawsuits last week seeking to stop Arkansas from enforcing a new law that largely prohibits them from owning retail pharmacies in the state. Both lawsuits argue that the Arkansas policy violates the Constitution's Dormant Commerce Clause. CVS Health argues that the law improperly leverages the state's licensing power. CVS Health says it will have to close 23 pharmacies in Arkansas under the law, which is effective Jan. 1, 2026. Cigna, which owns mail-order pharmacies operating in the state, says the law will harm the 50,000 Arkansas residents it serves. But the ramifications are nationwide, with many other states weighing new restrictions, including prohibitions on steering business to affiliated pharmacies. Texas and New York have introduced bills similar to Arkansas'. Other states are also getting aggressive: Alabama in March passed a law requiring PBMs to reimburse independent pharmacies at rates at least as high as Medicaid. The Pharmaceutical Care Management Association, a PBM trade group, says such laws would hurt seniors and veterans using prescription drug home delivery and patients with complex medical conditions who rely on specialty pharmacies for their treatments. The other side: The PBMs are only fighting Arkansas in the courts because they're worried other states will follow the lead of Gov. Sarah Huckabee Sanders (R) in trying to secure patient access and affordable prescriptions, Sanders' spokesman Sam Dubke wrote in an email. Between the lines: PBMs play a pivotal role in the drug supply chain and have benefited from consolidation and vertical integration, allowing some companies to steer business to affiliated pharmacies or push contracts on independent pharmacies. The Federal Trade Commission during the Biden administration blamed CVS Caremark, Express Scripts and OptumRx for hiking the cost of drugs, including overcharging patients for cancer treatments. The Trump administration, which has said it wants to "cut out" drug middlemen," halted an FTC lawsuit against the companies in April. Flashback: This isn't the first time PBMs have clashed with Arkansas in the courts. And the U.S. Supreme Court in 2020 unanimously ruled in the state's favor, deciding in favor of a law that forced PBMs to reimburse pharmacies at least what they pay in drug acquisition costs. The PCMA had brought the lawsuit, arguing that the policy preempted federal laws governing private health plans. Every state has passed some kind of legislation to regulate PBMs, per the National Academy for State Health Policy. What to watch: The massive Republican budget bill moving through Congress also includes narrow PBM changes, including moving to flat-fee payment for services in Medicare Part D and prohibiting PBMs from charging Medicaid managed care insurers more for a drug than the price they pay a pharmacy for dispensing it. Reality check: PBMs are adept at shifting their business models to keep up with the changing health care landscape, and likely won't see that much impact to their operations if legislative proposals moving through Congress pass, financial services firm TD Cowen wrote in a report released Monday.
Yahoo
4 days ago
- Business
- Yahoo
CVS and Express Scripts sued to block a new law restricting drug middlemen
CVS and Cigna-owned Express Scripts filed lawsuits Thursday to block an Arkansas law that tries to curb the power of pharmacy benefit managers (PBMs) in the state. PBMs, also known as drug middlemen, are third-party administrators of prescription drug plans for health insurers. They negotiate with pharmaceutical companies over how much a health plan will pay for a drug and set the out-of-pocket costs for patients. Arkansas Gov. Sarah Huckabee Sanders signed a law last month that banned PBMs from owning and operating pharmacies in the state, saying at the time that they 'have taken advantage of lax regulations to abuse customers.' The legislation came following two reports from the Federal Trade Commission and the House Committee on Oversight and Accountability last year that accused PBMs of reaping massive profits by pushing patients to pay for more expensive drugs, including life-saving cancer medicine. Supporters of the Arkansas law, which goes into effect in January, claimed it would also greatly help independent pharmacies, which can't compete with PBM-owned chains like CVS. In its lawsuit Thursday, CVS said the legislation will force it to close 23 pharmacies in the state, eliminating hundreds of jobs, and claimed the ban would 'drive-up costs for Arkansans.' CVS, which declined to further comment, said in their press release that the law violates the Dormant Commerce Clause, a part of the Constitution that restricts states from discriminating against or unfairly burdening out-of-state businesses. It also said the law violates the company's Equal Protection rights. Susan Peppers, vice president of pharmacy practice for Evernorth Health Services, which runs Express Scripts and is owned by Cigna, said in a press release that 'if this law takes effect in January, hundreds of thousands of Arkansans will be left scrambling to navigate the forced closure of pharmacies and finding new ways to get their medicines and critical clinical support.' While advocates say the law will help rural Arkansans whose local pharmacies can't stay afloat, Express Scripts is claiming the opposite. The law 'could be especially challenging for the more than 40% of Arkansans that live in a rural area and may not have easy access to a retail pharmacy,' it said. In a statement to Quartz, Arkansas Attorney General Tim Griffin defended the legislation. 'Pharmacy benefit managers wield outsized power to reap massive profits at the expense of consumers,' he said. 'Through Act 624, Arkansas is standing up to PBMs on behalf of consumers, and I will vigorously defend our law.' For the latest news, Facebook, Twitter and Instagram.
Yahoo
20-05-2025
- Automotive
- Yahoo
OOIDA's fight against AB5 in California dealt another loss
The last-gasp battle against implementing California's AB5 independent contractor law in the trucking sector has taken what might be its final blow in a federal appellate court. The 9th U.S. Circuit Court of Appeals ruled for the second time that AB5 does not violate various laws that might have kept it from becoming the law of the land in trucking. AB5 has been in effect in numerous other sectors since the start of 2020, though dozens of industries have been granted exceptions from the law. The court, in a six-page decision handed down Friday, made quick work of the arguments of the Owner-Operator Independent Drivers Association in its appeal of a lower court decision from March 2024 that upheld enforcing AB5 in California trucking. The OOIDA lawsuit had roots that went back to a 2019 action by the California Trucking Association against AB5, which OOIDA joined as a co-defendant in November 2023. But after the March 2024 defeat, CTA pulled out of the case, leaving OOIDA to fight on alone in an effort that few trucking attorneys saw as likely to succeed. Legal arguments in OOIDA's effort were different from those in the original push by CTA, which succeeded in putting AB5 on the shelf in trucking for more than two and a half years on the back of a New Year's Eve 2019 injunction. But that lower court injunction was ultimately overturned by the same 9th Circuit court (though with different members on the three-judge panel), and the Supreme Court decision not to review the Circuit Court decision meant that AB5, in the summer of 2022, went into effect in California's trucking market. Since it joined the case with CTA, OOIDA's emphasis in its push against AB5 was on different legal arguments than the CTA case. But the 9th Circuit affirmed the lower court in just six pages. The court in its decision did little more than quote earlier precedents on the issues raised by OOIDA. For example, on the OOIDA claim that AB5 violates the Dormant Commerce Clause of the U.S. Constitution, the appellate court quoted a precedent saying the clause 'is not a roving license for federal courts to decide what activities are appropriate for state and local government to undertake, and what activities must be the province of private market competition.' Quoting another precedent, the panel said the Supreme Court 'has frequently admonished that courts should not second guess the empirical judgments of lawmakers concerning the utility of legislation.' (As a Harvard Law Review article noted last year, the Dormant Commerce Clause has been interpreted by the Supreme Court 'not only as an affirmative grant of power to Congress but also as a restraint on the legislative authority of states.') The OOIDA argument has been that AB5 discriminates between intrastate and interstate drivers, violating the Dormant Commerce Clause. But laying out its own arguments, the appellate court said OOIDA 'implicitly concedes … AB5 does not preclude out-of-state drivers from working in California, nor does it favor in-state drivers at the expense of out-of-state drivers. At worst, AB5 restricts what kind of drivers may operate in California.' OOIDA had argued that the multistep business-to-business exception in AB5 also did not violate the Dormant Commerce Clause. The B2B exception is a high hurdle to meet to prove a driver is truly independent and not effectively an employee. OOIDA's argument was that the B2B exception can only be achieved by an in-state driver given various federal restrictions. But the appellate court said OOIDA did not make its case how the B2B exception was discriminatory 'when the regulations apply to all drivers engaged in interstate commerce, including California-based drivers.' The appellate court said there is no conflict with the Equal Protection Clause of the Constitution, because interstate and intrastate drivers are not treated differently. OOIDA released a statement that it was 'disappointed with this news and assessing options.' The next step would either be to request the 9th Circuit review the decision en banc – a larger number of judges taking up the appeal – or to appeal for review to the Supreme Court. Getting either an en banc or Supreme Court review hearing has a low chance of success. A third option would be for OOIDA to view the 9th Circuit decision as the end of the road for the trucking industry's litigation against implementing AB5 in trucking. AB5 was passed by California lawmakers in 2019 and signed by Gov. Gavin Newsom. Since the day it was signed, trucking's view of the three-step test for determining whether a worker is truly independent or is effectively an employee has focused on the B prong. That section says an independent worker is one who 'performs work that is outside the usual course of the hiring entity's business.' A driver on a lease plan with a trucking company providing work – trucking – that is the usual course of the hiring entity's business was always seen as likely to trip up some carriers. But almost three years after the injunction against AB5 in trucking was lifted, there are no known actions by the state against any carriers for AB5 violations, nor lawsuits from aggrieved drivers claiming AB5 violations. More articles by John Kingston Georgia tort reform aims to change practices in judicial 'hell hole' New Jersey, feds take opposite paths on independent contractor rules State of Freight takeaways: Freight crash may turn into sudden revival The post OOIDA's fight against AB5 in California dealt another loss appeared first on FreightWaves.
Yahoo
22-04-2025
- Automotive
- Yahoo
OOIDA makes now-solo case in court that California's AB5 should exempt trucking
What is likely to be the final industry battle challenging California's AB5 regulation that defines independent contractor status now awaits a ruling from the 9th U.S. Circuit Court of Appeals, which already once upheld the law's jurisdiction over trucking. Oral arguments were heard earlier this month before a three-judge panel. The roughly 40 minutes of questions and answers in the case by the Owner-Operator Independent Drivers Association touched on arguments that had not been heavily discussed previously, in part because the industry was pursuing other lines of attack against applying AB5 to trucking that ultimately fell flat in multiple court decisions following earlier success. For OOIDA, which is carrying on the lawsuit that was originally filed by the California Trucking Association in 2019, the issue is clear: AB5 'categorically prohibits leased owner operators from operating in California,' OOIDA outside counsel Paul D. Cullen Jr. said in his opening remarks. (CTA last August decided not to pursue the appeal to the 9th Circuit.) AB5 went into effect in 2019, defining when a worker can be legally considered an independent contractor and not an employee. At its heart is the ABC test, a three-pronged guidance that the law says should be used in that determination. For the trucking industry, the ABC test has been seen as problematic or an outright ban on drivers who are on a long-term lease to a trucking company because of the B prong, which says a worker can be considered independent if he or she 'performs work that is outside the usual course of the hiring entity's business.' OOIDA's focus has been on drivers on long-term lease to a carrier rather than on drivers who take spot loads, because the former could be seen as performing work that is decidedly not 'outside the usual course of the hiring entity's business.' OOIDA is appealing a March 2024 decision that rejected several arguments, including the CTA's view from early in the litigation that putting trucking under AB5 conflicts with the Federal Aviation Administration Authorization Act. That so-called F4A restricts a state's ability to regulate transportation in a way that would impact a 'price, route or service.' CTA had argued AB5 would violate that prohibition. The lower federal court rejection has left OOIDA with a smaller list of arguments against AB5. Its core push is its broad complaint that AB5 conflicts with the Dormant Commerce Clause of the Constitution. The clause upholds the idea of federal preemption of state laws even if there is no explicit law or regulation governing a particular action. The oral arguments earlier this month focused on several points, including the business-to-business exception in AB5. The B2B exception is a 13-point pathway on which, if all boxes are 'checked,' the question of status can turn to whether the worker is independent enough to pass the Borello test. Borello is a widely used standard for determining independent contractor status that is considered more lenient than AB5 and its ABC test but is still a tough bar to hurdle. Cullen, asked from the bench whether the B2B exception could be a way for a driver to remain as a leased owner-operator, said OOIDA does not believe it can. The issue, he said, is that lease operators are also under the jurisdiction of the federal Truth in Lending Act. Cullen said the act would require the carrier to have exclusive control over the vehicle, which he said is not possible under standard practices in the trucking industry. But that complete control of the carrier under the Lending Act is in direct conflict with the Borello definition of control. 'It's irreconcilable,' he said. Cullen added, however, that intrastate truck owners under lease are not subject to rules governing interstate commerce, setting up a situation where intrastate drivers don't face the conflict between the Lending Act and AB5 but interstate owner-operators do. A question from the bench on the B2B exception indirectly raised an aspect of AB5 in trucking that has been noted by several people: There have not been any known enforcement, regulatory or civil legal actions regarding trucking in AB5 since an earlier injunction against enforcing the law in trucking was lifted in 2022. Samuel Harbourt, the attorney representing California Attorney General Rob Bonta in defending AB5, responded to the judge's question that he did not think any company had been found to be operating under all the provisions in the B2B exception. But what he did not say is that there is no known litigation in which a trucking company, sued for violating AB5, ever tried to use the B2B exception as its defense. The B2B exception appears to be the basis for one of the state's main arguments, offered by Harbourt: Any claim that a person cannot exist as an owner-operator in the state is false. 'The exemption was intended to be a demanding standard for a reason,' Harbourt said, 'which is the California legislature reasonably decided to make the ABC test the central worker classification standard under California law.' Another route around AB5 – the two-check system, which was touted by TransForce soon after the AB5 injunction was lifted in 2022 – received a mild vote of confidence by Robin Tholin. She was representing the Teamsters, added as a defendant with the state earlier in the case. Tholin also cited earlier testimony in the case that AB5 had not been that disruptive to trucking in California. 'There were no changes in indicators like load-to-truck ratios that would be expected from a lack of available drivers,' she said. (The chart below is the five-year SONAR series of the Los Angeles Outbound Tender Rejection Index, a measure of truck capacity.) The two-check system involves a truck owner being hired as an employee and paid a regular wage that generates a W-2 form for tax purposes, satisfying the goals of AB5, while leasing the truck to the company and being paid for maintenance and other costs. Whether the two-check system would comply with AB5 has been a subject of debate; Tholin's comments, from the side of the legal case defending AB5, suggested the state considers it acceptable. Tholin also said that 'if drivers want to be truly independent, they can obtain their own operating authority under the Federal Motor Carrier Safety Administration.' That always has been a suggested route to get around AB5, but it comes with drivers being required to finance many things they now get from the carrier by being leased, such as insurance and the protection of the carrier's motor carrier authority. More articles by John Kingston Another federal circuit weighs broker liability, boosting odds of Supreme Court review Freight fraud everywhere, but Truckstop CEO asks: Is anybody going to jail? A market on the precipice: 5 takeaways from the April State of Freight The post OOIDA makes now-solo case in court that California's AB5 should exempt trucking appeared first on FreightWaves.
Yahoo
03-03-2025
- Business
- Yahoo
A tax on digital advertising will hurt Rhode Island small businesses and consumers
Rhode Island lawmakers have a choice when it comes to a proposed tax on digital advertising, which opponents say could hurt small businesses and consumers. (Photo by Janine L. Weisman/Rhode Island Current) As a former South Dakota State senator, past president of the National Conference of State Legislators, and a Certified Public Accountant, I've seen firsthand how tax policies can either help or hurt a state's economy. The digital advertising tax that is being pushed in Rhode Island Gov. Dan McKee's proposed fiscal 2026 budget is a clear case of the latter — a misguided policy that threatens to harm every small business and consumer in the Ocean State. Advertising isn't just about flashy billboards or catchy jingles; it's a cornerstone of economic activity. An independent study commissioned by the Association of National Advertisers shows that advertising expenditures generate a whopping $22.4 billion in economic activity in Rhode Island alone, supporting over 106,000 jobs. That's 15.5% of all jobs in the state. Taxing digital ads opened Maryland up to litigation. McKee wants Rhode Island to do it anyway. When you tax digital advertising, you're not just targeting faceless tech giants, you're hitting the local coffee shop trying to reach new customers, the family-run bookstore promoting a weekend sale, and the startup striving to make its mark. You might think you're hitting the big guy but you're really just stepping on the little guy. As I noted in my testimony in front of the Senate Finance Committee, because of this tax, small businesses would face tough choices. That is not the fate that legislators should be rooting for when it comes to Rhode Island's small business community. Proponents of this tax argue it's aimed at billion-dollar corporations, but history tells a different story. In France, a similar digital advertising tax ended up passing 55% percent of its burden onto consumers, according to a Deloitte study. Beyond the straight economic impact, this tax is a double whammy for businesses. Rhode Island companies already pay income tax, now they'd be taxed again just for advertising their products and services. This kind of double taxation doesn't just strain businesses —- it discourages them from growing, investing, and hiring. For a state in which business owners already face significant headwinds, this tax could be the final straw for many entrepreneurs. You might think you're hitting the big guy but you're really just stepping on the little guy. Let's not forget the legal minefield this tax creates. Maryland's attempt to implement a similar tax has been tied up in costly legal battles, draining taxpayer dollars with no end in sight. The proposed tax in Rhode Island could face similar challenges, potentially violating the First Amendment, the Dormant Commerce Clause, and federal laws like the Internet Tax Freedom Act. If the courts strike it down, Rhode Island could be on the hook to refund every cent collected, plus interest. With an already challenging fiscal situation on the horizon, that's a gamble the state can't afford to take. Digital advertising has been a game-changer for small businesses, leveling the playing field and allowing them to reach audiences far beyond their local communities. Over the past decade, it's fueled growth and innovation, helping more than 100,000 small businesses in Rhode Island thrive. Taxing this critical tool doesn't just stifle growth —- it sends a message that Rhode Island isn't open for business. A tax on digital advertising isn't just bad policy, it's a step backward. Rhode Island lawmakers have a choice: they can pursue short-sighted revenue grabs that hurt the very people they're supposed to serve, or they can focus on fostering a business-friendly environment that encourages growth, innovation, and prosperity. I urge lawmakers to reject this harmful tax and instead focus on policies that build a stronger, more competitive state. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
