McKee Foods Corp., a commercial bakery that produces Little Debbie snacks, challenged Tennessee's Public Chapter 569 and Public Chapter 1070 after the state attempted to regulate PBM practices affecting its self-funded ERISA health plan. The laws, enacted after the Supreme Court's 2020 Rutledge decision, included any-willing-provider provisions requiring PBMs to include all pharmacies willing to accept network terms and incentive provisions barring differential copays that could steer patients to certain pharmacies. McKee had removed Thrifty MedPlus Pharmacy from its network after an audit revealed billing issues and later created its own company pharmacy offering lower copays to employees.
Circuit Judge Justin Walker found the Tennessee laws went beyond permissible cost regulation and instead "require[d] particular plan structures," "govern[ed] a central matter of plan administration," and "interfere[d] with nationally uniform plan administration." The court distinguished the laws from the Arkansas reimbursement rate regulations upheld in Rutledge, explaining that Tennessee's provisions "diminish, if not outright eliminate, a plan's ability to design its network in a way most accommodating and beneficial to its participants." Walker noted that the any-willing-provider rules "eliminate [any] choice" in plan structure by mandating pharmacy inclusion, while the incentive provisions impermissibly dictate uniform cost-sharing arrangements.
The case began as a dispute between McKee and Thrifty Med over network removal, but expanded when Tennessee intervened and McKee added state officials as defendants. The district court initially dismissed on mootness grounds, but the Sixth Circuit reversed and remanded. Following McKee's amended complaint targeting the state laws, the lower court granted summary judgment for McKee and permanently enjoined enforcement against the company's ERISA plan.
The ruling adds to growing circuit-level precedent limiting state PBM regulation of ERISA plans, joining the Tenth Circuit's similar decision in PCMA v. Mulready. The decision could impact other states' efforts to regulate PBM practices affecting rural pharmacy access, as courts continue to grapple with balancing state healthcare policy goals against federal benefits law uniformity requirements.