Ninth Circuit Dismisses Pharmacy Benefit Managers' First Amendment Challenge to California Statute Mandating Disclosure of Pharmacies' Retail Drug Pricing Plan - Beeman V. Anthem Prescription Management1

By Pezzolo, William | American Journal of Law & Medicine, October 1, 2011 | Go to article overview

Ninth Circuit Dismisses Pharmacy Benefit Managers' First Amendment Challenge to California Statute Mandating Disclosure of Pharmacies' Retail Drug Pricing Plan - Beeman V. Anthem Prescription Management1


Pezzolo, William, American Journal of Law & Medicine


Ninth Circuit Dismisses Pharmacy Benefit Managers' First Amendment Challenge to California Statute Mandating Disclosure of Pharmacies' Retail Drug Pricing Plan - Beeman v. Anthem Prescription Management - The United States Court of Appeals for the Ninth Circuit held that a California statute,2 which requires pharmacy benefit managers (PBMs) to disclose the findings of a biannual drug pricing study to insurers, did not violate the First Amendment.3

PBMs are business entities that act as intermediaries between pharmacies and insurers.4 They reimburse pharmacies for submitted claims according to a networkwide rate that is lower than the rate generally paid by the pharmacies' uninsured, cash-paying customers.5 California Civil Code section 2527 compels PBMs to report pharmacies' pricing for private uninsured customers to insurers.6 This allows insurers to compare the PBMs' reimbursement rates against the prices that pharmacies actually charge customers.7

Plaintiffs, retail pharmacy owners in California, brought a class action suit against the defendant PBMs ("Defendants") to enforce California Civil Code sections 2527 and 2528.8 In response, Defendants argued that compelled disclosures, which force individuals to endorse a viewpoint contrary to their own, are unconstitutional under the free speech provisions of the United States and California Constitutions.9 Defendants asserted that the publication of biannual studies coerced them into supporting a measure that was inimical to their fiscal interests.10 By forcing the Defendants to highlight their lower reimbursement rates, section 2527 turned the Defendants into unwilling advocates for higher pharmaceutical reimbursement rates.11 Nonetheless, the district court rejected this argument and denied the Defendants' motion for summary judgment on the unconstitutionality of section 2527.12

The Ninth Circuit affirmed the district court, finding that section 2527 did not implicate the First Amendment because it compelled, rather than restricted, purely factual speech.13 The court held that section 2527 only required the Defendants to report statistical information as an informational exercise.14 It did not require a subjective analysis of the study's results, nor did it compel the Defendants to endorse the findings as indicative of a larger message or meaning.15

The Ninth Circuit held that compelled speech, be it opinion or fact, will "implicate the First Amendment only if [it] affect[s] the content of the message or speech by forcing the speaker to endorse a particular viewpoint or by chilling or burdening a message that the speaker would otherwise choose to make."16 Defendants could both comply with section 2527 and "directly discourage" increasing reimbursements to pharmacies.17 Therefore, the statute did not violate the First Amendment because it did not circumscribe the Defendants' ability to independently comment on the biannual reports.18

The Supreme Court's recent First Amendment pronouncement in Sorrell v. IMS Health Inc. sits in tension with the Ninth Circuit's decision.19 Sorrell struck down a Vermont statute that restricted the disclosure of factual information20 "similar" to the speech compelled by section 2527.21 The Court noted that the "First Amendment protects even dry information, devoid of advocacy, political relevance, or artistic expression" because even these pieces of factual information convey messages.22

The Ninth Circuit, however, elected to depart from the Supreme Court's stance in Sorrell, claiming that "the compulsion of factual speech is 'quite different from' the prohibition of such speech."23 Defendants retained the ability to comment on the compelled speech distinguishing Jerry Beeman from other challenges restricting speech.24 In the instant case, Defendants could still "encourage action or inaction on the basis of the statistics" or "say that the [fee] report is worthless, sent only under government mandate," as opposed to having their message completely silenced. …

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