Background
Kentucky sued Express Scripts, OptumRx, and related companies in state court, alleging that the pharmacy benefit managers contributed to the opioid crisis by securing preferred formulary placement for prescription opioids in exchange for rebates, fees, and other payments from drug manufacturers. The Commonwealth asserted state consumer-protection and public-nuisance claims and sought declaratory and injunctive relief, civil penalties, and nuisance abatement.
The PBMs removed the case under the federal officer removal statute, relying on their work administering pharmacy benefits for federal employees, TRICARE beneficiaries, veterans, and their families. The district court remanded the case after concluding that Kentucky had disclaimed liability for conduct undertaken at the direction of federal officers. While the appeal was pending, the Sixth Circuit rejected a similar disclaimer in Ohio ex rel. Yost v. Ascent Health Services, LLC.
The Court’s Holding
The Sixth Circuit held that the PBMs properly removed the case under 28 U.S.C. § 1442(a)(1). Express Scripts and Optum acted under federal officers because they performed pharmacy-benefit functions that federal agencies otherwise would have had to perform, and they did so under extensive federal contractual supervision and control.
Kentucky’s claims related to federally supervised conduct because the PBMs conducted unified negotiations with drug manufacturers for federal and non-federal clients, making the challenged rebate and formulary practices indivisible. The PBMs also presented colorable federal defenses, including government-contractor immunity and preemption under FEHBA, TRICARE, ERISA, and Medicare Part D. Kentucky’s disclaimer could not defeat removal, and the possibility of later amending the complaint did not alter jurisdiction over the complaint as pleaded. The court reversed the remand order and returned the case to the district court.
Key Takeaways
- A PBM may act under a federal officer when it administers federal pharmacy benefits under detailed federal contracts, oversight, and control.
- A state cannot defeat federal officer removal merely by disclaiming recovery for federal conduct when the challenged federal and non-federal business practices are indivisible.
- Removal requires only a colorable federal defense, not proof that the defense will ultimately prevail.
Why It Matters
The decision confirms that opioid-related claims attacking PBMs’ nationwide rebate negotiations and formulary practices may proceed in federal court when those practices also serve federally administered health programs. It extends the Sixth Circuit’s reasoning in Yost to Kentucky’s lawsuit and aligns the court with other circuits addressing similar PBM litigation.
The ruling concerns the proper forum, not whether Kentucky’s allegations are meritorious or whether the PBMs’ federal defenses will succeed. Kentucky may still seek leave to amend its complaint, but the existing pleading supplies federal jurisdiction.