Can Kentucky enforce its PBM anti-steering law, or does federal ERISA override it, and does it reach out-of-state PBMs?

Plain-English summary

Kentucky passed Senate Bill 188 in 2024 to regulate pharmacy benefit managers (PBMs), the middlemen that build drug formularies, pay pharmacy claims, and set up pharmacy networks for health plans. Section 4 of the bill contains "anti-steering" rules: a plan or PBM cannot push patients toward mail-order or PBM-affiliated pharmacies, cannot discriminate against in-network pharmacies, and has to give pharmacies equal access on identical terms.

After the law passed, the Kentucky Department of Insurance and pharmacy groups disagreed about how far it could be enforced. The Department took the position that the anti-steering provisions were preempted by ERISA, the federal law governing employer benefit plans, and that out-of-state PBMs were generally outside its reach. Senator Max Wise asked the Attorney General two questions: are the anti-steering rules enforceable or preempted, and do they apply to PBMs located outside Kentucky?

The Attorney General concluded that the anti-steering provisions are likely enforceable. Following the U.S. Supreme Court's decision in Rutledge v. Pharmaceutical Care Management Association, the opinion reasons that SB 188 regulates PBMs, not the design of ERISA plans themselves, so it does not "relate to" an ERISA plan in the way that triggers preemption. The opinion also concluded that a PBM based outside Kentucky is still subject to SB 188 when it provides coverage to Kentuckians, because the statute's definitions turn on coverage provided in the state, not on where the PBM or plan is domiciled.

What this means for you

Pharmacists and independent pharmacies: Based on this opinion, the anti-steering protections in Section 4 of SB 188 (now codified at KRS 304.17A-597) are read as enforceable, including the requirements that PBMs offer equal network access on identical reimbursement terms and stop steering patients to affiliated or mail-order pharmacies. The opinion treats those as regulation of PBM conduct rather than ERISA plan design.

PBMs and health insurers: The opinion's view is that being domiciled outside Kentucky does not exempt a PBM from SB 188 when it provides coverage to Kentucky residents. It reasons from the statutory definitions of "health plan" (coverage "in this state") and "pharmacy benefit manager" in KRS 304.9-020(15), neither of which is limited to Kentucky-domiciled entities.

State regulators: The opinion disagrees with the Department of Insurance's preemption position on the anti-steering provisions. It is the Attorney General's opinion, which is persuasive rather than binding, and it expressly notes that a pending Sixth Circuit appeal in McKee Foods Corp. v. BFP Inc. could supply new controlling authority that changes the analysis.

Health-policy attorneys: The opinion is careful to say the anti-steering provisions are "likely" enforceable under Rutledge and that out-of-circuit decisions like Mulready (10th Cir.) and Wehbi (8th Cir.) are persuasive only, not binding in the Sixth Circuit.

Common questions

Q: What does SB 188 actually prohibit?
A: Among other things, it bars insurers, PBMs, and other administrators from requiring or incentivizing patients to use mail-order or PBM-affiliated pharmacies, from penalizing pharmacies for offering a lower-cost alternative, and from discriminating against in-network pharmacies. It also requires equal access and identical reimbursement terms for all pharmacies in the plan's coverage area.

Q: Does federal ERISA law block Kentucky from enforcing these rules?
A: The Attorney General concluded it likely does not. Following Rutledge, the opinion reasons that SB 188 regulates PBMs and pharmacy networks rather than forcing ERISA plans to adopt any particular benefit design, so it does not have the kind of "connection with" or "reference to" ERISA plans that triggers preemption.

Q: What is the Rutledge decision and why does it matter?
A: Rutledge v. Pharmaceutical Care Management Association is a 2020 U.S. Supreme Court ruling that upheld an Arkansas PBM law against an ERISA-preemption challenge. The opinion treats SB 188 as "not meaningfully different" from the Arkansas law Rutledge upheld.

Q: Are PBMs based in other states subject to SB 188?
A: The opinion concluded yes, when they provide coverage to Kentuckians. The statute's definitions of "health plan" and "pharmacy benefit manager" turn on coverage provided in Kentucky, not on where the entity is located.

Q: Is this opinion the final word?
A: No. An AG opinion is persuasive authority, not binding law, and the opinion itself flags a pending Sixth Circuit appeal (McKee Foods Corp. v. BFP Inc.) that could produce controlling authority changing the analysis.

Background and statutory framework

ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" it covers (29 U.S.C. § 1144(a)). A state law "relates to" an ERISA plan if it has a "connection with" or "reference to" such a plan. Under Rutledge and the cases it builds on, a law has an impermissible connection when it requires providers to structure benefit plans in particular ways or when its acute, indirect economic effects force a plan to adopt a certain scheme of substantive coverage; laws that merely affect costs or alter incentives are not preempted. A law has an impermissible "reference to" an ERISA plan when it acts immediately and exclusively on ERISA plans or where the existence of such plans is essential to its operation.

Applying that framework, the opinion reasons that Section 4 of SB 188 regulates third-party PBMs and the pharmacy networks they sell, not the substantive benefits an ERISA plan must provide, so it neither connects with nor references ERISA plans in the preemptive sense. On the out-of-state question, the opinion applies the presumption against extraterritorial operation of statutes recognized in Union Underwear Co. v. Barnhart, then reads SB 188's definitions (coverage "in this state" and the PBM definition in KRS 304.9-020(15)) to reach PBMs serving Kentuckians regardless of domicile, consistent with the directive in KRS 446.080(1) to construe statutes to promote their objects.

Source

• Landing page: https://www.ag.ky.gov/Opinions/Pages/default.aspx
• Original PDF: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG%2025-11.pdf

Original opinion text

September 24, 2025

OAG 25-11

Subject: (1) Are the anti-steering provisions in Section 4 of Senate Bill 188 enforceable or preempted by federal ERISA laws? (2) Are PBMs that are domiciled outside of the Commonwealth, yet doing business within the state, subject to regulation under Senate Bill 188?

Requested by: Senator Max Wise, Kentucky Senate, District 16

Written by: Matthew Cocanougher, Assistant Attorney General

Syllabus: (1) The anti-steering provisions of Senate Bill 188 are likely enforceable under Rutledge v. Pharm. Care Mgmt. Ass'n, 592 U.S. 80, 86 (2020). (2) PBMs that are domiciled outside of Kentucky, but doing business in Kentucky, are subject to regulation under Senate Bill 188 for their coverage impacting Kentuckians.

Opinion of the Attorney General

Senate Bill 188 from the 2024 Regular Legislative Session ("SB 188") is an act regarding pharmacy benefit managers ("PBMs") and patient access to pharmacy benefits. It passed the Senate 35-1, the House of Representatives 97-0 and was signed into law by Governor Andy Beshear on April 5, 2024. While the bill had broad bipartisan support, the Kentucky Department of Insurance ("DOI") and various stakeholders now disagree about its enforcement.

On February 17, 2025, DOI wrote a letter to Dr. Benjamin P. Mudd, Executive Director of the Kentucky Pharmacists Association, expressing the DOI's positions on enforcing SB 188. In response, the Kentucky Pharmacists Association and the Kentucky Independent Pharmacy Alliance sought outside counsel and responded with a letter from attorney Robert T. Smith on March 12, 2025. On June 19, 2025, Senator Wise wrote to Attorney General Russell Coleman seeking an opinion on the two areas at issue, preemption and regulation of out-of-state PBMs. On June 30, 2025, DOI issued DOI Bulletin 2025-03, which confirmed its position on preemption and provided additional information about regulating out-of-state PBMs.

Senator Wise's letter argues the new law should be enforced in its entirety. He cites the enforcement positions of Departments of Insurance for similar laws in other states and Pharm. Care Mgmt. Ass'n v. Wehbi, 18 F.4th 956, 964 (8th Cir. 2021). The DOI argues that portions of the Bill are preempted by the federal Employee Retirement Income Security Act of 1974 ("ERISA"). Specifically, the DOI finds that the "anti-steering" provisions of Section 4 of SB 188 are preempted, citing Pharm. Care Mgmt. Ass'n v. Mulready, 78 F.4th 1183, 1188 (10th Cir. 2023), cert. denied sub nom. Mulready v. Pharm. Care Mgmt., No. 23-1213, 2025 WL 1787716 (U.S. June 30, 2025).

Senator Wise's letter also argues that SB 188 can be enforced on PBMs that are located outside of Kentucky but provide benefits to residents of the Commonwealth. This is in response to the DOI's February 17, 2025, letter stating that it "will generally not exercise control over health care benefit providers who can show that they are subject to another jurisdiction, pursuant to KRS 304.11-045. However, each individual case will involve fact-specific considerations regarding the contract(s) involved and the provider(s) in question."

The DOI's June 30, 2025, bulletin provided additional information on enforcement for out of state PBMs, stating:

…DOI will assert its jurisdiction to assist with resolving PBM-related complaints involving plans (both self-funded and fully funded) that were issued out-of-state, which related to prescriptions filled by Kentucky pharmacies to Kentucky residents. Because this extension of extraterritorial jurisdiction rests solely on the inclusion of specific language with SB 188 – now codified in KRS 304.17A-591 and KRS 304.17A-595 – it will generally be limited to complaints arising under the provisions of that particular bill.

1. Anti-Steering Provisions of SB 188

The "anti-steering" provisions of SB 188 have been described by the parties as Section 4 of SB 188. Section 4 of this Bill is now codified at KRS 304.17A-597 but since the discussions thus far have referred to the sections in the Bill, we will do the same.

Section 4(1)(a) provides prohibitions for an "insurer, a pharmacy benefit manager, or any other administrator of pharmacy benefits". These prohibitions provide that an "insurer, a pharmacy benefit manager, or any other administrator of pharmacy benefits" shall not:

1. Require or incentivize an insured to use a mail-order pharmaceutical distributor, including a mail-order pharmacy;
2. Prohibit a pharmacy or pharmacist from, or impose a penalty on a pharmacy or pharmacist for… selling a lower cost alternative to an insured, if one is available;
3. Discriminate against any pharmacy or pharmacist that is [l]ocated within the geographic coverage area of the health plan; and [w]illing to agree to, or accept, reasonable terms and conditions established for participation in the insurer's, pharmacy benefit manager's, other administrator's, or health plan's network;
4. Impose limits, including quantity limits or refill frequency limits, on an insured's access to medication from a pharmacy that are more restrictive than those existing for a pharmacy affiliate;
5. Require or incentivize an insured to receive pharmacy or pharmacist services from a pharmacy affiliate; or
6. Interfere with an insured's right to choose the insured's network pharmacy of choice.

In addition to the prohibitions of Section 4(1)(a), Section 4(1)(b) provides that an "insurer, a pharmacy benefit manager, or any other administrator of pharmacy benefits" shall provide equal access and incentives to all pharmacies within the insurer's, pharmacy benefit manager's, other administrator's, or health plan's network; and offer all pharmacies located in the health plan's geographic coverage area eligibility to participate in the insurer's, pharmacy benefit manager's, other administrator's, or health plan's network under identical reimbursement terms for the provision of pharmacy or pharmacist services.

2. ERISA and Federal Preemption

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. Of importance here, ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. 29 U.S.C. § 1144(a). "[A] state law relates to an ERISA plan if it has a connection with or reference to such a plan." Egelhoff v. Egelhoff, 532 U.S. 141, 147, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001) (internal quotation marks omitted). Rutledge v. Pharm. Care Mgmt. Ass'n, 592 U.S. 80, 86 (2020).

Rutledge advised "[t]o determine whether a state law has an 'impermissible connection' with an ERISA plan, this Court considers ERISA's objectives "as a guide to the scope of the state law that Congress understood would survive." California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc., 519 U.S. 316, 325, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997) (internal quotation marks omitted). ERISA was enacted "to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures." Gobeille v. Liberty Mut. Ins. Co., 577 U. S. 312, 320–321 (2016). In pursuit of that goal, Congress sought "to ensure that plans and plan sponsors would be subject to a uniform body of benefits law," thereby "minimiz[ing] the administrative and financial burden of complying with conflicting directives" and ensuring that plans do not have to tailor substantive benefits to the particularities of multiple jurisdictions. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990).

As explained by Rutledge:

ERISA is therefore primarily concerned with pre-empting laws that require providers to structure benefit plans in particular ways, such as by requiring payment of specific benefits, Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), or by binding plan administrators to specific rules for determining beneficiary status, Egelhoff, 532 U.S. 141. A state law may also be subject to pre-emption if "acute, albeit indirect, economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage." Gobeille, 577 U.S. at 320, 136 S.Ct. 936 (internal quotation marks omitted). As a shorthand for these considerations, the Rutledge court asked whether a state law "governs a central matter of plan administration or interferes with nationally uniform plan administration." If it does, it is pre-empted.

Rutledge, 592 U.S. at 86-87.

However, "not every state law that affects an ERISA plan or causes some disuniformity in plan administration has an impermissible connection with an ERISA plan. That is especially so if a law merely affects costs…In short, ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage." Id. at 87-88.

3. SB 188 under Rutledge

We are aware of several federal decisions applying Rutledge to various state laws regulating PBMs. See generally Pharm. Care Mgmt. Ass'n v. Wehbi, 18 F.4th 956 (8th Cir. 2021); Pharm. Care Mgmt. Ass'n v. Mulready, 78 F.4th 1183, 1188 (10th Cir. 2023), cert. denied sub nom. Mulready v. Pharm. Care Mgmt., 2025 WL 1787716 (U.S. June 30, 2025); and McKee Foods Corp. v. BFP Inc., 2025 WL 968404 (E.D. Tenn. Mar. 31, 2025). However, none of these decisions are from the U.S. Court of Appeals for the Sixth Circuit. While both federal and state courts in Kentucky may draw upon precedent from these courts for persuasive authority, opinions from outside the Sixth Circuit are not binding on them. See generally General Motors v. Woods, 699 S.W.3d 874, 880 (Ky. App. 2024); Embs v. Pepsi–Cola Bottling Co. of Lexington, Ky., Inc., 528 S.W.2d 703, 705 (Ky.1975); Kindred Nursing Centers Ltd. P'ship v. Cox, 486 S.W.3d 892, 896 (Ky. App. 2015). Similarly, while arising within the Sixth Circuit and raising substantially similar ERISA preemption issues related to Tennessee's PBM law, the opinion of the District Court in McKee Foods Corp. v. BFP Inc. is currently on appeal to the Sixth Circuit. Accordingly, while acknowledging that the ultimate ruling in that case may provide new controlling authority that could impact our analysis, until the Sixth Circuit decides that appeal, we are left to rely on the Supreme Court's framework in Rutledge as examined below.

A. "Relate to" Analysis

To "relate to" an ERISA plan, a law must either have a "connection with" or "reference to" such a plan. Rutledge at 86 (quoting 29 U.S.C. § 1144). "Connection with" preemption arises when either a law "require[s] providers to structure benefit plans in particular ways," or "'acute, albeit indirect, economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage.'" Id. at 86–87 (quoting Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 320, 136 S.Ct. 936, 194 L.Ed.2d 20 (2016)).

"[C]reating inefficiencies alone is not enough to trigger ERISA pre-emption," so a state law that "merely affects [the] costs" of providing benefits will still be enforceable, ERISA notwithstanding. Rutledge, 592 U.S. at 87, 91. State law reaches innumerable matters that can and do "alter" the "incentives" of providing employee fringe benefits. Id. at 88; see Self-Ins. Inst. of Am., Inc. v. Synder (SIIA II) 827 F.3d 549, 558–59 & n.3 (6th Cir. 2016); Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550, 555 (6th Cir. 1987). "ERISA . . . does not 'create a state-law-free zone around everything that affects an ERISA plan.'" SIIA II, 827 F.3d at 555 (quoting Associated Builders, 543 F.3d at 284).

Proper exercises of state police power will inevitably "cause[] some disuniformity in plan administration" and push employers "to limit benefits or charge plan members higher rates." Rutledge, 592 U.S. at 87, 91. ERISA "connection with" preemption avoids a situation where plans must "keep certain records in some States but not in others; . . . make certain benefits available in some States but not in others; . . . process claims in a certain way in some States but not in others; [or] comply with certain fiduciary standards in some States but not in others." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987). When state law stops short of imposing such direct administrative burdens or otherwise "forcing plans to adopt any particular . . . substantive coverage," it will not be preempted for having an impermissible connection with ERISA plans. Rutledge, 592 U.S. at 88.

Section 4 of SB 188 does not "require providers to structure benefit plans in particular ways." Rutledge, 592 U.S. at 86-87. This is because a state law that regulates third-party PBMs does "not directly regulate health benefit plans at all, ERISA or otherwise." Id. at 88-89 (emphasis added). ERISA does not regulate the providers of goods and services to plans. It also does not purport to regulate the relationships between third-party providers and other third parties (i.e., PBMs and pharmacies). It certainly does not displace generally applicable state laws in areas, like these, "where ERISA has nothing to say." Dillingham, 519 U.S. at 330.

As applied to PBMs, the provisions of Section 4 of SB 188 are not meaningfully different from the Arkansas law at issue in Rutledge. Kentucky's provisions, like Arkansas's, limit the services "a plan might prefer that PBMs" are permitted to offer. Rutledge, 592 U.S. at 90. But insofar as they regulate the pharmacy networks that PBMs sell to plans, Kentucky's laws, like Arkansas's, do "not require plans to provide any particular benefit to any particular beneficiary in any particular way." Id. (emphasis added). They do not "force[] [ERISA] plans" to make any specific choices about which benefits to offer or who is eligible for coverage. Id. Rather, they regulate which services a PBM may offer and the rates a PBM may charge.

In Rutledge, for example, the Supreme Court rejected PCMA's challenge to a law authorizing a pharmacy to decline to dispense a drug if a PBM is going to reimburse the pharmacy less than the pharmacy's cost to acquire the drug. 592 U.S. at 91; see Ark. Code § 17-92-507(e). The PBMs argued this provision "effectively denies plan beneficiaries their benefits" and rendered the pharmacy out of network for a particular drug. Rutledge, 592 U.S. at 91. But the Court held the law did not regulate "plan design" in any impermissible way, and it emphasized that "state-law mechanisms" govern the relationship between PBMs and pharmacies. Id. at 90-91. Based on Section 4 of SB 188, PBMs are still free to establish multi-tiered pharmacy networks, and they can require pharmacies to meet PBM-imposed standards to participate in those networks. They cannot, however, discriminate among pharmacies when inviting them to participate on the PBMs' terms, whether by denying access to the network or by showing special treatment to PBM-favored pharmacies. Section 4 of SB 188 regulates PBM administration, not ERISA plan administration. It does not "relate to" ERISA in the first instance.

Further, Rutledge provides that ERISA may preempt a state law "if acute, albeit indirect, economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage" or if a state law forces a plan "to tailor substantive benefits to the particularities of multiple jurisdictions." Rutledge, 592 U.S. at 86-87 (emphasis added). This raises the question, what are the "substantive coverage" or "substantive benefits" Rutledge is describing? In the context of prescription-drug programs referenced in SB 188, these terms most naturally refer to the formulary: the pre-agreed list of drug products the insurer has agreed to help purchase. SB 188 does not dictate the contents of formularies or prevent the construction of pharmacy networks. Instead, it simply requires that network participation be applied to all pharmacies equally once those formularies and networks are established by the plan.

Similarly, Section 4 of SB 188 does not force insurers to cover certain conditions or make available certain types of drugs. Washington Physicians Serv. Ass'n v. Gregoire, 147 F.3d 1039, 1047 (9th Cir. 1998). Instead, the covered drugs will be the same regardless of what pharmacy sells them. Rutledge, 592 U.S. at 88. State laws have no connection with ERISA plans unless they "bind employers or plan administrators to particular choices" regarding substantive benefits. Coyne & Delaney Co. v. Selman, 98 F.3d 1457, 1468 (4th Cir. 1996) (citing Travelers, 514 U.S. at 659); see Rutledge, 592 U.S. at 86–87. The laws at issue here do no such thing.

B. "Reference to" Analysis

"Reference to" preemption arises in a different set of circumstances, namely "where a State's law acts immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law's operation[.]" Gobeille, 577 U.S. at 319–20, 136 S.Ct. 936. In Rutledge, the Court concluded that the Arkansas law did not act immediately and exclusively upon ERISA plans because the law applied to "PBMs whether or not they manage[d] an ERISA plan." Id. In contrast, in Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 828-29 (1988), the Court found that the state law was preempted because it expressly referred to and solely applied to ERISA plans. See also D.C. v. Greater Washington Bd. of Trade, 506 U.S. 125, 130 (1992) ("Section 2(c)(2) of the District's Equity Amendment Act specifically refers to welfare benefit plans regulated by ERISA and on that basis alone is pre-empted."). SB 188 does not expressly refer to or solely apply to ERISA plans. See Section 1(2), defining "Health plan" as "…any policy, certificate, contract, or plan that offers or provides covering in this state for pharmacy or pharmacist services, whether the coverage is by direct payment, reimbursement, or otherwise." (emphasis added). Accordingly, it is not preempted on that basis either.

4. Reach of SB 188 on Out-of-State PBMs

The second question at issue is whether PBMs that are domiciled outside of the Commonwealth, yet doing business within Kentucky, are subject to regulation under SB 188. The DOI's June 30, 2025, bulletin provided the following on enforcement for out-of-state PBMs:

…DOI will assert its jurisdiction to assist with resolving PBM-related complaints involving plans (both self-funded and fully funded) that were issued out-of-state, which related to prescriptions filled by Kentucky pharmacies to Kentucky residents. Because this extension of extraterritorial jurisdiction rests solely on the inclusion of specific language with SB 188 – now codified in KRS 304.17A-591 and KRS 304.17A-595 – it will generally be limited to complaints arising under the provisions of that particular bill.

Under the "extraterritoriality canon," it must be presumed that a statute has no extraterritorial application. Scalia & Garner, Reading Law: The Interpretation of Legal Texts (West 2012), at 268–72; see also Restatement (First) of Conflict of Laws § 57 (1934) (observing that, in general, "a state cannot exercise executive jurisdiction within the territory of another state"). Kentucky law has embraced "the well-established presumption against extraterritorial operation of statutes." Union Underwear Co. v. Barnhart, 50 S.W.3d 188, 190 (Ky. 2001). In other words, "unless a contrary intent appears within the language of the statute, we presume that the statute is meant to apply only within the territorial boundaries of the Commonwealth." Id. (citation omitted). Kentucky courts do not infer the extraterritorial reach of a statute "absent a positive showing . . . that the General Assembly intended that the Act be applied extraterritorially." Id. at 191. And the statutory use of broad adjectives such as "any" and "all" when referring to persons covered by the law "does not imply that the enacting legislature intended that the legislation be applied extraterritorially." Id. (emphasis in original).

While being mindful of potential extraterritoriality issues, we must turn to the statutory text to determine the reach of SB 188. "All statutes of this state shall be liberally construed with a view to promote their objects and carry out the intent of the legislature[.]" KRS 446.080(1).

"In construing statutes, our goal, of course, is to give effect to the intent of the General Assembly. We derive that intent, if at all possible, from the language the General Assembly chose, either as defined by the General Assembly or as generally understood in the context of the matter under consideration. . . . We presume that the General Assembly intended for the statute to be construed as a whole, for all of its parts to have meaning, and for it to harmonize with related statutes. . . . We also presume that the General Assembly did not intend an absurd statute or an unconstitutional one. . . ." Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 551 (Ky. 2011) (citations omitted). Where a statute is ambiguous, the "time-honored canons of statutory construction" may be helpful in arriving at the statute's meaning. Jefferson Cnty. Bd. of Educ. v. Fell, 391 S.W.3d 713, 720 (Ky. 2012); see Shawnee, 354 S.W.3d at 551 ("Only if the statute is ambiguous or otherwise frustrates a plain reading, do we resort to extrinsic aids such as . . . the canons of construction[.]")

SB 188 focuses on health plans that provide coverage within the Commonwealth. See SB 188, Section 1(2)(a). The definition of "Health Plan" is "…any policy, certificate, contract, or plan that offers or provides coverage in this state for pharmacy or pharmacist services, whether the coverage is by direct payment, reimbursement, or otherwise." (emphasis added). Throughout the rest of the definitions section, there are no limitations as to whether a Health Plan is domiciled within or outside Kentucky and no provisions that limit issuers to issuing only Kentucky-domiciled plans.

PBMs are defined in KRS 304.9-020(15) as:

"Pharmacy benefit manager" means an entity that, on behalf of a health benefit plan, state agency, insurer, managed care organization providing services under KRS Chapter 205, or other third-party payor: (a) Contracts directly or indirectly with pharmacies to provide prescription drugs to individuals; (b) Administers a prescription drug benefit; (c) Processes or pays pharmacy claims; (d) Creates or updates prescription drug formularies; (e) Makes or assists in making prior authorization determinations on prescription drugs; (f) Administers rebates on prescription drugs; or (g) Establishes a pharmacy network;

This definition does not exclude PBMs from administering out-of-state plans with Kentucky beneficiaries. Based on the plain language of SB 188, nothing suggests that a PBM that satisfies the applicable statutory definitions and provides coverage to Kentuckians would be exempt from the statutory requirements generally. Therefore, a PBM is subject to SB 188 where it provides coverage to Kentuckians, regardless of where the plan is domiciled.

In sum, it is the opinion of this Office that the anti-steering provisions of Section 4 of SB 188 are enforceable under Rutledge v. Pharm. Care Mgmt. Ass'n, 592 U.S. 80, 86 (2020). It is also the opinion of this Office that PBMs that are domiciled outside of Kentucky, but doing business in Kentucky, are subject to regulation under SB 188 for their coverage impacting Kentuckians.

Russell Coleman
Attorney General

Matthew Cocanougher
Assistant Attorney General