Kentucky Suit Against PBMs Warrants Federal, not State, Court Jurisdiction

Case File

Kentucky's claims against pharmacy benefit managers were sufficiently connected to the PBMs' federally directed activities and involved colorable federal defenses. As a result, the PBMs properly removed the action to federal court under the federal officer removal statute.

Case

Commonwealth of Kentucky v. Express Scripts, Inc., No. 25-5866 (6th Cir. 09/08/26)

What Happened?

Kentucky sued two pharmacy benefit managers in state court, alleging that the PBMS "flooded" the commonwealth's prescription drug market with opioids, violating state consumer protection law and creating a public nuisance. Kentucky sought a declaration that the PBMs willfully violated state law, civil monetary payments, a permanent injunction, and a court order requiring abatement of a public nuisance.

The PBMs removed the case to federal court under the 28 USC 1442(a)(1). Kentucky moved to remand, and the District Court granted its motion. Thereafter, the 6th U.S. Circuit Court of Appeals decided Ohio ex rel. Yost v. Ascent Health Services, LLC, 165 F.4th 999 (6th Cir. 2026), which rejected Ohio's similar effort to avoid federal jurisdiction by disclaiming its intent to hold the PBMs liable for federal controlled conduct.

Rule of Law

Under 28 USC 1442, a state-court defendant may remove a lawsuit against "any officer (or any person acting under that officer) of the United States or of any agency thereof, in an official or individual capacity, for or relating to any act under color of such office." The statute permits removal if the defendant establishes that:

(1) He is a federal officer or person "acting under" a federal officer.

(2) The lawsuit targets conduct "for or relating to any act under color of [federal] office."

(3) The lawsuit "involves a colorable federal defense."

What the 6th Circuit Said

Looking to these three factors, the court ruled that removal to federal court was permitted because:

(1) The PBMs acted as a person under a federal officer because the Office of Personnel Management contracted with commercial insurance carriers that subcontracted with the PBMs pursuant to the Federal Employees Health Benefits Act requiring OPM to administer a "comprehensive" health insurance program for federal employees. "Because the PBMs' provision of pharmacy benefit services furthers the government's legal obligations and occurs under federal guidance, the PBMs satisfy [the] 'acting under' prong when they negotiate with drug manufacturers and administer pharmacy benefits for federal health plans," the court wrote.

(2) Kentucky's complaint challenged conduct "for or relating to" the performance of federal duties because there was "little to no daylight between their federal and non-federal conduct" as it pertained to negotiations with drug manufacturers.

(3) The PBMs raised two colorable federal defenses: 1) under Boyle v. United Technologies Corp., 487 U.S. 500 (1998), they were immune from state tort liability for acts they performed in furtherance of their federal contracts; and 2) federal preemption applied because 5 USC 8902(m)(1) directs that contract terms of the plans at issue that "relate to the nature, provision, or extent of coverage or benefits" displace state law on matters that relate to health insurance or plans.

Thus, the 6th Circuit found that the case was properly removed to federal court.

Verdict: The 6th Circuit reversed and remanded the District Court's decision.

Takeaway

States cannot avoid federal jurisdiction simply by framing their claims as attacks on commercial PBM activity when the challenged conduct is part of an integrated system used to administer federal health-benefit programs. Where federal and non-federal operations are closely intertwined and the PBM can assert a colorable federal defense, removal under the federal officer statute is likely available.

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