Health Law Daily Wrap Up, PRESCRIPTION DRUGS—2d Cir.: District court erred in ordering remand based on disclaimers of federal conduct claims, (Sep 10, 2026)

By Jeffrey H. Brochin, J.D.

Disclaimers as to federal conduct were ineffective in preventing removal because the claims targeted indivisible conduct performed by pharmacy benefit managers and implicated similarly indivisible harms.

The United States Court of Appeals for the Second Circuit has reversed the decisions of the district courts that relied on disclaimers as to federal conduct when ordering removed cases back to state court. The disclaimers failed to defeat federal officer removal jurisdiction because they failed to negate the pharmacy benefit managers’ (PBMs) indivisibility theory, where the PBMs plausibly claimed that the challenged conduct, namely, the negotiation of rebates with opioid manufacturers, was a single negotiation across both the federal and non-federal programs, and they did not have separate rebate agreements for the federal and non-federal programs (County of Westchester v. Express Scripts, Inc., No. 24-1639-cv(L) (2d Cir. Sept. 2, 2026)).

Alleged role in opioid crisis. Numerous counties and municipalities across New York sued Express Scripts, Inc. and OptumRx, Inc. (PBMs) in dozens of state court lawsuits in New York, asserting state law claims based on allegations that the PBMs bore responsibility for the local impact on their communities from the nationwide opioid epidemic. Specifically, the plaintiffs claimed that the PBMs’ formulary coverage affected how much a patient pays for a drug and used the formularies to steer patients toward certain drugs over others based on lucrative rebates negotiations. The PBMs therefore served as “the gatekeepers to the vast majority of opioid prescriptions filled in the United States.”

The PBMs removed the lawsuits to the United States District Court for the Eastern District of New York, and the Southern District of New York, under the federal officer removal statute, 28 U.S.C. § 1442(a)(1), based on their contention that the alleged conduct was done at least in part pursuant to their work as PBMs on behalf of agencies or entities (e.g., TRICARE, VHA, FEHBP) that were part of the federal government, and their intention to rely on federal defenses.

Disclaimers and remand. The plaintiffs then sought to disclaim the federal aspects of the PBMs’ conduct via amended complaints, and the district courts remanded the cases back to state court in light of those disclaimers. Upon appeal by the PBMs, the issue before the court was whether such disclaimers could be effective in defeating federal officer removal. For the reasons stated below, the court determined that such disclaimers could not in fact be effective to defeat Section 1442(a) removal.

Removal provision. Section 1442(a)(1) authorizes “the United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof” to remove actions “for or relating to any act under color of such office.” The Supreme Court has distilled the statute into three elements, permitting removal of cases to federal court by a litigant who (1) is a person acting under a federal officer, such as certain private parties hired to assist federal officers, (2) is being sued for an act taken for or relating to any act under color of such office, and (3) asserts a colorable federal defense.

The statute is to be liberally construed, and it allows suits against federal officers to be removed despite the non-federal cast of the complaint and reflects a congressional policy that federal officers (and indeed the federal government itself), require the protection of a federal forum. The intention is to guard against a state court adjudication of a federal defense ‘paralyzing’ the operations of the government.

Indivisibility of conduct. The PBMs argued that reversal of the remands to state court was warranted because the plaintiffs’ disclaimers were factually and legally ineffective in eliminating the basis for federal-officer jurisdiction, due to the indivisible nature of the alleged conduct and harms. The PBMs had removed the cases on the basis that the plaintiffs sought to hold them liable for actions they took on behalf of their TRICARE, FEHBP, and VHA clients; in other words, actions they were required to perform at the direction and supervision of the federal government. They further maintained that the disclaimers could not possibly prevent federal-officer jurisdiction because they conducted singular rebate negotiations with opioid manufacturers on behalf of all clients—federal and non-federal plans alike—and entered into singular rebate contracts that governed both types of plans.

The plaintiffs countered that in disclaiming all claims based on the PBMs’ conduct on behalf of federal programs (and any resulting harms) the disclaimers were sufficiently “specific and comprehensive” to render Section 1442(a)(1) inapplicable.

Sister circuits. The court agreed with the PBMs, and in support of that position observed that a growing body of cases before its sister circuits were finding such disclaimers to be ineffective in the context of lawsuits against PBMs arising from the opioid epidemic.

Here, the plaintiffs’ disclaimers similarly failed to defeat federal officer removal jurisdiction because they failed to negate the PBMS’ indivisibility theory: the PBMs plausibly claimed that the challenged conduct—namely, the negotiation of rebates with opioid manufacturers—was a single negotiation across both the federal and non-federal programs. The PBMs further claimed that they did not have separate rebate agreements for the federal versus non-federal programs. Accordingly, under the theory of the case, the targeting of the rebate negotiations necessarily implicated federal conduct, because it was the same conduct at issue for the federal and non-federal programs.

Based on the foregoing, the court concluded that the disclaimers were ineffective in defeating federal officer removal jurisdiction, and it therefore reversed the district courts’ remand orders, and remanded the cases for further proceedings consistent with the opinion.

The case is No. 24-1639-cv(L).

Judge: Bianco, J.

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