Health Law Daily Wrap Up, PRESCRIPTION DRUGS—4th Cir.: West Virginia’s claims against CaremarkPCS Health merit federal jurisdiction, (Jun 17, 2025)

By Leah S. Poniatowski, J.D.

Sister federal appellate circuit’s “sound reasoning” in similar lawsuits challenging increase in diabetes medication supported federal officer removal jurisprudence.

West Virginia’s lawsuit against Caremark PCS Health, LLC, for using illegal means to increase the price of insulin did implicate the federal officer removal statute to support removing the state-filed action to federal court, the U.S. Court of Appeals for the Fourth Circuit ruled, reversing the lower court and remanding the case to the federal district court (State of West Virginia v. CaremarkPCS Health, L.L.C., No. 24-1924 (4th Cir. Jun. 12, 2025)).

Background. CaremarkPCS Health, LLC, is a nationwide pharmacy benefit manager (PBM). Recently, several states filed lawsuits against the company asserting that diabetes medication prices had increased unlawfully. In the case at bar, West Virginia premised its lawsuit on state law claims, but CaremarkPCS sought to remove the matter to federal court under 28 U.S.C. § 1442(a)(1), the federal officer removal statute. CaremarkPCS argued that its rebate negotiating work was on behalf of the United States. The federal district court disagreed and remanded the lawsuit to state court. CaremarkPCS filed the present appeal to the U.S. Court of Appeals for the Fourth Circuit, asking to remove the case to federal court.

Federal officer removal. The panel explained that the federal officer removal statute provides “a federal forum for any action against an ‘officer (or any person acting under that officer) of the United States . . . for or relating to any act under color of such office.” Applicable case law holds that the congressional promise is broad and mandates a liberal construction. Further, the well-pleaded complaint rule is not effective when the federal officer removal statute applies, the panel stated, citing U.S. Supreme Court rulings which hold that federal jurisdiction is proper even if the core of the complaint is cast as not being a federal issue.

Federal disclaimer. West Virginia asserted that its claims are wholly rooted in state law and, thus, disclaim any federal connection in order to maintain jurisdiction in the state court. Although this was persuasive to the lower court, the appellate panel explained that the federal officer removal statute is an “absolute” right to removal when there is sufficient evidence that the party worked on behalf of the federal government.

Turning to recent decisions in similar lawsuits filed against CaremarkPCS in the First and Ninth Circuits, the panel agreed with the reasoning in those decisions that disclaimers could not defeat the federal officer removal statute because the work performed by CaremarkPCS could not be “disaggregated from its work for the federal government.”

Validity of removal. The panel examined whether CaremarkPCS stated a valid federal officer removal action. The applicable standard, as provided by controlling case law, is whether the party sufficiently alleged: (1) that it acted under a federal officer; (2) that it has a colorable federal defense; and (3) that the charged conduct was carried out for or in relation to the asserted official authority.

First, CaremarkPCS contended that it acts under a federal officer through its rebate negotiations with manufacturers because it also negotiates on behalf of federal clients, whose plans are governed by the Federal Employees Health Benefits Act (“FEHBA”). FEHBA deputizes the Office of Personnel Management (“OPM”) to administer the act and authorizes OPM to contract with private carriers for federal employees’ benefits Thus, when CaremarkPCS negotiates rebates with manufacturers, all of its clients are impacted by its actions. Because the OPM exerts some control over CaremarkPCS and CaremarkPCS carries out OPM’s duties to administer health insurance, the first element was met.

Second, the panel held that CaremarkPCS’ notice of removal met the “colorable federal defense” threshold because it was plausible that CaremarkPCS’s federal preemption defense would succeed. The panel noted the contract terms between OPM and CaremarkPCS was sufficient to meet the low threshold.

Finally, the panel held that CaremarkPCS met the federal nexus requirement. Similar to the second element, the defendant’s theory of the case is credited when evaluating if there is a nexus and the defendant needs to show plausibility of success. Central to West Virginia’s case is the allegation that CaremarkPCS was involved in a conspiracy to inflate insulin prices. Because that action involved negotiating rebates for all of its clients and, thus, is “related to” its work on behalf of the government. Therefore, the lower court’s ruling was reversed and CaremarkPCS may proceed in federal court.

The case is No. 24-1924.

Judge: Agee, G.

Attorneys: Anthony J. Majestro (Powell & Majestro, PLLC) for State of West Virginia and Mark A. Hunt. Jordan Lee Damron (Carey Douglas Kessler & Ruby, PLLC) for CaremarkPCS Health, L.L.C.

Companies: CaremarkPCS Health, L.L.C.

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