Indivisible PBM Drug-Price Negotiations Trigger Federal Officer Removal Despite State Disclaimers

1. Introduction

Ohio sued multiple healthcare entities, including Pharmacy Benefit Managers (“PBMs”) Express Scripts and Prime Therapeutics, in state court. The complaint alleged conspiratorial and deceptive practices that allegedly inflated prescription drug list prices and imposed retroactive pharmacy fees—conduct framed as violations of Ohio antitrust and consumer-protection laws.

Two PBMs removed under the federal officer removal statute, asserting that Ohio’s claims necessarily implicated PBM drug-price negotiations performed under federal direction for FEHBA (federal employees) and TRICARE (military beneficiaries). Ohio moved to remand, disavowing any challenge to “the operation or administration” of FEHB/TRICARE. The district court remanded; the Sixth Circuit reversed.

Core issue: Whether a State can defeat federal officer removal by disclaiming federal-program liability when the challenged conduct (PBM negotiations) is alleged by defendants to be a single, integrated negotiation undertaken for both federal and non-federal clients, and when the complaint’s theory targets negotiation-driven price inflation.

2. Summary of the Opinion

The Sixth Circuit held that removal was proper under 28 U.S.C. § 1442(a)(1) because:

• The PBMs are “person[s] acting under” federal officers due to extensive federal control and supervision in FEHBA and TRICARE contracting.
• Ohio’s claims are “for or relating to” acts under color of federal office because the complaint targets the substance and effects of negotiations that, under the PBMs’ credited theory, were conducted as a single negotiation for all clients (including federal ones).
• The PBMs asserted colorable federal defenses—primarily FEHBA and TRICARE preemption.

The court rejected Ohio’s disclaimer as ineffective where it would require the state court to decide whether the challenged conduct is federally connected and where the conduct is alleged to be indivisible and backward-looking (damages for past negotiations). The case was reversed and remanded for federal adjudication.

3. Analysis

3.1 Precedents Cited (and How They Shape the Rule)

A. The purpose and posture of federal officer removal

• Bradford v. Harding: Cited for the proposition that § 1442 protects governmental interests—avoiding interference with federal operations—even while not impugning state court competence.
• Colorado v. Symes and Printz v. United States: Used to underscore that removal is not premised on distrust of state courts; rather, it is a structural safeguard.
• Tennessee v. Davis: The canonical justification—state proceedings could “paralyze the operations of the government,” and removal ensures a federal forum for federal defenses.
• Dart Cherokee Basin Operating Co. v. Owens and Hudak v. Elmcroft of Sagamore Hills: Establish pleading-stage standards for evaluating removal allegations and de novo review of remand.

B. “Acting under” a federal officer (private entities and control)

• Watson v. Philip Morris Cos. and Maryland v. Soper: Supply the controlling test—private parties “act under” when assisting a federal superior in carrying out duties, within a relationship of “subjection, guidance, or control,” often as contractors doing work the government would otherwise do.
• Bennett v. MIS Corp.: Sixth Circuit benchmark for contractor removal where the federal agency exercised “detailed regulation, monitoring, [and] supervision.” The court analogized PBMs’ FEHBA/TRICARE constraints (pricing rules, rebate pass-through, audits, network requirements) to Bennett’s level of federal control.
• Mays v. City of Flint: The contrasting case—mere “dialogue” and coordination between state and federal entities did not create “acting under.” The Sixth Circuit treated PBMs as much closer to Bennett than Mays because federal agencies dictated contractual parameters and auditing rights.
• Cnty. Bd. of Arlington Cnty. v. Express Scripts Pharmacy, Inc.: Fourth Circuit support that TRICARE contracting can satisfy “acting under” given extensive Department of Defense control.
• Ohio State Chiropractic Ass'n v. Humana Health Plan Inc.: Distinguished. Medicare Advantage entities were characterized as a private alternative the government could abandon; FEHBA drug-price negotiation is integral to a continuing statutory obligation.
• Graves v. 3M Co.: Distinguished as a case where claims were limited to non-federal (commercial) warnings/instructions rather than the federally directed design work; the Sixth Circuit suggested Ohio’s complaint, by targeting negotiations and list-price effects, did not similarly isolate non-federal conduct.

C. “For or relating to” acts under color of office (2011 expansion)

• Morales v. Trans World Airlines, Inc. and FMC Corp. v. Holliday: Used to establish that “relate to” is “conspicuous for its breadth,” supporting the broad “connected in some way” understanding after the 2011 amendment.
• Willingham v. Morgan: Central for two propositions: (1) the removal inquiry focuses on the relation between charged conduct and asserted official authority; (2) removal should not require defendants to “win” on the merits (or on authorization) before obtaining a federal forum.
• Sawyer v. Foster Wheeler LLC and Baker v. Atl. Richfield Co.: Reinforce that post-amendment “relating to” requires a connection, not necessarily direct federal direction, and that partial federal connection can suffice.
• Egelhoff v. Egelhoff ex rel. Breiner and Shaw v. Delta Air Lines, Inc.: Supply limiting principles—courts should avoid reading “relate to” to capture “every ripple in the pond,” and exclude relationships that are “tenuous, remote, or peripheral.”
• Rutledge v. Pharm. Care Mgmt. Ass'n: Invoked for the interpretive move that text-driven statutory objectives guide the scope of “relate to” provisions (here, the federal-forum-protection aim of § 1442).

D. Disclaimers and “theory of the case”

• Smith v. Nationwide Prop. & Cas. Ins. Co.: Acknowledges that disclaimers sometimes can avoid federal jurisdiction when jurisdiction turns on claim type—yet the Sixth Circuit emphasized limits to that principle.
• Jefferson County v. Acker: Key doctrinal engine. The court treated Acker as requiring acceptance of the defendant’s jurisdictional “theory of the case.” Applied here: if PBMs plausibly allege they conducted a single negotiation for all clients, a complaint attacking that negotiation necessarily “relates to” federal-client negotiations.
• McCulloch v. Maryland: Mentioned in explaining Acker’s tax theory dispute and the federal immunity context, illustrating that the framing of what is being regulated/taxed matters.
• K&D LLC v. Trump Old Post Off. LLC: Cited as another instance of applying Acker’s “legal model” approach to jurisdiction.
• Puerto Rico v. Express Scripts, Inc., West Virginia ex rel. Hunt v. CaremarkPCS Health, L.L.C., and California v. CaremarkPCS Health LLC (Ikuta, J., concurring only in the judgment): The Sixth Circuit aligned with these decisions rejecting attempts to avoid removal where rebate negotiations are indivisible across federal and non-federal clients.

E. “Under color of” even when alleged conduct is wrongful

• Arizona v. Manypenny: Supports that acts can be “under color” even if contested as unlawful.
• United States v. Tohono O'Odham Nation: Used for the concept that acting under color involves “claiming or wielding federal authority,” not proving authorization.
• Tennessee v. Davis and Willingham v. Morgan: Reinforce that removal cannot turn on whether the alleged act was within lawful discretion; otherwise removal protection collapses in hard cases.

F. Colorable federal defense and preemption breadth

• Mesa v. California and City of Nashville v. Cooper: Establish that defendants need only present a “colorable” defense, not a winning one, to remove.
• Coventry Health Care of Mo., Inc. v. Nevils: Interprets FEHBA’s preemption clause and reiterates the breadth of “relate to” in preemption contexts.
• Pilot Life Ins. Co v. Dedeaux and Morales v. Trans World Airlines, Inc.: Deployed to critique “general applicability” carve-outs as potentially illusory given broad “relating to” language.
• Sprietsma v. Mercury Marine and United States v. Gonzales: Used to reject Ohio’s argument that “law” excludes common law; FEHBA’s “any State or local law” is expansively worded.
• Cnty. Bd. of Arlington Cnty. v. Express Scripts Pharmacy, Inc.: Supports TRICARE preemption being at least colorable.

3.2 Legal Reasoning (Step-by-Step)

(1) PBMs as “persons acting under” federal officers

The court anchored this prong in concrete contract and program controls: FEHBA/OPM requirements allegedly capped PBM charges, constrained reimbursement methodology, mandated rebate pass-through, required extensive disclosures, and reserved audit rights. TRICARE/DOD similarly restricted fees/rebates and controlled network adequacy and audits. These controls, in the court’s view, resemble the contractor-subjection in Watson v. Philip Morris Cos. and the supervision in Bennett v. MIS Corp., and are unlike the cooperative but non-subordinate relationship in Mays v. City of Flint.

(2) “For or relating to” federal-office acts through indivisible negotiations

The crucial move is the court’s treatment of the negotiations as a single system. Because Ohio sought damages for past conduct, the court viewed the relevant question as whether the challenged negotiations already occurred in an integrated manner across federal and private clients. If so, liability “necessarily includes federal conduct.”

The opinion reads Ohio’s complaint as directly attacking negotiation mechanics that allegedly force higher list prices:

This matters because price inflation is not treated as mere narrative flourish; the court saw it as embedded in the theory of harm and causes of action (e.g., “supracompetitive prices”). Thus, the complaint connects to federally supervised negotiations rather than only to post-negotiation rebate retention.

(3) Disclaimers cannot defeat removal when they require adjudicating the federal connection

Ohio’s disclaimer (“does not seek recovery” for services “as they relate to” FEHB/TRICARE) failed because it would force a state court to decide whether the challenged conduct “relate[s] to” federal work—the very issue § 1442 is designed to place in a federal forum when a colorable federal defense is asserted. The court analogized to Tennessee v. Davis: Tennessee could not defeat removal by asserting it did not mean to punish federal-duty conduct when that was the contested characterization of the events.

The court also relied on Jefferson County v. Acker to credit the PBMs’ “theory of the case” for jurisdictional purposes: if negotiations were single and indivisible, then a suit challenging those negotiations “relates to” federal-office acts.

(4) “Under color of office” does not require federal authorization of alleged misconduct

Ohio argued that because OPM forbids rebate retention, such conduct cannot be “under color of” federal office. The court rejected this, invoking Willingham v. Morgan and Arizona v. Manypenny: the statute requires a sufficient relation between charged conduct and asserted authority, not proof the conduct was authorized. Otherwise, removal would improperly require merits resolution at the threshold.

(5) Colorable preemption defenses suffice

The PBMs asserted FEHBA preemption under 5 U.S.C. § 8902(m)(1) and TRICARE preemption under 10 U.S.C. § 1103(a). The court treated these as at least plausible because the complaint attacks how PBMs negotiate drug prices and administer rebates—conduct with a “connection with” benefits and benefit payments under FEHB plans, and with TRICARE contract administration. Under Mesa v. California and Willingham v. Morgan, plausibility—not certainty—is enough.

The court rejected arguments that (i) generally applicable state laws are exempt (citing ERISA/ADA analogies like Morales v. Trans World Airlines, Inc.), and (ii) “law” excludes common law (distinguishing Sprietsma v. Mercury Marine because FEHBA uses “any State or local law,” reinforced by United States v. Gonzales). It also rejected Ohio’s assertion that TRICARE preemption requires an unmet Secretary determination, pointing to 32 C.F.R. § 199.17(a)(7)(i)(ii).

(6) Jurisdictional discovery denied

The court denied Ohio’s request (not raised below) because divisibility was treated mainly as a legal theory question under Jefferson County v. Acker, and because Ohio’s cited evidence did not undermine the integrated-negotiation premise.

3.3 Impact

• Strengthened removal pathway for PBMs and similarly situated federal contractors. When contractors serve both federal and private customers through a single operational process, state-law attacks on that process are more likely removable under § 1442.
• Meaningful constraint on “disclaimer” strategies in public enforcement suits. A plaintiff cannot avoid federal officer removal by disavowing federal-program targeting when the contested liability theory (as framed by defendants and supported by complaint allegations) necessarily reaches federally controlled conduct.
• Broader reach of the post-2011 “relating to” language. The opinion reinforces that federal direction is not always required; a substantial connection to acts under color of office can suffice.
• Preemption defenses gain procedural leverage. By treating FEHBA and TRICARE preemption as colorable in this context, the decision ensures such defenses will often be litigated in federal court—potentially affecting nationwide state AG pricing and rebate litigation strategies.
• Practical pleading consequences. The decision signals that to avoid § 1442 removal, plaintiffs must do more than disclaim; they must plausibly plead and structure claims to isolate non-federal conduct in a way comparable to the narrowed theory in Graves v. 3M Co. or the “private billing dispute” framing in Ohio State Chiropractic Ass'n v. Humana Health Plan Inc..

4. Complex Concepts Simplified

• Federal officer removal (§ 1442): A special removal statute letting federal officers—and private parties acting under them—move a case from state to federal court so federal defenses can be heard in a federal forum.
• “Person acting under” a federal officer: Not mere compliance with regulation; it generally requires helping the government perform its duties under federal supervision/control (often via contracting), as described in Watson v. Philip Morris Cos..
• “For or relating to”: After the 2011 amendment, the case need not be strictly “for” a directed federal act; it is enough that the claims are connected or associated with acts done under color of federal office, subject to limits for remote or peripheral links (drawing on Morales v. Trans World Airlines, Inc. and Shaw v. Delta Air Lines, Inc.).
• “Under color of” office even if allegedly wrongful: The phrase concerns the relationship to asserted federal authority, not whether the act was authorized; otherwise removal would require deciding the merits at the threshold (per Willingham v. Morgan).
• Colorable federal defense: A plausible federal defense (often preemption) is enough to remove; the defendant need not prove it will win (Mesa v. California).
• Indivisible negotiations: A factual-operational claim that the same bargaining process sets terms for all clients. If the complaint attacks that process, it necessarily implicates federal-client negotiations too.

5. Conclusion

The Sixth Circuit’s decision establishes a clear operational rule for § 1442 in the PBM context: when a complaint attacks drug-price negotiations alleged to be a single, integrated process serving both federal and non-federal clients, the case is removable even if the plaintiff disclaims intent to challenge FEHB/TRICARE administration. The court further underscores that “relating to” is broad post-2011, that “under color of” does not require authorization of the alleged wrong, and that FEHBA/TRICARE preemption defenses are at least colorable in litigation targeting negotiation-driven pricing and rebate practices. In effect, the opinion channels many state-law PBM pricing suits into federal court whenever federally supervised negotiation activity is meaningfully intertwined with the challenged conduct.