The battle over pharmacy benefit manager (PBM) regulations is intensifying across the United States. Recently, major PBMs and their trade association filed federal lawsuits challenging new pharmacy laws in Tennessee and Illinois. These cases could shape how states regulate drug pricing, pharmacy ownership, and patient access for years to come.
While lawmakers argue the reforms protect patients and independent pharmacies, PBMs claim the laws violate federal protections and could disrupt healthcare services. As a result, the courts will now decide how far states can go in regulating these powerful healthcare intermediaries.
Tennessee’s FAIR Rx Act Sparks Legal Battle
What Is the FAIR Rx Act?
Tennessee enacted the Freedom, Access and Integrity in Registered Pharmacy (FAIR Rx) Act in May 2026. The law prevents a company from simultaneously owning a pharmacy, a health insurer, and a PBM if ownership exceeds 5%. The restrictions are scheduled to take effect in July 2028.
State lawmakers say the legislation addresses conflicts of interest in prescription drug pricing and protects independent pharmacies from unfair competition. They believe vertically integrated healthcare companies wield excessive influence over drug distribution and reimbursement.
PBMs Fight Back
However, PBMs strongly disagree. The Pharmaceutical Care Management Association (PCMA), along with companies such as Express Scripts and CVS Health, has challenged the law in federal court.
The plaintiffs argue that the FAIR Rx Act violates the U.S. Constitution and conflicts with federal programs, including Medicare Part D, TRICARE, and the Employee Retirement Income Security Act (ERISA). They also warn that the law could force closures of pharmacies affiliated with PBMs and disrupt medication access for thousands of patients.
Express Scripts estimates that more than 180,000 Tennessee residents rely on its pharmacy services. The company argues that relocating its specialty pharmacy operations could cost more than $100 million and significantly affect patient care.
Illinois Faces Federal Challenge
New Rules Under Fire
Illinois is facing a similar lawsuit. PCMA filed a complaint against the state’s Prescription Drug Affordability Act, arguing that the law improperly regulates how PBMs manage pharmacy networks and patient referrals.
The Illinois law limits PBMs from steering patients toward preferred pharmacies and imposes additional reporting requirements. According to PCMA, these provisions interfere with federally regulated employer-sponsored health plans and are preempted by ERISA.
Growing Tension Between States and PBMs
The Illinois case represents another chapter in the growing conflict between states seeking to regulate PBMs and companies attempting to preserve their business models. Similar disputes have emerged in Arkansas and Iowa, signaling a nationwide struggle over pharmacy reform.
Why PBMs Oppose These Laws
PBMs argue that state laws restricting pharmacy ownership and network management could increase healthcare costs and reduce patient access.
According to industry groups, integrated healthcare companies can negotiate better drug prices, streamline pharmacy operations, and improve medication adherence. Therefore, they believe restrictions on ownership and pharmacy steering could eliminate efficiencies that benefit consumers.
On the other hand, critics claim PBMs prioritize affiliated pharmacies and reimburse independent pharmacies at lower rates. Tennessee lawmakers cited state audits showing significant reimbursement disparities between affiliated and non-affiliated pharmacies as justification for reform.
Impact on Patients and Independent Pharmacies
Potential Benefits
Supporters of the new laws believe stricter PBM regulations could:
- Increase transparency in drug pricing.
- Strengthen independent pharmacies.
- Reduce conflicts of interest.
- Promote fair competition.
- Improve consumer choice.
Potential Risks
Meanwhile, opponents warn of possible consequences, including:
- Pharmacy closures.
- Reduced access to specialty medications.
- Higher administrative costs.
- Disruptions to employer-sponsored health plans.
- Increased legal uncertainty.
These competing concerns highlight the complexity of pharmacy reform. Ultimately, courts will have to balance state authority with federal healthcare laws.
What Happens Next?
The lawsuits could have far-reaching implications. Earlier this year, the Sixth Circuit ruled that some Tennessee PBM regulations were preempted by ERISA. That decision raised doubts about how aggressively states can regulate PBMs without conflicting with federal law.
Nevertheless, lawmakers across the country continue to pursue reforms aimed at increasing oversight of PBMs. As more states introduce similar legislation, federal courts are likely to play a central role in defining the future of pharmacy regulation.
Conclusion
The legal battles unfolding in Tennessee and Illinois represent a major turning point for pharmacy benefit managers and state healthcare policy. States want greater control over drug pricing practices and pharmacy ownership. Meanwhile, PBMs argue that federal law protects their business operations and integrated healthcare models.
As these lawsuits move through federal courts, healthcare providers, employers, pharmacies, and patients will closely watch the outcomes. The decisions could reshape the pharmacy industry and influence healthcare policy across the United States for years to come.
