Tennessee Pharmacy Law Aims to Avoid Arkansas’ Fate in Court

A Tennessee law banning pharmacy benefit managers from owning pharmacies will test a different but similar legal strategy underpinning an earlier Arkansas law that’s frozen in court.

Tennessee Gov. Bill Lee (R) enacted the law in May, following Arkansas in attempting to curb the vertical integration among health insurance companies, PBMs, and pharmacies that critics say is driving up drug prices and shuttering local pharmacies. The law takes effect July 1, 2028.

PBM lobby group the Pharmaceutical Care Management Association filed the latest challenge to the Tennessee law last week, joining two additional lawsuits from CVS Caremark and Cigna‘s Express Scripts Inc. in arguing the law is unconstitutional and preempted by federal law.

The battle between states and PBMs, which negotiate drug prices for health plans, is escalating as legislators and regulators take bolder action against the country’s three largest companies—CVS, Express Scripts, and UnitedHealth Group‘s Optum RX. But PBMs say banning their affiliated pharmacies risks worsening rural healthcare access and damaging the state economy.

PBMs argue they help keep drug prices low, and that employers make the final decisions in their health plans. PCMA recently launched a new ad campaign in what president and CEO David Marin said is an effort to better communicate the value PBMs offer.

The three lawsuits in the US District Court for the Middle District of Tennessee accuse the state of violating the commerce and takings clauses of the US Constitution, and argue the law is preempted by the Employee Retirement Income Security Act, Medicare, and TRICARE. The plaintiffs allege Tennessee’s law also targets out-of-state pharmacies, shielding smaller in-state PBM RxPreferred Benefits.

Arkansas’ law, meanwhile, allegedly exempts Walmart, which is headquartered there.

Avoiding Arkansas’ Mistakes

Tennessee legislators structured the law to avoid the pitfalls that led to the US District Court for the Eastern District of Arkansas freezing Arkansas’ version last year, said Hayden Rooke-Ley, a senior fellow at Brown University. Arkansas is appealing the case to the US Court of Appeals for the Eighth Circuit.

Tennessee exempted military contracts, for example, since the Arkansas law was enjoined partly for its interference with TRICARE, the federal healthcare program for armed service members, which contracts with Express Scripts.

The law also forgoes language explicitly seeking to protect local pharmacies in an attempt to evade the dormant commerce clause, which prohibits protectionist policies that interfere with interstate commerce. States have garnered additional authority from the US Supreme Court over the years in circumstances where they are not explicitly discriminating against out-of-state businesses, making it more difficult for the plaintiffs.

“It’s clear in the way that the statute is drafted that they are trying to channel the longstanding and well-recognized police powers of the state,” Rooke-Ley said.

The PBMs’ complaints point to state lawmakers’ public comments about protecting local pharmacies to make their case. Several who backed the bill own local drugstores, the lawsuits alleged, arguing they sought to profit off the law.

Similar discussions were cited by the Arkansas court in freezing its law, even though the judge there noted that lawmakers’ comments can include “meaningless drivel.” The legislative history for Tennessee’s law is not as divisive, said Andrew Twinamatsiko, director of the O’Neill Institute’s Center for Health Policy and the Law at Georgetown University. Courts also don’t typically consider political rhetoric conclusive evidence of a law’s effects, he said.

“Do those statements manifest in the legislative text?” he said.

Economic Consequences

Banning PBM-owned pharmacies intensifies a strategy that courts have been rejecting.

The Sixth Circuit recently shot down parts of a separate Tennessee law preventing PBMs from steering patients to their own and other preferred pharmacies through financial incentives.

The new law does “precisely the opposite” of protecting rural pharmacy access, CVS Pharmacy Inc. and its affiliated PBM, Caremark Rx LLC, said in their complaint. Parent company CVS Health also owns health insurer Aetna Inc.

CVS would be forced to close 136 retail stores and put “thousands” of Tennesseans out of work, the company said. The law would impact 1.5 million patients and 26 million prescriptions.

Express Scripts employs around 1,200 Tennesseans through the Memphis location of its mail-order specialty pharmacy Accredo, the company said in its complaint.

“Dismantling the organization in this way is neither practical nor feasible, because ESI and its affiliated pharmacies have longstanding, deeply interwoven common ownership and business relationships,” Express Scripts said.

New Old Era

The two state laws represent a revival of neoliberal tactics that emerged from the first Gilded Age, Rooke-Ley said, in which governments sought to crack down on powerful oil and utility companies. The modern healthcare industry didn’t exist then, but ongoing backlash to corporate healthcare from both Democrats and Republicans signals that school of thought has returned.

“I think there’s something actually coherent going on at the state level,” he said.

The criticism is uniting lawmakers at the federal level too.

Congress recently banned PBMs from retaining rebates from drug manufacturers, and lawmakers have grilled insurance and PBM executives in public hearings. Twinamatsiko pointed to a bill (S. 4509) from Sens. Josh Hawley (R-Mo.) and Elizabeth Warren (D-Mass.) that would block insurers and PBMs from owning pharmacies.

“Josh Hawley and Sen. Warren could be diametrically opposed politically,” he said, “but they jointly have proposed a law that would go to the heart of this.”

The cases are CVS Pharmacy, Inc. v. Tenn. Board of Pharmacy, M.D. Tenn., No. 3:26-cv-00685, complaint filed 5/22/26, Express Scripts, Inc. v. Blane, M.D. Tenn., No. 3:26-cv-00806, complaint filed 6/12/26, and Pharmaceutical Care Mgmt. Ass’n v. Blane, M.D. Tenn., No. 3:26-cv-00816, complaint filed 6/15/26.