Tennessee has become the latest flashpoint in a widening state fight over pharmacy benefit managers, the companies that manage prescription drug coverage for health plans. CVS Health and Express Scripts are challenging a Tennessee law that would bar PBMs from owning pharmacies starting July 1, 2028.
Tennessee law faces a federal challenge.
Tennessee’s FAIR Rx Act targets one of the most disputed parts of the prescription drug system: vertical ownership. The law would stop pharmacy benefit managers from operating pharmacies or dispensing medications in the state. CVS Health has sued Tennessee officials over the law. Express Scripts, owned by Cigna, also filed a federal lawsuit challenging the measure.
States push bills on prescription costs.
The Tennessee case is part of a much larger state push. Lawmakers in at least 26 states introduced more than 120 PBM bills this year. The bills target several parts of the PBM business model. Some limit compensation. Others require more disclosure. Several set minimum payments that PBMs must make to pharmacies.
At least a dozen states passed PBM-related laws this year. The measures reflect growing pressure from voters, pharmacists, and local officials who say prescription costs remain too high. PBMs manage claims for insurers and health plans. They negotiate with drug manufacturers, decide how plans cover medications, and reimburse pharmacies after prescriptions are filled.
Patients report cost pressure.
Medication affordability is driving much of the political pressure. A 2026 health care survey found that six in ten adults were worried about prescription costs for themselves or their families. Four in ten adults said costs had caused them to skip doses, delay filling prescriptions, use over-the-counter substitutes, or take other cost-saving steps.
Independent pharmacies seek stronger payments.
Independent pharmacies say PBM reimbursement rates often fall below their cost of filling prescriptions. Owners say that it forces them to rely on other stores’ sales or absorb losses on medications. Kansas passed a law requiring PBMs to pay a $10.50 dispensing fee per prescription. Louisiana approved an $11.81 dispensing fee.
Supporters say those fees help keep pharmacies open in small towns and rural areas. They argue patients lose access when independent pharmacies close. Opponents call mandatory dispensing fees a new cost that could move through the health care system. They say higher reimbursements may affect premiums, plan costs, or consumer prices.
PBMs defend their role.
PBMs reject the claim that they are responsible for high drug prices. They say drug manufacturers set list prices, while PBMs negotiate discounts for health plans and employers. The industry also points to the wide use of generic drugs. Generics account for about 90% of U.S. prescriptions, a figure PBMs use to argue that they help reduce costs.
Critics say generic use does not address the full concern. They want to know how much money PBMs keep from rebates, fees, pharmacy spread pricing, and affiliated pharmacy payments.
FTC report sharpens scrutiny
Federal scrutiny has added pressure. A January 2025 federal report said the three largest PBMs marked up specialty generics dispensed at affiliated pharmacies by hundreds or thousands of percent. The report focused on specialty generic drugs used to treat serious conditions, including cancer and HIV. It also said affiliated pharmacies were often reimbursed at higher rates than unaffiliated pharmacies.
Congress adds PBM rules.
Congress has also moved to regulate PBMs, though state lawmakers say more work is needed. New federal provisions require PBMs to pass through all rebates to certain employer health plans and increase reporting requirements. Federal rules also add oversight for PBM services tied to Medicare Part D plans. Some provisions are scheduled to take effect later, including changes to how PBMs are paid.
State efforts remain broader in some areas. Tennessee is targeting ownership. Kansas and Louisiana are targeting pharmacy payments. Other states are pressing for disclosure and restrictions on patient steering. The next legal test will play out in a federal court in Tennessee. If the state law survives, similar bills could gain momentum elsewhere. If it is blocked, lawmakers may shift toward narrower rules on payments, transparency, and rebate practices.
