What States Have Been Trying to Do
State legislatures have spent several years writing laws to constrain pharmacy benefit managers, and federal courts have spent the same years blocking much of it.
Pharmacy benefit managers, or PBMs, sit between insurers, drug manufacturers, and pharmacies. They negotiate rebates, decide which drugs a plan covers, set what pharmacies get paid, and determine which pharmacies are in a network. The three largest are owned by companies that also own pharmacies, which is the arrangement most state laws have targeted.
The measures fall into a few categories. Some regulate reimbursement, requiring PBMs to pay pharmacies at least the cost of a drug. Some require networks to admit any pharmacy willing to accept the terms, known as any-willing-provider rules. Some restrict steering patients toward affiliated pharmacies through lower copays. And the newest go further, barring PBMs from owning pharmacies at all.
Tennessee's FAIR Rx Act, passed in May, took that last approach, prohibiting PBMs and certain affiliated entities from owning, operating, or controlling pharmacies licensed in the state.
Why Courts Keep Saying No
The recurring obstacle is a federal law most patients have never heard of, and understanding it explains the whole pattern.
ERISA, the federal statute governing employer-sponsored benefit plans, preempts state laws that interfere with how those plans are designed and administered. Employers running self-funded plans across many states argue they cannot administer a uniform benefit if each state imposes its own pharmacy rules.
In April, the Sixth Circuit held that ERISA preempts two Tennessee laws designed to stop PBMs steering patients to affiliated pharmacies. The court found the any-willing-provider requirement mandated a particular plan structure and governed a central matter of administration, the scope of the pharmacy network, while forcing state-specific tailoring. It reached the same conclusion about provisions barring plans from using different copays to encourage particular pharmacies, describing the laws as impermissible interference with "ERISA plan design and administration."
Arkansas has run into different walls. A federal district court preliminarily blocked its PBM ownership law in July 2025, on grounds including a likely Commerce Clause violation and preemption by TRICARE, the military health program. Iowa's PBM law has been partly enjoined as well, on ERISA and First Amendment grounds, with the state appealing.
The Line the Supreme Court Drew
There is a boundary here, and it is the reason states keep trying rather than giving up.
In 2020, in Rutledge v. PCMA, the Supreme Court upheld an Arkansas law that regulated what PBMs must reimburse pharmacies, requiring payment at no less than acquisition cost and establishing an appeals process. The Court treated that as cost regulation, which ERISA permits states to do even when it raises plan expenses.
Courts since have read Rutledge narrowly. Regulating what pharmacies get paid appears to survive. Dictating who is in a network, how copays are structured, or who may own a pharmacy has repeatedly not.
That distinction is doing enormous practical work. It means states can improve the economics of dispensing a prescription but have limited power over whether an independent pharmacy is allowed into the network where the prescriptions are.
What Tennessee Tried Differently
The Tennessee statute is worth examining because it was drafted specifically to survive the challenges that sank earlier laws.
Legal analyses note that it carved out military and federal contracts, an attempt to avoid the TRICARE preemption that helped block Arkansas. It also deliberately omitted legislative findings or language framing the law as protecting local pharmacies, because a federal court had found such statements constitutionally problematic in the Arkansas case, where they suggested economic protectionism against out-of-state businesses.
It drew three lawsuits anyway, filed independently in June by CVS's Caremark, Cigna's Express Scripts, and the Pharmaceutical Care Management Association.
According to summaries of the filings, the plaintiffs argue the law discriminates against out-of-state companies under the Dormant Commerce Clause, is preempted by ERISA along with Medicare and TRICARE, interferes with national pharmacy networks, threatens patient access to retail, mail-order, and specialty pharmacy services, and "may require divestiture or closure of pharmacy operations."
Those are allegations in complaints, not findings. No court has ruled on them.
What This Means for Where You Fill Prescriptions
The connection to patients runs through distance, and it is more concrete than the legal argument suggests.
Independent pharmacies operate on thin margins that depend heavily on PBM reimbursement and inclusion in networks. When reimbursement falls below the cost of dispensing, or when a pharmacy is excluded from the network covering most local patients, it closes. In many rural counties and lower-income urban neighborhoods, the independent pharmacy is the only one.
Health services research has consistently found that distance to a pharmacy affects whether people refill prescriptions on time. Someone who has to arrange a long trip refills late or not at all, and the medications most affected are the daily ones for chronic conditions where interruptions matter.
What patients can do is limited but not nothing. Check your plan's pharmacy network at open enrollment rather than assuming your usual pharmacy is included, and check whether a preferred tier gives you a lower copay for a specific medication. If a plan requires mail order for a maintenance drug, ask whether an exception is available. If your pharmacy closes, ask it to transfer prescriptions rather than starting over, and confirm the new pharmacy has your full list.
Nobody should skip or stretch doses because of a pharmacy problem. Tell the prescriber, who can often send the prescription elsewhere the same day.
The confirmed facts are a Sixth Circuit ruling finding two Tennessee PBM laws preempted, and three industry lawsuits filed against Tennessee's ownership ban. Those most affected are patients whose only nearby pharmacy is independent. The reasonable action is verifying pharmacy network status at enrollment. The central uncertainty is how courts rule on the ownership restrictions. The next expected developments are district court rulings in the Tennessee cases and the Eighth Circuit's decision on Iowa.
Frequently Asked Questions
What is a pharmacy benefit manager? A company that sits between insurers, drugmakers and pharmacies, negotiating rebates, setting formularies, deciding pharmacy payment and determining network membership.
What did the Sixth Circuit decide? That ERISA preempts two Tennessee laws requiring networks to admit any willing pharmacy and barring plans from using copay differences to steer patients.
Why does ERISA matter here? It preempts state laws that interfere with how employer-sponsored benefit plans are designed and administered, which courts have read to cover network structure.
What did the Supreme Court allow? In Rutledge v. PCMA, it upheld an Arkansas law regulating what PBMs must reimburse pharmacies. Courts have read that as permitting cost regulation but not network mandates.
Who is suing Tennessee? Caremark, Express Scripts and the Pharmaceutical Care Management Association filed separate suits in June. Their claims are allegations that no court has ruled on.
How does this affect my prescriptions? Mainly through pharmacy closures and network exclusions, which increase travel distance. Distance is consistently linked to missed refills.
What should I check at open enrollment? Whether your pharmacy is in the plan's network, whether a preferred tier lowers your copay elsewhere, and whether mail order is required for maintenance drugs.
