- with readers working within the Healthcare industries
- within Finance and Banking, Government and Public Sector topic(s)
Tennessee has quickly become one of the most important states in the national PBM reform debate.
On May 22, 2026, Governor Bill Lee signed Tennessee’s Freedom, Access, and Integrity in Registered Pharmacy Act, better known as the FAIR Rx Act. The law takes a direct aim at one of the most controversial issues in pharmacy today: whether a pharmacy benefit manager should be allowed to own or control the very pharmacies that compete in the networks the PBM administers.
For independent pharmacies, this is not an abstract policy issue. It goes directly to the daily reality of competing in a market where PBMs may control reimbursement, network access, formulary design, specialty pharmacy channels, mail order requirements, audits, fees and patient steering — while also operating affiliated pharmacies.
What the Tennessee FAIR Rx Act Does
At its core, the FAIR Rx Act restricts PBMs and certain affiliated entities from owning, operating or controlling pharmacies licensed in Tennessee. The law also reaches nonresident pharmacies that ship or dispense prescriptions into Tennessee, including mail-order, specialty, central fill, telepharmacy and automated dispensing operations.
The law is aimed at vertical integration — the business model in which a PBM, insurer, specialty pharmacy, mail-order pharmacy and retail pharmacy may operate within the same corporate family.
The law also requires pharmacy license applicants and license holders to disclose ownership, affiliate, management, staffing, purchasing, inventory, technology and control relationships. In other words, Tennessee is not only regulating ownership on paper. It is attempting to examine who actually controls the pharmacy.
That matters. In the PBM space, control is not always obvious from a corporate chart.
The Lawsuits: CVS, Express Scripts and PCMA Push Back
The ink was barely dry before litigation began.
CVS Health filed suit in May 2026, arguing that the law is unconstitutional and would force CVS to close or divest Tennessee pharmacy operations. Express Scripts and the Pharmaceutical Care Management Association followed with their own challenges in June 2026.
The plaintiffs are making several arguments, including that the FAIR Rx Act:
- violates the Dormant Commerce Clause by allegedly discriminating against out-of-state companies;
- is preempted by federal law, including ERISA and other federal benefit-program frameworks;
- interferes with national pharmacy benefit networks;
- threatens patient access to retail, mail-order, specialty and other pharmacy services; and
- may require divestiture or closure of pharmacy operations.
Express Scripts has specifically pointed to Accredo, its specialty pharmacy operations, and mail-order services as examples of pharmacy operations that could be disrupted if the law is enforced.
Those are serious arguments, and the litigation should not be dismissed as a formality. Similar structural PBM laws have already drawn constitutional challenges in other states, including Arkansas.
Why This Case Is Different From Traditional PBM Reform
Most PBM reform laws focus on reimbursement, spread pricing, audit practices, network adequacy, patient steering, transparency or maximum allowable cost pricing.
Tennessee’s law goes further. It does not merely regulate a PBM practice. It challenges the structure of the PBM business model itself.
That is why this case is so important. The central question is not just whether a PBM must pay a pharmacy differently or disclose more information. The question is whether a state can decide that a PBM’s ownership or control of pharmacies creates a conflict of interest serious enough to justify structural separation.
For independent pharmacies, that is the heart of the matter. The concern has long been that vertically integrated PBMs can favor affiliated pharmacies through network design, preferred pharmacy arrangements, specialty drug channeling, mail-order incentives, reimbursement disparities and other mechanisms that are difficult for independent pharmacies to challenge on a claim-by-claim basis.
Tennessee’s approach effectively says: the conflict is not incidental. The conflict is built into the model.
What Independent Pharmacies Should Take From This
Independent pharmacies should be watching the Tennessee litigation for several reasons.
First, the case may determine how far states can go in regulating PBM ownership and control of pharmacies. If Tennessee’s law survives, other states may view it as a roadmap for more aggressive PBM reform.
Second, the lawsuits will likely test the boundary between state pharmacy regulation and federal benefit-plan law. PBMs will continue to argue that state laws interfere with ERISA plans, Medicare Part D, TRICARE, and national benefit administration. Pharmacies and state regulators will argue that pharmacy licensure, ownership and patient access are traditional areas of state authority.
Third, the litigation may bring more public attention to patient steering and vertically integrated specialty pharmacy models. Even if the law is narrowed, delayed or enjoined, the case puts the ownership issue squarely in the spotlight.
Fourth, independent pharmacies should expect PBMs to frame these laws as threats to access and affordability. Pharmacies should be prepared to explain the other side of the access story: what happens when independent pharmacies close, when patients lose local access, when reimbursement is below acquisition cost, and when network terms are effectively dictated by entities that also own competing pharmacies.
The Broader PBM Reform Trend
Tennessee is not acting in isolation. Across the country, state legislatures, attorneys general, Congress, the FTC, pharmacy associations and provider groups continue to scrutinize PBM practices.
What is changing is the focus.
The next generation of PBM reform is not limited to transparency or reimbursement. It is increasingly focused on market power, vertical integration, ownership and control.
That shift is significant. Independent pharmacies have argued for years that PBM reform cannot be limited to isolated practices while ignoring the larger structure that allows those practices to occur.
The FAIR Rx Act is one of the clearest examples yet of a state legislature accepting that argument.
Final Thoughts
The Tennessee FAIR Rx Act is more than another PBM reform law. It is a direct challenge to the vertical integration model that has reshaped the pharmacy marketplace.
For independent pharmacies, the case is worth watching because it raises the issue they have been living with for years: how can a pharmacy fairly compete when the entity setting the rules may also own the competitor?
That question is now before the courts. And its answer could shape the next phase of PBM reform nationwide.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
