The legal battle over state regulation of pharmacy benefit managers is intensifying, with two major developments reshaping the national landscape in July 2026.
On June 29, 2026, the Eighth Circuit Court of Appeals ruled in Flowers v. Caremark PCS Health that a key element of an Arkansas statute regulating PBMs is preempted by federal law.
The court specifically struck down the “Geographic Coverage Requirements” of the Arkansas law, which mandated that PBMs ensure high percentages of covered individuals live close to a network pharmacy.
Those requirements set thresholds of 90% for urban or suburban plans and 70% for rural plans, with pharmacy proximity limits of two, five, and fifteen miles respectively.
The Eighth Circuit found that these requirements effectively forced PBMs to “tailor and retailor their networks — and perhaps even build new brick-and-mortar pharmacies — to comply with a set of exacting particularities.”
The court concluded that this “bulldoze[d] through [Congressional] objectives” under ERISA, the federal law governing employer-sponsored health plans, rendering the Arkansas provisions preempted.
The ruling signals that similar geographic network requirements in other states could face the same fate, significantly limiting the tools available to state legislatures seeking to regulate PBMs.
Separately, Tennessee’s recently enacted Fair RX Act, which prohibits PBMs from owning pharmacies, is now facing three independent federal lawsuits filed in the Middle District of Tennessee.
The suits were filed independently by CVS’s Caremark, Cigna’s Express Scripts, and the Pharmaceutical Care Management Association, each raising overlapping but distinct legal arguments against the law.
All three lawsuits argue that federal programmes including Medicare, TRICARE, and ERISA preempt Tennessee’s attempt to restrict PBM ownership structures within the state.
The plaintiffs contend that PBMs already operate within existing federal frameworks governing pharmacy networks, reimbursement structures, and contracting relationships, leaving no room for Tennessee’s ownership ban.
Each lawsuit also argues the law violates the dormant Commerce Clause by unfairly discriminating against out-of-state pharmacies engaged in interstate commerce.
One of the lawsuits goes further, arguing the law constitutes an unconstitutional taking by compelling divestiture of longstanding, highly integrated pharmacy operations that have existed for decades.
Tennessee lawmakers drafted the Fair RX Act with prior legal defeats in mind, including the successful constitutional challenge to an Arkansas PBM law in Express Scripts v. Richmond.
To that end, the Tennessee statute specifically exempted military and federal contracts to avoid TRICARE preemption, and avoided statutory language suggesting an intent to protect local pharmacies.
Despite these precautions, the three simultaneous legal challenges suggest PBMs are willing to mount aggressive and well-resourced litigation campaigns against state-level ownership restrictions.
The broader national picture remains one of growing state ambition to curb PBM power colliding with substantial federal legal barriers, including ERISA preemption and constitutional commerce protections.
State enforcement efforts are nonetheless expected to continue, with attorneys-general pursuing regulatory action amid public concern that PBM consolidation contributes to rising drug costs and reduced consumer choice.
The Attorney-General of Florida recently announced a probe into PBM practices, reflecting the political momentum behind reform efforts even as courts narrow the available legal strategies.