States target pharmacy benefit managers to cut drug costs

Tennessee’s new law will bar pharmacy benefit managers, the middlemen that manage drug coverage for health insurers, from owning retail pharmacies starting July 1, 2028, and CVS Health has already sued to keep from closing its 136 Tennessee stores. Gov. Bill Lee signed the FAIR Rx Act, Senate Bill 2040 and House Bill 1959, on May 22, and the measure became Public Chapter 1111 five days later.

PBMs sit between insurers, pharmacies and patients, deciding how drugs are covered, reimbursed and discounted. Their fees, rebate arrangements and payment rules can change what people pay at the counter, which is why the fight over them has moved from a quiet industry dispute into a direct effort to cut household medicine bills.

The Tennessee law is the sharpest example of a broader state push. Legislators in at least a dozen states passed PBM bills this year that limit compensation to the companies, set minimum payments for pharmacists and force more disclosure to clients, regulators and the public. The National Academy for State Health Policy says all 50 states have now passed some legislation to regulate PBMs, and its tracker says the most common provisions through 2025 have targeted ownership restrictions, transparency, rebate pass-through and compensation changes.

Tennessee lawmakers said CVS is the only company in the state that both owns a PBM and owns retail pharmacies, making the law a direct challenge to vertically integrated drug businesses. If the state can enforce it, independent pharmacies could gain from stronger payment rules, while patients could benefit if more of the savings from rebates and spread-pricing limits reach the pharmacy counter instead of staying inside the supply chain.

The industry has already shown it will fight. Arkansas passed the first state ban on PBMs owning pharmacies in 2025, but a federal judge preliminarily blocked enforcement on July 28, 2025. That case now hangs over Tennessee’s effort, which will likely face the same argument that the rules go too far and could simply shift costs elsewhere if insurers, drugmakers or PBMs adjust their prices and contracts.

Congress moved as well. The Consolidated Appropriations Act, 2026, signed on February 3, included PBM reforms that begin in 2028 and 2029, underscoring how many lawmakers now see drug pricing as a pocketbook issue as much as a health policy one. KFF polling in January found two-thirds of adults worried about affording health care costs and a majority worried about prescription drugs, a pressure that helps explain why the state crackdown is widening.