Our Take
PBMs are fighting state-level structural regulation with litigation instead of lobbying, which signals they expect legal grounds but lack political capital to stop these laws.
Why it matters
Tennessee's FAIR Rx Act is the first state law to mandate separation of PBM and pharmacy operations. If it survives litigation, other states will likely follow, forcing the industry to choose between business models and market access.
Do this week
Compliance teams: document your current PBM-pharmacy integration scope and revenue mix by end of Q1, so leadership can model operational and financial impact if similar laws pass in your operating states.
Express Scripts joins CVS Caremark in challenging FAIR Rx Act
Express Scripts and the Pharmaceutical Care Management Association (PCMA) have filed a lawsuit to block Tennessee's FAIR Rx Act, which requires pharmacy benefit managers to separate their operations from retail pharmacy chains. CVS Caremark filed a similar challenge earlier. The law passed the Tennessee legislature earlier this year despite strong opposition from the PBM industry.
The FAIR Rx Act mandates structural separation between PBM operations and pharmacies by a specified deadline, aiming to eliminate financial incentives for PBMs to steer patients away from lower-cost independent and regional pharmacies toward their own affiliated chains.
Litigation replaces legislative defeat
The PBM industry lost this fight in the Tennessee statehouse. Rather than accept the outcome or retry the lobbying approach, Express Scripts and PCMA are now pursuing a constitutional or regulatory challenge in court. This shift reflects confidence in legal grounds (likely Commerce Clause or takings arguments) but also acknowledgment that political opposition at the state level has been exhausted.
If Tennessee's law survives judicial review, it becomes a template. Other states have proposed similar structural-separation bills. A court victory for PBMs buys time; a loss invites replication. The industry is betting on the judiciary to overturn what legislatures have been willing to pass.
Model the worst case now
If structural-separation laws spread and withstand court challenge, PBMs and integrated pharmacy operators must choose: divest one arm of the business, accept lower margins on steering revenue, or exit certain state markets. Operators should model the financial impact of forced separation—including integration costs, contract renegotiation, and revenue loss from eliminated affiliate steering—for all states where similar bills are pending or likely. This is not lobbying work; it is contingency planning.