CVS Challenges Tennessee Law Restricting PBM Ownership of Pharmacies

Key Takeaways 

• CVS Health has filed suit challenging Tennessee’s new FAIR Rx Act, which prohibits pharmacy benefit managers (PBMs) from owning pharmacies in the state.
• The lawsuit raises broader constitutional and competition-related questions surrounding state regulation of vertically integrated PBM business models.
• The case could become a significant legal test for similar PBM reform efforts emerging nationwide.

CVS Health has filed a legal challenge against Tennessee’s newly enacted FAIR Rx Act, a law that prohibits PBMs from owning pharmacies in the state. The law has intensified ongoing national debates over PBM regulation, competition, and pharmacy access.

The lawsuit comes shortly after Tennessee Governor Bill Lee signed the Freedom, Access and Integrity in Registered Pharmacy (FAIR Rx) Act into law, making Tennessee one of several states pursuing aggressive reforms targeting vertically integrated PBM business models.

Tennessee FAIR Rx Act Targets PBM-Owned Pharmacies

Supporters of the FAIR Rx Act argue the legislation is intended to increase transparency and fairness in the prescription drug market while protecting independent and community pharmacies.

The Tennessee Pharmacists Association characterized the law as an effort to address concerns surrounding PBM market influence and its impact on local pharmacy operations and patient care.

The legislation reflects broader state-level scrutiny of PBMs, particularly large vertically integrated entities that combine pharmacy benefit management, insurer relationships, and retail or specialty pharmacy ownership within the same corporate structure.

CVS Alleges Law Unconstitutionally Targets Out-of-State Companies

In its lawsuit, CVS argues that the FAIR Rx Act disproportionately targets national companies while favoring in-state pharmacy businesses and independent pharmacies.

According to CVS, the law would require closure of its 136 pharmacy locations in Tennessee and could result in the closure of more than 160 pharmacies statewide. The company also contends that the law would reduce patient access to medications and increase prescription drug costs for employers and consumers.

CVS further alleges that the legislation interferes with lawful competition and was crafted specifically to disadvantage out-of-state entities operating integrated PBM and pharmacy models.

The lawsuit is expected to raise constitutional issues frequently implicated in state regulation of national health care entities, including:

• Potential burdens on interstate commerce
• Equal treatment of in-state and out-of-state businesses
• State authority to regulate vertically integrated health care operations

Broader Regulatory Pressure on PBMs Continues to Grow

The case emerges amid intensifying scrutiny of PBMs at both the state and federal levels.

PBMs have increasingly faced criticism from lawmakers, independent pharmacies, employers, and regulators over the following:

• Reimbursement practices
• Pharmacy network design
• Spread pricing and rebate arrangements
• Market concentration and vertical integration

At the same time, PBMs and integrated health care companies have argued that their models help lower costs, improve care coordination, and expand pharmacy access.

Tennessee’s FAIR Rx Act represents one of the more aggressive state-level approaches to addressing these concerns by directly restricting ownership structures rather than focusing solely on pricing or transparency requirements.

Potential Implications for Pharmacy Access and Competition

A central dispute in the litigation is whether the law will improve or restrict patient access to pharmacy services.

Supporters of the legislation argue it could strengthen independent and rural pharmacies that have struggled to compete against large integrated entities.
CVS, however, contends that mandatory pharmacy closures could reduce access points for patients and disrupt continuity of care for individuals relying on existing pharmacy networks.

The litigation may also affect broader questions surrounding the following areas:

• State authority to reshape PBM business models
• Competition between independent and vertically integrated pharmacies
• The balance between consumer protection and market regulation
• Employer and payer prescription drug costs

National Implications for Future PBM Legislation

The Tennessee case could become an important legal test for similar PBM reform efforts nationwide.

Multiple states have recently advanced legislation aimed at increasing PBM oversight, limiting certain contracting practices, or addressing concerns related to pharmacy reimbursement and ownership structures.

A court ruling on the FAIR Rx Act may influence how aggressively states can regulate vertically integrated PBMs and whether such laws withstand constitutional scrutiny.

For health care companies, pharmacies, payers, and pharmaceutical stakeholders, the outcome could shape future regulatory strategies and the evolving legal framework governing prescription drug distribution and reimbursement.

Reference

Minemyer P. CVS sues to challenge Tennessee's new PBM law. Fierce Healthcare. Published May 26, 2026. Accessed May 27, 2026. https://www.fiercehealthcare.com/payers/cvs-sues-challenge-tennessees-new-pbm-law