States are taking aim at PBM-owned pharmacies as concerns grow around competition, patient choice, and prescription drug pricing. Learn what new PBM legislation could mean for employers and their health plans.
2025 was a pivotal year in the pharmacy sector as Arkansas became the first state to enact a law (Act 624) prohibiting Pharmacy Benefit Managers (PBMs) from owning or controlling pharmacies. Flash forward to May 2026, Tennessee is following suit with SB 2040, also known as the FAIR RX Act. As more states are considering creating their own versions, employers need to stay up to date on what PBM-owned pharmacy legislation means for them and their employees.
Act 624 drew national attention, as it directly challenges the vertically integrated PBM model and is the first state law of its kind. However, it has not gone without facing legal challenges, with employers, PBMs, pharmacies, and lawmakers closely watching this issue. With growing interest from states, employers should evaluate what these new laws could mean for health plans, pharmacy networks, and their employees.
Vertically integrated PBMs control the entire lifecycle of a medication. From the health plan all the way to the pharmacy, they oversee multiple layers of the prescription drug supply chain. With this, they can steer patients toward affiliated pharmacies, limit independent pharmacies’ access, and create conflicts of interest in prescription drug pricing and reimbursement.
In many cases, the same parent company may have ownership or financial interests in the health plan, PBM, mail-order pharmacy, specialty pharmacy, or related pharmacy services. This means the PBM may influence not only which drugs are covered, but also where members are encouraged or required to fill prescriptions.
Lawmakers’ concern is that this structure may create conflicts of interest. For example, a PBM could steer patients toward an affiliated mail-order or specialty pharmacy, limit access to independent pharmacies, or structure reimbursement to benefit its related entities. Critics argue this will make it harder for employers and members to understand the true cost of prescription drugs and whether pharmacy access decisions are being made in the best interest of the plan and its participants.
States are starting to question whether this current model calls for fair competition. Arkansas made the first move with HB 1150/Act 624; the bill amended the current pharmacy permit law to prohibit PBMs from holding a retail pharmacy permit for the sale of drugs or medicines in Arkansas, including mail-order pharmacies. Supporters say the law is intended to protect independent pharmacies and reduce prescription drug supply chain conflicts. Those that oppose the law, such as large PBMs and affiliated companies, argue that these laws could disrupt
Conversely, Tennessee’s FAIR Rx Act prohibits a person or entity with ownership interest exceeding 5% from owning, operating, controlling, or directing a pharmacy while also doing the same for a health insurance issuer and a PBM. This push to separate PBM operations from pharmacy ownership begins July 1, 2028.
For employers, the issue is not just whether a PBM owns a pharmacy. The larger question is how ownership relationships may affect pharmacy access, pricing, plan design, rebates, specialty drug management, and member choice. Many employers rely on PBMs to negotiate discounts, manage formularies, administer clinical programs, and control prescription drug costs. If state laws change how PBMs can contract with or operate pharmacies, those changes could eventually flow through to employer-sponsored health plans.
As other states start to consider similar legislation, employers need to stay informed, as this could affect their health plans in certain states. Arizona, Louisiana, Minnesota, New Jersey, New York, Oklahoma, and Vermont are currently considering updating their legislation. Some proposals would directly ban PBM ownership of pharmacies, while others focus on disclosure, licensing restrictions, or limits on overlapping control between insurers, PBMs, and pharmacy providers.
The issue is gaining momentum as lawmakers look for ways to protect independent pharmacies, improve patient choice, and reduce perceived conflicts in the prescription drug supply chain. However, these laws are also likely to face legal challenges, such as Arkansas’ law, from large PBMs and affiliated companies, making this an important area to watch in 2026 as implementation timelines and outcomes may remain uncertain even after legislation is passed.
The impact of these state-specific laws may vary by plan type, such as fully insured, governmental, and self-funded plans, all depending on federal preemption issues and how the PBM chooses to administer pharmacy benefits across its book of business. Self-funded ERISA plans could have additional legal considerations; however, they can still experience indirect impacts if a PBM changes pharmacy networks, mail-order operations, specialty pharmacy arrangements, or administrative processes in response to requirements.
Members could see changes to where their prescriptions are filled, with changes to preferred pharmacy networks, mail-order options, specialty pharmacy requirements, or pharmacy access in certain states. In other cases, members could gain more flexibility to use local or independent pharmacies, or there may be temporary disruption if PBMs are required to restructure pharmacy arrangements, or if legal challenges delay implementation.
The cost impact from the laws is also uncertain. Supporters believe they may help improve competition and reduce conflicts of interest. Opponents argue the laws could increase costs, reduce efficiencies, or disrupt existing mail-order and specialty pharmacy services. Because both sides are raising different concerns, employers should avoid assuming these laws will automatically lower prescription drug costs. Instead, employers should ask their PBM how any state-specific legislation could affect pricing, rebates, guarantees, administrative fees, pharmacy access, and member disruption.
Employers with employees in affected states should consider asking their PBM several key questions:
PBM-owned pharmacy legislation is part of a broader push for more transparency and accountability in prescription drug benefits. While the legal and operational impact is still developing, employers should monitor this issue closely, especially if they have employees in states considering or implementing PBM ownership restrictions. The Miller Group will continue watching these developments and helping clients understand how new legislation may affect their pharmacy benefit strategy, plan costs, and member experience. For more information regarding a specific state, reach out to a trusted advisor.
