Express Scripts and PCMA File Suit Against Tennessee's FAIR Rx Act
The battle over pharmacy benefit manager (PBM) reform is heating up in the courts. Express Scripts, one of the largest PBMs in the United States, along with the Pharmaceutical Care Management Association (PCMA), the primary lobbying arm of the PBM industry, have filed legal complaints challenging Tennessee's landmark FAIR Rx Act. The move follows a similar lawsuit filed by CVS Caremark, signaling a coordinated industry effort to dismantle state-level legislation that threatens the vertically integrated business model PBMs have built over decades.
The FAIR Rx Act, which passed earlier in 2024 despite fierce opposition from PBMs, represents one of the most aggressive state-level attempts in the country to reshape how pharmacy benefit managers operate. Its passage marked a significant milestone in the ongoing national conversation about drug pricing transparency, independent pharmacy access, and patient choice. Now, the law faces its most serious legal test yet.
What Is the FAIR Rx Act and Why Does It Matter?
Tennessee's FAIR Rx Act is designed to structurally separate PBMs from the pharmacies they own or affiliate with. The legislation targets what many lawmakers, independent pharmacists, and patient advocates describe as an inherent conflict of interest: a PBM that also owns a pharmacy has a financial incentive to steer patients toward its own affiliated dispensaries, potentially at the expense of patient choice and competitive pricing.
PBMs sit at the center of the U.S. prescription drug supply chain. They negotiate drug prices between insurers and pharmaceutical manufacturers, manage formularies, process claims, and increasingly operate their own mail-order and specialty pharmacies. The three largest PBMs — Express Scripts (owned by Cigna), CVS Caremark, and OptumRx (owned by UnitedHealth Group) — together manage drug benefits for a significant majority of Americans with prescription drug coverage.
Critics argue that this concentration of power, combined with vertical integration into pharmacy ownership, allows PBMs to engage in practices that disadvantage independent pharmacies and drive up out-of-pocket costs for patients. The FAIR Rx Act was written to address these concerns directly by establishing clear boundaries between PBM administrative functions and retail pharmacy ownership.
Express Scripts and PCMA's Legal Arguments
In their legal filings, Express Scripts and PCMA argue that the FAIR Rx Act is unconstitutional and unlawfully interferes with federally regulated business operations. The lawsuits echo arguments made by CVS Caremark in its own challenge to the law, suggesting a unified legal strategy coordinated across the PBM industry.
The plaintiffs contend that the law conflicts with the Employee Retirement Income Security Act (ERISA), a federal statute that governs employer-sponsored health plans and has historically been used to preempt state-level health insurance regulations. ERISA preemption has long been a legal shield for PBMs against state oversight efforts, and it is widely expected to be the central battleground in these proceedings.
PCMA, which has challenged similar legislation in other states, argues that patchwork state regulations create an unworkable compliance environment for national PBM operations. The organization contends that such laws ultimately raise costs for employers and beneficiaries rather than lowering them — a claim that independent pharmacy advocates and state legislators strongly dispute.
The Broader PBM Reform Landscape
Tennessee is not acting in a vacuum. Across the country, state legislatures and the U.S. Congress have been ramping up scrutiny of PBM practices. A growing body of bipartisan legislative activity reflects widespread frustration with the opacity of drug pricing and the market power wielded by a small number of PBM conglomerates.
- The Federal Trade Commission (FTC) has launched a multi-year investigation into PBM practices, releasing a scathing interim report that documented how large PBMs use their market position to favor affiliated pharmacies and inflate drug costs.
- Several states, including Arkansas, Oklahoma, and Georgia, have enacted their own PBM reform laws targeting spread pricing, reimbursement fairness for independent pharmacies, and transparency requirements.
- Federal legislative proposals, including components of broader drug pricing reform packages, have sought to impose new disclosure mandates and limit certain PBM business practices at the national level.
Against this backdrop, the lawsuits filed by Express Scripts and PCMA are widely seen as a high-stakes effort to draw a legal line before more states follow Tennessee's lead. A ruling in favor of Tennessee could open the door to a wave of similar legislation nationwide. A ruling in favor of the PBMs, on the other hand, could effectively insulate the industry from state-level structural reform for years to come.
What Independent Pharmacies and Patients Stand to Lose
For independent pharmacies, the outcome of these lawsuits is existential. Independent pharmacy closures have accelerated in recent years, with many operators citing inadequate reimbursement rates set by PBMs as a primary driver. When a PBM can steer patients to its own pharmacy while simultaneously setting the reimbursement terms for competitors, independent operators argue the playing field is fundamentally uneven.
Patients in rural and underserved communities are particularly vulnerable. Independent pharmacies often serve as the only accessible pharmacy option in small towns and rural counties. Their closure doesn't just inconvenience patients — it can create genuine barriers to medication adherence, which carries significant public health consequences.
Supporters of the FAIR Rx Act argue that structural separation is not merely a matter of business competition — it is a patient safety and public health issue that states have both the right and the responsibility to address.
What Comes Next
The legal proceedings are expected to unfold over months or potentially years, with the question of ERISA preemption likely to reach appellate courts regardless of how lower courts rule. Tennessee officials have signaled their intent to defend the law vigorously, and the state is likely to receive support from independent pharmacy groups and consumer health advocates as amicus participants in the litigation.
As the court battles play out, all eyes will be on Congress and the FTC to see whether federal action accelerates in parallel. The outcome of these cases will shape not only Tennessee's regulatory landscape but the future trajectory of PBM reform across the entire United States.