NASHVILLE, Tenn. — CVS Health has filed suit in federal court to block Tennessee’s newly enacted FAIR Rx Act, escalating the battle over pharmacy benefit manager reform just hours after Gov. Bill Lee signed the legislation into law Friday.
The law, formally known as Senate Bill 2040/House Bill 1959, prohibits a single company from operating a pharmacy benefit manager, a health insurer, and a pharmacy in Tennessee at the same time. Supporters say the measure aims to curb conflicts of interest associated with vertically integrated healthcare companies and preserve competition for community pharmacies.
Thorvardur de Shong
CVS Health, which operates PBM giant Caremark alongside its insurance and pharmacy businesses, immediately challenged the law’s constitutionality in the U.S. District Court.
“Our stores, retail, specialty and mail pharmacies, and retail medical clinics are open and serving patients and customers,” the company said in a statement.
“We will exhaust all options we can to continue to provide pharmacy and health care services to our 1.5M+ Tennessee pharmacy patients and will be filing a lawsuit this afternoon challenging the constitutionality of this law in federal court. This unconstitutional law puts special interests and local politics ahead of patients, restricting their access to life-saving medications and undermining fair competition.”
CVS argued that the legislation specifically targets the company while protecting in-state pharmacy operators.
“S.B. 2040 is designed to target CVS Health, not to protect patients,” the company said. “Tennessee lawmakers crafted the law to exclude CVS Health’s pharmacy operations while protecting in-state pharmacy businesses.”
According to CVS, the law violates the Constitution’s Dormant Commerce Clause by discriminating against or unfairly burdening out-of-state businesses.
The company warned that the legislation could force the closure of 134 community pharmacies in Tennessee, including 12 24-hour locations, and 25 MinuteClinic locations. CVS also said the measure threatens more than 2,000 healthcare jobs statewide and could disrupt care for more than 35,000 patients relying on specialty pharmacy services.
The company warned that the legislation could force the closure of 134 community pharmacies in Tennessee, including 12 24-hour locations, and 25 MinuteClinic locations. CVS also said the measure threatens more than 2,000 healthcare jobs statewide and could disrupt care for more than 35,000 patients relying on specialty pharmacy services.
“As we have said previously, with the passage of S.B. 2040, Tennessee’s legislature is choosing to close 134 community pharmacies, including a dozen that are open 24 hours, as well as 25 MinuteClinic retail medical clinics; leave more than 2,000 local health care workers without good-paying jobs; erode access to specialized pharmacy care for the 35,000+ Tennessee patients with serious conditions who rely on additional support; and increase the cost of Tennessee health benefits by millions of dollars each year,” CVS said.
The company further claimed that the law would raise employers' prescription drug costs in Tennessee by more than $180 million annually, beginning in 2028.
Supporters of the FAIR Rx Act have framed the legislation as a landmark reform that would separate PBMs from pharmacy ownership and reduce the market power of vertically integrated healthcare companies.
CDR
“The signing of the FAIR Rx Act is a testament to what is possible when lawmakers, stakeholders, and advocates come together around good public policy,” said Steven C. Anderson, president and CEO of the National Association of Chain Drug Stores. “This landmark law takes a meaningful step toward ensuring that the rules governing pharmacy reimbursement are set fairly, supporting a marketplace where pharmacies can compete, and patients can continue to access the care they need.”
The legislation passed the Tennessee Senate 24-9 and the House 86-7, both by bipartisan support. It is scheduled to take effect on July 1, 2028.
The Tennessee law mirrors legislation enacted in Arkansas last year and comes amid growing national scrutiny of PBMs and their role in the prescription drug supply chain. A federal bill that would require companies that own insurers or PBMs to divest their pharmacy businesses was reintroduced in Congress earlier this month.
Independent pharmacy advocates and industry groups, including the National Community Pharmacists Association and the Tennessee Pharmacists Association, strongly supported the Tennessee legislation.
“Today marks a historic step forward for patients and pharmacists across Tennessee,” said Anthony Pudlo, CEO of the Tennessee Pharmacists Association. “We’re grateful to Gov. Bill Lee, the General Assembly, and our pharmacist and technician members for standing together to push back on PBMs, strengthen patient protections, and uphold fair, community-focused health care.”
CVS Statement in full
Our stores, retail, specialty and mail pharmacies, and retail medical clinics are open and serving patients and customers.
We will exhaust all options we can to continue to provide pharmacy and health care services to our 1.5M+ Tennessee pharmacy patients and will be filing a lawsuit this afternoon challenging the constitutionality of this law in federal court. This unconstitutional law puts special interests and local politics ahead of patients, restricting their access to life-saving medications and undermining fair competition.
S.B. 2040 is designed to target CVS Health, not to protect patients. Tennessee lawmakers crafted the law to exclude CVS Health’s pharmacy operations while protecting in-state pharmacy businesses. There’s no way around the fact that this legislation will limit patients’ options and increase the cost of their medicines.
For these reasons, S.B. 2040 violates the Constitution’s Dormant Commerce Clause, which prevents states from discriminating against or unfairly burdening out-of-state business. We have a right and responsibility to challenge this harmful policy to protect patient care and fair competition.
As we have said previously, with the passage of S.B. 2040, Tennessee’s legislature is choosing to close 134 community pharmacies, including a dozen that are open 24 hours, as well as 25 MinuteClinic retail medical clinics; leave more than 2,000 local health care workers without good-paying jobs; erode access to specialized pharmacy care for the 35,000+ Tennessee patients with serious conditions who rely on additional support; and increase the cost of Tennessee health benefits by millions of dollars each year.
The passage of this legislation will increase Tennessee employers’ drug costs by more than $180 million a year and does nothing to lower the cost of prescription medication. Facts should matter more than rhetoric, and a thoughtful and realistic economic analysis could have avoided this chaos. Small businesses, employers, health plans, and others are going to have to pay more for prescription drugs in 2028 because of this new law.
Proponents of the bill have consistently made misleading claims about the need and rationale for this legislation, while downplaying the devastating impact it will have on patient care.
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