Why It Matters
Tennessee has become the latest battleground in a national fight over pharmaceutical pricing and market structure. The new state law, now facing a federal legal challenge, could reshape how drugs are priced and distributed for more than a million patients across the state — and set a precedent for similar legislation advancing in other states.
What Happened
CVS Health filed a federal lawsuit against Tennessee officials on May 22, 2026, hours after Gov. Bill Lee signed legislation prohibiting a pharmacy benefit manager from simultaneously owning brick-and-mortar pharmacy locations. The suit was filed in U.S. District Court for the Middle District of Tennessee.
The law effectively singles out CVS Health, which is the only company operating in Tennessee that owns both a major PBM and a retail pharmacy network. PBMs serve as intermediaries between insurance companies and pharmacies, negotiating drug prices and reimbursement rates.
CVS spokesperson Amy Thibault issued a statement framing the measure as harmful to patients, saying the company would pursue legal action “challenging the constitutionality of this law” and warning it “puts special interests and local politics ahead of patients, restricting their access to life-saving medications.”
The governor signed the bill approximately one month after it cleared the state legislature. Tennessee lawmakers have characterized the legislation as PBM reform aimed at leveling the playing field for independent pharmacies.
By the Numbers
- 136 — CVS retail pharmacy locations in Tennessee that the company threatened to close when the bill was first introduced
- 1.5 million — Tennessee pharmacy patients CVS says it currently serves
- 160x — The highest reimbursement rate disparity found by a state audit, comparing PBM payments to affiliated pharmacies versus independent stores
- ~80% — Share of the national PBM market controlled by CVS Health, UnitedHealth/Optum, and Cigna/Express Scripts combined, according to KFF Health
- $230,000+ — Political donations from the Tennessee Pharmacists Association PAC to state lawmakers over the past five years, compared to less than $10,000 from CVS
Legislative Ties to the Pharmacy Industry
The bill drew notable support from lawmakers with direct ties to independent pharmacy. The Senate sponsor, Kingston Republican Bobby Harshbarger, is a pharmacy owner. Co-sponsors included Lt. Gov. Randy McNally, along with state senators Shane Reeves and Ferrell Haile — all of whom are licensed pharmacists. In the House, Speaker Cameron Sexton also co-sponsored the measure; his wife works as a pharmacist.
CVS mounted an aggressive campaign to block the legislation, spending millions of dollars on statewide advertising through the spring legislative session and deploying mass text message outreach to Tennessee residents. The effort did not prevent the bill’s passage.
Zoom Out
Tennessee is not the first state to pursue this type of PBM vertical-integration restriction. Arkansas enacted comparable legislation in 2025, prompting CVS to threaten closure of its roughly two dozen pharmacies there. CVS and other PBMs sued, and a federal judge blocked the Arkansas law from taking effect, citing federal statutes that limit states from imposing excessive regulations on out-of-state business operations. That case remains in litigation.
The outcome of the Tennessee lawsuit could carry significant weight nationally. A growing number of state legislatures have spent years attempting to regulate PBM practices, particularly around reimbursement disparities that independent pharmacists argue disadvantage non-affiliated stores. As Southern and midsized cities continue to see strong population growth, the policy stakes around regional healthcare access are rising alongside demand.
What’s Next
The federal case will now proceed in the Middle District of Tennessee. CVS will likely seek a preliminary injunction to prevent the law from taking effect while litigation continues — the same legal strategy that succeeded in Arkansas. State officials are expected to defend the statute’s constitutionality. The parallel Arkansas case may offer an early indicator of how federal courts are likely to weigh state PBM regulation against existing federal commerce protections.