Why It Matters
Tennessee has become the latest battleground in a national fight over pharmacy benefit manager regulation, with major implications for drug pricing, patient access, and the balance of power between large health care conglomerates and independent pharmacies. The outcome could set a precedent for similar laws 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 barring any company from operating both a pharmacy benefit manager and brick-and-mortar pharmacy locations within the state.
The suit was filed in U.S. District Court for the Middle District of Tennessee. CVS is the only company operating in Tennessee that owns both retail pharmacy locations and a PBM, making the law a direct challenge to the company’s integrated business model.
PBMs serve as intermediaries between insurance companies and pharmacies, negotiating drug prices and reimbursement rates. Supporters of the legislation framed the measure as a reform effort to correct a structural imbalance that has disadvantaged independent pharmacies for years.
CVS spokesperson Amy Thibault stated that the company would challenge what it called an “unconstitutional law” that it said places “special interests and local politics ahead of patients, restricting their access to life-saving medications.”
By the Numbers
- 136 — CVS 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 maximum rate differential found in a state audit, showing some PBMs reimbursed affiliated pharmacies at up to 160 times the rate paid to non-affiliated stores
- ~80% — Share of the PBM market controlled by CVS Health, United Health/Optum, and Cigna/Express Scripts combined, according to KFF Health
- $230,000+ — Contributions from the Tennessee Pharmacists Association PAC to state lawmakers over the past five years, compared to less than $10,000 from CVS over the same period
Legislative Ties to the Pharmacy Industry
The bill drew notable support from lawmakers with direct ties to the pharmacy profession. The Senate sponsor, Republican Sen. Bobby Harshbarger of Kingston, owns a pharmacy. The legislation was also co-sponsored by Lt. Gov. Randy McNally and Sens. Shane Reeves and Ferrell Haile, all of whom are pharmacists by trade.
In the House, Speaker Cameron Sexton co-sponsored the bill, and his wife works as a pharmacist. CVS mounted a multimillion-dollar advertising campaign across Tennessee throughout the spring — including television ads and mass text messages — in an unsuccessful attempt to block the bill’s passage.
Zoom Out
Tennessee’s law closely mirrors legislation Arkansas enacted in 2025. CVS and other PBMs challenged that law in federal court, and a judge blocked it from taking effect, finding it potentially conflicted with federal statutes limiting states from imposing excessive regulations on out-of-state businesses. That case remains ongoing.
The Tennessee fight reflects a broader national effort by state legislatures to constrain PBM market power. Independent pharmacy advocates have spent nearly a decade pushing for such restrictions, arguing that vertically integrated health care companies use their dual roles to extract higher reimbursements for their own stores at the expense of competitors. Southern and midsized cities like those in Tennessee have seen significant population growth, increasing the stakes for health care access policy in the region.
What’s Next
The federal lawsuit will proceed in the Middle District of Tennessee. CVS is expected to seek a preliminary injunction to prevent the law from taking effect while litigation continues — the same legal strategy used in the Arkansas case.
State lawmakers are expected to defend the law in court. Whether Tennessee courts follow the Arkansas federal court’s reasoning, or reach a different conclusion on the constitutional questions, will likely determine whether similar legislation advances in other states currently weighing comparable PBM reforms.