June 09, 2025 - Modern Healthcare
Nona Tepper
Pharmacy benefit managers are taking states to court over laws that limit or ban core aspects of their business models.
CVS Caremark parent company CVS Health and Express Scripts parent company Cigna are battling statutes in Arkansas and Oklahoma, several states implemented new laws this year, and more are considering legislation.
The outcome of these lawsuits and a case Cigna brought against Minnesota last year could determine the future of state PBM regulation depending on whether courts rule that federal laws preempt state policies. At the same time, the sweeping tax-and-spending-cuts bill speeding through the Republican-led Congress could introduce tougher national laws.
Rising drug costs, concerns about vertical integration in healthcare and consternation about how PBM middlemen make their profits have spurred an uptick in legislative activity at the state level this year.
“PBM legislation has been, over multiple years, the most-filed legislation that we track, and that trend continues," said Maureen Hensley-Quinn, senior director of coverage, cost and value at the National Academy for State Health Policy. "It is the area that we are tracking the largest number of bills in this year, and we've seen states really try to take a more pointed approach."
States are trying to crack down and reduce pharmaceutical costs, and PBMs are fighting to preserve loose federal oversight, said Antonio Ciaccia, CEO of drug pricing research firm 46brooklyn Research and president of 3 Axis Advisors, a consulting firm.
“What you're seeing is different labs of democracy arise in states to try and address problems that are festering, and that the federal government has been unwilling thus far to provide solutions for,” Ciaccia said.
Yet the PBM sector is under pressure from the Federal Trade Commission. The FTC reported last year that six PBMs manage 95% of all prescriptions filled, and that CVS Caremark, UnitedHealth Group unit OptumRx and Express Scripts dominate the market. Those PBMs improperly raised costs for specialty generic drugs by $7.3 billion over six years, for example, the FTC alleged in a separate report.
The FTC sued these PBMs and affiliated group purchasing organizations last year for allegedly inflating drug prices; the PBMs filed a countersuit.
Here’s what to know about PBM litigation in the states.
A recent case concerns an Arkansas law that bans companies from owning both PBMs and pharmacies in the state.
In separate lawsuits filed May 29, CVS Health and Cigna allege the law violates the Constitution’s dormant commerce clause, which limits how states can regulate businesses that cross state lines. CVS Health also argues Arkansas overstepped its licensing power.
CVS Health warned it will have to close 23 drugstores in Arkansas to comply with the law. Cigna runs a mail-order pharmacy that operates in the state and serves 50,000 patients, according to the company.
That provision has attracted support elsewhere. Indiana, New York, Oregon, Texas, Vermont and others are considering similar proposals. In April, a bipartisan group of 39 state attorneys general called on Congress to disallow PBMs from owning pharmacies.
If Arkansas prevails, its law represents an existential threat to the large PBM corporate structure, said Wayne Winegarden, director of the Center for Medical Economics and Innovation at the Pacific Research Institute, a free-market think tank.
“If every state did that, or the federal government implemented it, then CVS’ business model doesn't work,” Winegarden said.
Pharmacy benefit managers are also fighting over the extent to which states can regulate their operations.
The most high-profile case involves an Oklahoma law that would have required PBMs to contract with any willing retail drugstore and limited how PBMs steer patients to pharmacies affiliated with their parent companies.
The Pharmaceutical Care Management Association, which represents PBMs, sued in 2019, alleging Oklahoma violated the federal Employee Retirement Income Security Act of 1974, known as ERISA, and Medicare Part D rules. The U.S. Court of Appeals for the 10th Circuit sided with the trade group in 2023, ruling the Oklahoma statute would have infringed on employers’ ability to create pharmacy networks.
Oklahoma Insurance Commissioner Glen Mulready (R) petitioned the Supreme Court to hear the case and 33 state attorneys general urged justices to reconsider the 10th Circuit ruling. But on May 28, the U.S. Justice Department recommended the Supreme Court not accept an appeal.
In December, Cigna sued Minnesota over a 2019 law that requires PBMs to widen mail-order and specialty pharmacy networks. The ERISA Industry Committee, which represents employers, and the union-backed National Labor Alliance of Health Care Coalitions are also plaintiffs. Like in Oklahoma, the complainants argue federal law supersedes the Minnesota law.
Alabama, Arizona, Arkansas and Utah have enacted laws this year governing how PBMs operate, according to the National Academy of State Health Policy.
New regulations include requirements that PBMs reimburse pharmacies at least as much as Medicaid pays, continue to cover treatments approved by patients' previous PBMs and pass through drugmaker rebates to reduce out-of-pocket costs, among other things. They also ban spread pricing, or when PBMs charge health plans more for medicines than the prices they negotiated with drug companies.
Rules banning spread pricing and requiring rebate pass-throughs target outdated business practices, said Geoffrey Joyce, director of health policy at the University of Southern California Schaeffer Center.
“The more you see how PBMs have evolved and the games they play, the more you just get pessimistic that this little piecemeal legislation at the state level is going to do anything to them,” Joyce said.
Still, Joyce said, state actions serve as a contrast to laxer federal regulation.
President Donald Trump's One Big Beautiful Bill Act of 2025 would ban spread pricing in Medicaid and require Medicare pay PBMs a set rate, rather than reimbursing them for each drug.
Enacting national standards would represent an improvement from the current regulatory environment, which favors larger companies, Ciaccia said. “The more complicated compliance with state laws becomes, the trickier it is for a smaller PBM to scale up and essentially deal with all those nuances from border to border,” he said.