Pharmaceutical Trade Group Files Lawsuits to Block State Laws on PBMs

The Pharmaceutical Care Management Association filed separate federal lawsuits challenging newly enacted pharmacy benefit manager laws in Illinois and Tennessee, arguing the state measures unlawfully interfere with employer-sponsored health plans governed by the Employee Retirement Income Security Act.

The complaints, filed last week in U.S. district courts in Illinois and Tennessee, mark the latest escalation in the legal battle over state efforts to regulate PBMs. The pharmaceutical gatekeepers have faced increasing scrutiny from lawmakers, regulators and employers into prescription drug pricing and business practices. The litigation also underscores a growing conflict between states seeking to reshape the prescription drug marketplace and PBMs arguing that federal law preempts many of those reforms.

The cases arrive as momentum for PBM regulation also continues to build at the federal level. Congress recently enacted sweeping transparency requirements that will require PBMs to disclose pricing, rebates, fees and spread pricing arrangements to employer health plans beginning in 2028, while the Department of Labor has proposed rules requiring PBMs to disclose direct and indirect compensation to ERISA plan fiduciaries. Separately, bipartisan lawmakers have introduced legislation that would deem PBMs fiduciaries under ERISA, further expanding federal oversight of the industry. Those developments have placed PBMs under increasing pressure, even as the industry challenges state laws in court.

In Illinois, the PCMA is seeking to block the state’s Prescription Drug Affordability Act, arguing that its pharmacy network restrictions and reporting requirements would increase costs for self-insured employers and interfere with employers’ ability to design health benefits. The trade group contends the law imposes state requirements on employer-sponsored health plans that are protected under ERISA.

“Prescription drug prices are far too high for too many Illinoisans. Yet this bill threatens to make them even higher,” PCMA President and CEO David Marin said in a statement announcing the lawsuit. Marin said the organization is seeking to protect self-insured employers and labor unions from what the PCMA describes as burdensome reporting requirements and restrictions on cost management tools.

The Illinois law includes broad PBM reforms intended to improve prescription drug affordability and pharmacy access, including new requirements affecting PBM operations and oversight.

Illinois Governor JB Pritzker and Illinois General Assembly members hailed the legislation as holding PBMs responsible for “predatory practices” lowering costs for consumers and for protecting local pharmacies.

In Tennessee, the PCMA challenged the state’s FAIR Rx Act, which prohibits PBMs from owning or controlling pharmacies in the state. Elected officials insist the law would make pricing more transparent. The association argues the law would force the closure of more than 160 PBM-affiliated retail, specialty and mail-order pharmacies, disrupting patient access to medications while creating administrative burdens for multistate employers.

According to the PCMA, the Tennessee law conflicts with both ERISA and federal Medicare statutes by dictating pharmacy network design for employer-sponsored and Medicare prescription drug plans. Marin said the law “creates new state-specific requirements for multistate employers trying to provide affordable, consistent benefits to workers across state lines.”

Tennessee Governor Bill Lee signed the legislation in May; the PCMA’s complaint follows similar legal challenges filed by CVS Health and Express Scripts.

The complaints also reflect a broader legal strategy by PBMs and employer groups, which have increasingly argued state PBM regulations are preempted by ERISA when they affect self-funded employer health plans.

Similar concerns have surfaced in other states. During debate over California’s PBM legislation in 2024, the ERISA Industry Committee warned lawmakers that regulating PBMs without exempting self-funded plans could violate federal law and invite litigation.

Scrutiny of PBMs and other healthcare service providers is unlikely to wane as affordability and price transparency become key political issues. 

During a Congressional hearing in April, for example, Chris Deacon, a health benefits consultant and the founder of VerSan Consulting, said that the healthcare industry is increasingly vertically consolidated, meaning Congress should track compensation flows among the related entities beyond PBMs to provide transparency.

“If you squeeze one end of the balloon, it pops up on the other,” she said. “So if you’re not catching all of those covered service providers, you will be missing something.”