States Intensify Legislative Push to Regulate Pharmacy Benefit Managers Amid Rising Drug Cost Concerns

State lawmakers across the United States are mounting an aggressive legislative campaign to rein in pharmacy benefit managers (PBMs), the powerful intermediaries that oversee prescription drug coverage for health insurers, as public anxiety over medication affordability continues to escalate. Legislators in at least 26 states introduced more than 120 bills targeting PBMs this year, according to an Associated Press analysis using the bill-tracking software Plural, with roughly a quarter of those measures clearing at least one legislative chamber.

The wave of legislation reflects growing bipartisan frustration with the role PBMs play in the pharmaceutical supply chain. At least a dozen states enacted laws this year that limit compensation to the companies, set minimum payments from PBMs to pharmacists, and mandate greater transparency in disclosures to clients, state regulators, and the public.

The Affordability Crisis Driving Reform

The legislative momentum is fueled by stark consumer distress. A KFF poll conducted earlier this year found that approximately 6 in 10 U.S. adults reported being at least somewhat worried about their ability to afford prescription medications. More troubling, about 4 in 10 said costs had led them to deviate from prescribed regimens within the previous year — whether by taking less than the prescribed dose, substituting over-the-counter alternatives, or simply not filling prescriptions at all.

PBMs, particularly the three largest companies that handle the majority of U.S. prescriptions, manage pharmacy claims for health insurers and negotiate with drug manufacturers over pricing and formulary placement. The companies argue they are uniquely positioned to drive down costs. “If PBMs already didn’t exist, you’d need to invent one,” said Prem Shaw (search)Search term, president of the CVS Health group overseeing its pharmacy and PBM operations. “Blaming PBMs for high drug prices is like blaming umbrellas for the rain.”

The industry points to the increased utilization of generic drugs — now accounting for 90% of U.S. prescriptions — as evidence of their cost-containing function. Critics, however, contend that PBMs retain portions of manufacturer rebates and discounts that should be passed through to consumers and health plans.

Tennessee Becomes a Legal Battleground

The most consequential confrontation is unfolding in Tennessee, where a new law will bar PBMs from operating retail pharmacies as of July 1, 2028. CVS Health Corp. (search)Search term, which operates approximately 9,000 pharmacies nationwide, has filed a federal lawsuit seeking to avoid closing its 136 Tennessee locations.

The lawsuit alleges that the company faces “naked protectionism” from lawmakers who themselves operate independent pharmacies — including the law’s main sponsor, state Sen. Bobby Harshbarger (search)Search term, and co-sponsor Sen. Shane Reeves (search)Search term. CVS spent $4 million this year on advertising opposing Tennessee’s new law, part of a broader $24 million spent by drug companies, PBMs, and their allies on broadcast and digital advertising since the start of 2025 to influence public opinion, according to ad-tracking firm AdImpact.

This is not CVS’s first legal battle over such restrictions. The company sued Arkansas last year after it enacted similar legislation, and a federal judge subsequently blocked that law. CVS also settled three lawsuits in which Louisiana accused it of unfair trade and deceptive practices in lobbying against legislation, agreeing to pay $45 million without acknowledging wrongdoing.

Independent Pharmacies Under Pressure

For independent pharmacy operators, the stakes are existential. Lisa Gales, who operates Main Street Pharmacy in Coldwater, Kansas, with her husband, calculated that she lost money on 86% of the prescriptions she filled last year. A new Kansas law requiring PBMs to pay a $10.50 dispensing fee per prescription represents what Gales called a “great win,” though she acknowledged, “It’s still way under what it’s costing us.”

Louisiana enacted a similar measure, imposing an $11.81 dispensing fee, alongside another law stipulating that PBMs must operate for the benefit of their health-insurer clients and plan enrollees. Critics deride these mandatory dispensing fees as a “pill tax” that will ultimately drive up consumer costs. Supporters counter that the laws also cap what PBMs can charge health plans for medications themselves, often keeping those charges well below wholesale prices.

Some states have gone further, requiring PBMs to pass along all manufacturer discounts and rebates rather than retaining any portion.

Patient Impact and Federal Action

The debate carries particular urgency in rural communities, where independent pharmacies often serve as the sole local access point for medications. Faith Sanders, a 79-year-old retired nursing home administrator in Cedar Vale, Kansas, emphasized that without the local pharmacy, residents would need to drive 35 miles “to go out of town to get anything.” For her elderly neighbors, she said, “We get to the point where it’s hard for us to get out of town.”

Even some PBM critics question whether state-level regulation is the appropriate mechanism. Tennessee state Rep. Robert Stevens, a Nashville-area Republican, told colleagues during debate that cracking down on PBMs “needs to be done by Congress and not by us.”

Congress did pass new PBM regulations in February. One key provision will prevent PBMs from retaining any rebates negotiated on drug prices for health plans that supplement federal Medicare coverage for Americans over 64, signaling that the regulatory scrutiny of these intermediaries is intensifying at both state and federal levels.