While state and federal legislation continues to shape the pharmacy benefits industry, a growing number of federal lawsuits also have the potential to significantly impact drug pricing, pharmacy access and plan design considerations. This update explores key pharmacy benefits litigation trends and provides updates on cases that plan sponsors should be paying close attention to.
Employee Retirement Income Security Act (ERISA) preemption of state pharmacy benefit laws
After the U.S. Supreme Court’s 2020 ruling in Rutledge v. PCMA, states are seeking to expand their regulatory authority over pharmacy benefit managers (PBMs) and continue to test the limits of ERISA preemption. As a reminder, the Rutledge court upheld an Arkansas law requiring PBMs to reimburse pharmacies at the actual acquisition cost for a given drug. The court found that state laws regulating “cost reimbursement” between PBMs and pharmacies were not preempted by ERISA. While this was a nuanced decision, many states viewed it as broadly upholding state laws that regulate PBM behavior. States have gone on to pass laws that go beyond cost regulation and interfere with benefit design, network composition and copay structure.
Since Rutledge, two federal circuit courts have found state any-willing-pharmacy laws to be preempted by ERISA.
- PCMA v. Mulready: The Tenth Circuit held that ERISA preempts Oklahoma’s any-willing-pharmacy law that prohibits preferred pharmacy networks and incentivizing mail-order pharmacies through cost-sharing discounts or lower copays.
- Mckee Foods Corp v. BFP. Inc.: The Sixth Circuit came to a similar decision over Tennessee’s any-willing pharmacy law. This case was an employer-initiated challenge from a plan sponsor facing an administrative complaint from the state department of insurance due to its exclusion of a pharmacy from its network.
These lawsuits are currently pending and confront similar ERISA preemption issues:
Case name
Central States, Southeast & Southwest Areas Health and Welfare Fund v. McClain
Current court/jurisdiction
Seventh Circuit Court of Appeals
Date filed
April 11, 2025
Summary
A large union fund is challenging Arkansas Rule 128, which requires ERISA plans to file annual reports disclosing pharmacy compensation amounts with the state. A lower court found in favor of the state, ruling that the law was permissible cost regulation. The union has appealed.
Case name
Iowa Association of Business and Industry v. Ommen
Current court/jurisdiction
Eighth Circuit Court of Appeals
Date filed
June 23, 2025
Summary
A business coalition is challenging Iowa SF 383’s requirements as applied to ERISA plans. A lower court granted a preliminary injunction which stops the Iowa insurance commissioner from enforcing the law against the plaintiffs while the litigation continues. The commissioner has appealed.
Case name
Optum Rx v. Bonta
Current court/jurisdiction
District Court for the Eastern District of California
Date filed
May 8, 2026
Summary
Optum is challenging California SB 41’s formulary, network and compensation restrictions as being preempted by ERISA. CVS filed a similar lawsuit challenging SB 41’s fiduciary requirements.
Case name
PCMA v. Gillespie
Current court/jurisdiction
District Court for the Central District of Illinois
Date filed
June 16, 2026
Summary
The PBM trade association is challenging Illinois HB 1697 and seeks a declaration that the law’s extensive data reporting and anti-steering requirements are preempted by ERISA.
Key takeaways: State law applicability may vary depending on where a plan is located, and some laws may apply based on where a script is filled rather than where a plan is domiciled. It is often unclear on its face whether a law applies to ERISA plans, especially when the law places restrictions on PBMs and not explicitly plans. State regulators’ intent may also influence the types of entities the state seeks enforcement against.
The Sixth and Tenth Circuit court decisions clarify the scope of Rutledge by confirming that while states may pass laws that regulate reimbursement for ERISA plans, they may not force ERISA plans to adopt a particular network, benefit design or substantive coverage requirement. There is no nationally binding decision on these questions yet, and each PBM may have a different compliance strategy. Plan sponsors should work with their account teams to understand how certain laws may impact their plan.
PBM pharmacy ownership bans
Following the Federal Trade Commission’s investigation into the big 3 PBMs and their vertically integrated subsidiaries, some states have passed legislation to ban PBMs from owning and operating pharmacies in their state. Upon the law’s effective date, the state board of pharmacy will revoke the licensure of any PBM-owned pharmacy operating within that state. Effectively, PBMs would have to choose between operating as a PBM or as a retail, specialty or mail-order pharmacy within that state.
Arkansas was the first state to pass this type of law, set to go into effect in 2026, and it was quickly met with a legal challenge from several PBMs. The PBMs argue that the law discriminates against out-of-state pharmacies and protects in-state pharmacies, Walmart is headquartered in Arkansas and is exempt from the law, in violation of the dormant commerce clause of the U.S. Constitution. In May 2026, Tennessee passed a similar law that is also facing a legal challenge. The cases are detailed below:
- Express Scripts v. Richmond: This lawsuit brought by PBMs challenges Arkansas HB 1150. The district court granted a preliminary injunction that halts enforcement of the law while the lawsuit is pending. The state has appealed this decision to the Eighth Circuit.
- CVS v. Tennessee: This lawsuit was filed in May 2026, hours after the Tennessee governor signed SB 2040 into law. Additional lawsuits have been filed by PCMA and Express Scripts.
Key takeaways: Arkansas’s law is currently paused, and we should know by the end of summer if Tennessee’s law will also be enjoined. Nine other states introduced and considered similar legislation in the 2026 state sessions, and we expect that trend to continue in 2027. These efforts reflect growing concerns about local pharmacy closures, although these bills would lead to hundreds of pharmacy closures if they take effect as intended. PBMs would work to continue expanding networks, but this could come with increased costs for plans and unavoidable access concerns in certain areas. In Congress, a bill was recently introduced that would incorporate this policy at the federal level. SB 4509, the Patients Before Monopolies Act, would ban insurers and PBMs from owning pharmacies.
Another day, another lawsuit: how to stay informed
Keeping up with the latest legal developments has become increasingly challenging as legislation, regulatory actions and court decisions continue to evolve across multiple jurisdictions. Employers Health is committed to keeping you apprised by providing timely alerts, analysis and actionable takeaways. In Part 2 of this article series, we will discuss recent litigation developments in the prohibited transaction and ERISA excessive fees cases.
To learn more, contact Madison Connor at [email protected].
