Arkansas passed a law in April 2025 that bars pharmacy benefit managers from acquiring, owning or operating retail or mail-order pharmacies in the state. The three largest managers, CVS Caremark, Express Scripts and OptumRx, sued along with the industry association. A federal judge in the Eastern District of Arkansas blocked the law in July 2025, finding that it likely violated the dormant Commerce Clause and was preempted by the federal TRICARE program. Arkansas appealed. The Eighth Circuit heard argument in September and has not ruled.
The case is called Express Scripts v. Richmond, No. 25-2529. On its surface it is a dispute about a state law and a business model. Underneath, it is a question about authority: can a state decide that a particular structure in the drug supply chain is illegal within its borders, or does the Constitution leave that choice to Congress? The answer will shape not only Arkansas's law but the growing wave of state bills aimed at pharmacy benefit managers.
A 2025 law, a 2025 injunction, and a waiting appellate court
Act 624 was enacted in April 2025. It prohibits a pharmacy benefit manager from acquiring, owning or operating a retail or mail-order pharmacy in Arkansas. The plaintiffs filed suit on May 29, 2025, in the Eastern District of Arkansas. On July 28, 2025, the district court granted a preliminary injunction.
The court accepted two of the plaintiffs' theories. It found that the law likely discriminated against interstate commerce in violation of the dormant Commerce Clause and that it was preempted by TRICARE, the federal health program for military families. It rejected several other challenges, including arguments under the Privileges and Immunities Clause, the Bill of Attainder Clause, the Takings Clause, the Equal Protection Clause, Medicare Part D and the Employee Retirement Income Security Act.
That split matters on appeal. Arkansas does not have to defend every theory the district court rejected, but the plaintiffs can renew them. The Eighth Circuit's decision will therefore speak to both the commerce power and the reach of federal preemption in a market where states and the federal government both regulate.
The procedural posture also matters. A preliminary injunction is a prediction, not a final judgment. The district court decided that the plaintiffs were likely to succeed, not that they had. The Eighth Circuit is reviewing that prediction on the record that existed in July 2025, before any trial or factual development. A ruling either way will be about the legal framework as much as about Act 624.
How the PBM business model became a state issue
A pharmacy benefit manager sits between insurers, employers and pharmacies. It negotiates rebates from drug makers, sets reimbursement rates for pharmacies, and designs networks. The largest managers are now part of much larger companies. CVS Caremark is owned by CVS Health, which also owns a retail pharmacy chain and a major insurer. Express Scripts is owned by Cigna. OptumRx is part of UnitedHealth.
That consolidation is the context for Act 624. When the same company owns the manager that sets a reimbursement rate and the pharmacy that collects it, the transaction has two sides controlled by one party. The state's theory is that this structure creates an incentive to steer patients to affiliated pharmacies and to pay those pharmacies more than independents, at the expense of patients and employers who fund the plans.
The FTC has documented the pattern. An FTC report found that one pharmacy benefit manager sold a cancer drug for more than $19,000 that cost $97 at Walgreens, according to KATV's account of the case. The commission has also found that vertically integrated managers can pay their own pharmacies more than independent ones. Those findings are the factual backdrop to Act 624.
The law does not regulate a particular reimbursement rate. It bans a structure. That is why it is a bigger case than a rate dispute. A state can regulate rates without challenging the existence of the business. Banning ownership challenges the business itself.
PBMs argue the law protects Arkansas pharmacies
The plaintiffs' case is that Act 624 burdens interstate commerce and protects in-state pharmacies at the expense of a national market. They say the law is protectionism dressed as consumer protection. They also argue that TRICARE and Medicare Part D occupy the field, leaving states no room to impose their own ownership rules on companies that administer federal benefits.
The law applies only to managers that own pharmacies. Walmart, which owns pharmacies but is not a pharmacy benefit manager, is not covered. The plaintiffs say that asymmetry shows the law is aimed at the major managers rather than at a general conflict of interest.
At argument, the managers' counsel said the ban could affect about one in five Arkansans, more than 50 pharmacy closures and 5 to 6 million prescriptions a year, according to reporting on the NACDS state update. Those are advocacy figures, and the court will weigh them against the state's evidence. But they frame what the judges are being asked to decide: whether the disruption of a national network is a cost the Constitution forbids a state from imposing.
The estimates are also a preview of the remedy problem. If Act 624 takes effect, the major managers would have to divest their Arkansas pharmacies or stop administering benefits in the state. Either choice takes time and changes contracts that were negotiated years earlier. A court weighing the balance of harms has to consider that transition, not just the abstract question of who wins.
The state argues the conflict is the business model
Arkansas's answer is that Act 624 is an exercise of its police power over a market that operates inside its borders. The state says the law addresses self-dealing, not competition from out-of-state companies. It points to the federal findings about integrated managers paying their own pharmacies more and steering patients to affiliated stores.
John Vinson of the Arkansas Pharmacists Association called the dispute an antitrust concern and warned that a win for the managers would rip away the rights of states. That is the state's frame: the case is about whether states can enforce competition law against a vertically integrated intermediary.
The judges' question at argument, as reported, went to the heart of it. If the managers prevailed, how could a state enforce any antitrust law? The question suggests the panel understands that the dormant Commerce Clause can swallow state regulation if applied broadly. It does not predict the outcome, but it identifies the stakes.
The Eighth Circuit's question is about authority
The dormant Commerce Clause asks whether a state law discriminates against interstate commerce or imposes a burden that is clearly excessive in relation to the local benefits. The district court found the law likely failed that test. Arkansas argues that the law is evenhanded because it applies to any manager that owns a pharmacy, and that the local benefit is a fair drug market.
The preemption question is narrower but just as important. TRICARE is a federal program, and the managers say its network rules leave no room for a state ownership ban. Arkansas says the law regulates the corporate structure of its contractors, not the benefits the program provides. The district court sided with the managers on both theories.
The TRICARE theory is the one to watch. If the Eighth Circuit holds that a federal health program's network rules preempt a state ownership ban, the reasoning could extend to other federal programs and other state laws that touch the drug supply chain. That would give the industry a broader shield than a loss on the commerce clause alone.
The panel could also decide the case without reaching the constitutional question. It could resolve the appeal on the preemption theory alone, or remand for a fuller factual record on the commerce clause, which was decided on a preliminary injunction rather than a trial. A narrow ruling is the more likely outcome for an appellate court that prefers to avoid broad constitutional holdings. Either way, the case would continue, and the district court would have to apply whatever standard the Eighth Circuit announces.
The timing matters for the states watching. Legislative sessions in many states begin in January, and lawmakers drafting ownership bans need to know whether the Arkansas model can survive a preliminary injunction. A narrow ruling would leave them guessing. A broad one would tell them whether to draft around the Constitution or wait for Congress.
The case is one of a wave. Tennessee and other states have passed laws regulating pharmacy benefit managers, and the industry has challenged them around the country. A ruling for Arkansas would give states a template for ownership bans. A ruling for the managers would narrow the tools states can use and push more of the fight back to Congress and the federal agencies.
What a ruling would change
If Arkansas wins, states can ban pharmacy ownership by benefit managers, and copycat laws become safer to enact. Managers would have to choose between owning pharmacies and administering benefits in those states. That could reshape networks and force divestitures or contractual changes.
If the managers win, states may still regulate reimbursement, disclosure and network design, but ownership bans would face a federal shield. The practical effect would be to preserve vertical integration in most of the country, even where a state legislature has decided it is harmful.
Either way, the ruling will not settle drug pricing. It will decide which level of government gets to try. That is a narrower question than the headlines suggest, and a more consequential one for the next round of state bills.
The case is not about whether pharmacy benefit managers save money or cost money. It is about whether a state can decide that a business structure is illegal within its borders. That is the question the Eighth Circuit has to answer before Act 624 can take effect.
Primary sources
- KATV reporting on the case for the Act 624 background, the parties, the district court injunction, the Eighth Circuit argument, the FTC findings, and the pharmacists association's position.
- Mintz analysis of state pharmacy benefit manager litigation for the case posture, the theories the district court accepted and rejected, and the wider wave of state laws.
- NACDS state update on Arkansas for the oral argument reporting and the managers' estimates about affected residents, pharmacy closures and prescription volume.
- Arkansas Act 624 as enacted for the ownership prohibition and its scope.