Pharmacy Organizations Defend Tennessee’s PBM Reform Law — and the Right to Regulate

OVERVIEW

 In August 2025, pharmacy advocacy groups took a bold stand for state-level oversight of Pharmacy Benefit Managers (PBMs) by filing an amicus brief in support of Tennessee’s 2021 PBM Reform Law. This legislation, hailed as one of the strongest in the country, aims to increase transparency, stop abusive PBM practices, and ensure fair reimbursement to pharmacies. But the law is now at the center of a legal battle: McKee Foods v. BFP (Thrifty Med) — a case challenging whether ERISA preempts Tennessee’s PBM regulations.This fight is more than just about one state. It’s a critical test of whether states can retain the authority to regulate healthcare access, provider fairness, and patient protection in the face of federal ERISA statutes.

BACKGROUND

What Tennessee’s 2021 PBM Reform Law Does

Passed as Public Chapter 569, the law includes key provisions designed to level the playing field for pharmacies:- Anti-Steering Protections: Prevents PBMs from forcing patients to use affiliated or mail-order pharmacies by excluding others from the network.- 340B Drug Program Protections: Prohibits PBMs from discriminating against 340B covered entities with lower reimbursements or unique fees.- Fair Reimbursement Mandate: Requires that pharmacies are not reimbursed below acquisition cost, and bars spread pricing.- MAC Appeal Rights: Mandates that PBMs must provide an appeal process with response timeframes for pharmacies to contest underpaid claims.- Transparency Requirements: PBMs must disclose reimbursement sources and pricing methodologies.

What Is an ERISA Insurance Plan?

The Employee Retirement Income Security Act of 1974 (ERISA) governs most private, employer-sponsored health plans, especially self-funded plans where employers directly pay claims instead of purchasing insurance.Under ERISA, federal law preempts state laws that “relate to” employee benefit plans—posing a challenge for states attempting to regulate how PBMs interact with these plans.

McKee Foods v. BFP (Thrifty Med): Key Legal Issues

District Court Ruling – March 2025

The U.S. District Court (Eastern District of Tennessee) ruled in favor of McKee Foods, holding that parts of Tennessee’s PBM reform laws—specifically the “any willing pharmacy” and anti-steering provisions—were preempted by ERISA as applied to McKee’s self-funded plan.Reasoning:- The court said network structuring affects plan administration, which is central to ERISA’s protected areas.- Distinguished from Rutledge v. PCMA (2020), which allowed cost regulation. In contrast, Tennessee’s law affects plan structure, not just payment.- Therefore, enforcing this part of the law against ERISA-covered plans would interfere with federal standards.

Result: A permanent injunction blocks the application of these law sections to McKee’s ERISA-covered plan.

CURRENTLY

Sixth Circuit Appeal – Case Not Over

The Sixth Circuit Court of Appeals revived the case by rejecting the argument that it was moot due to the passage of Public Chapter 1070 (which amended some legal language). The court concluded there was still a live controversy because the regulatory conflict remains unresolved.This means Tennessee’s efforts to uphold state authority are still in play—and the case could end up before the U.S. Supreme Court alongside others like PCMA v. Mulready (Oklahoma).

National Implications

If ERISA preemption is interpreted broadly to block PBM regulation, every state law targeting PBM behavior within self-funded plans may be at risk. That includes MAC appeal laws, anti-steering rules, and 340B protections.

States would lose vital tools to:

- Protect local pharmacy access

- Regulate unfair PBM practices

- Ensure adequate reimbursement for pharmacies dispensing essential medications

The Amicus Brief

What the Pharmacy Community Argues

In their joint amicus brief to the Sixth Circuit Court of Appeals, NCPA, APhA, and TPA argue forcefully in favor of Tennessee’s authority to enact and enforce these reforms:

- PBMs use market dominance to reduce patient access and underpay independent pharmacies while favoring their own mail-order or affiliate chains.

- States must regulate PBMs to maintain public health access and ensure competitive fairness in drug dispensing.

- Tennessee’s law doesn’t conflict with ERISA, but complements it by promoting local accountability and transparency in pharmacy care.

- Audit data supports reform, showing routine PBM steering and reimbursement manipulation.

“Pharmacies should not lose money dispensing essential medications.” – Michael D. Hogue, PharmD, APhA CEO

“PBMs have created a system where they win regardless of patient or provider impact.” – Matthew Seiler, NCPA General Counsel

“Tennessee’s reforms are necessary to protect patients and preserve pharmacy access.” – Anthony Pudlo, PharmD, CEO of TPA

Closing Thoughts

Why This Case Matters

The McKee case puts a spotlight on the delicate balance of state and federal power in regulating pharmacy benefits. Tennessee’s law is a bold attempt to protect local access and fairness. If federal preemption wipes that away, the ripple effect could erase years of progress made across the country. This isn’t just a legal battle—it’s about who gets to protect patients, pharmacists, and public health: your state or a corporate middleman? And in this battle, it’s reassuring and empowering to see national and state associations like NCPA, APhA, and TPA standing shoulder to shoulder with pharmacies.

Their unified voice in the amicus brief reflects not just legal strength, but a broader commitment to real-world pharmacy sustainability and patient care access. That kind of support is not just helpful—it’s essential to winning the long game in PBM reform.

References

1.    Tennessee Public Acts, 112th General Assembly. Public Chapter 569. Available at: https://publications.tnsosfiles.com/acts/112/pub/pc0569.pdf. Accessed August 2025.

2.    Tennessee Public Acts, 112th General Assembly. Public Chapter 1070. Available at: https://publications.tnsosfiles.com/acts/112/pub/pc1070.pdf. Accessed August 2025.

3.    National Community Pharmacists Association. NCPA, APhA, TPA File Brief Supporting Tennessee PBM Regulation Law. Published August 7, 2025. Available at: https://ncpa.org/newsroom/qam/2025/08/07/ncpa-apha-tpa-file-brief-supporting-tennessee-pbm-regulation-law. Accessed August 2025.

4.    U.S. District Court for the Eastern District of Tennessee. McKee Foods v. BFP Enterprises. Civil Case Summary and Ruling. March 31, 2025.

5.    Tennessee Department of Commerce and Insurance. Rules of the Tennessee Department of Commerce and Insurance, Division of Insurance, Chapter 0780-01-95. Published June 27, 2023. Available at: https://www.tn.gov/content/dam/tn/commerce/documents/insurance/posts/0780-01-95PBMRules06272023.pdf. Accessed August 2025.

6.    Supreme Court of the United States. Rutledge v. Pharmaceutical Care Management Association, 592 U.S. ___ (2020).

7.     American Pharmacists Association (APhA), National Community Pharmacists Association (NCPA), Tennessee Pharmacists Association (TPA). Joint Amicus Brief to the Sixth Circuit Court. Filed August 2025.