From the Arkansas Advocate:
A federal judge said Wednesday that he will decide “fairly soon” whether to block Arkansas’ first-in-the-nation law regulating pharmacy benefit managers (PBMs).
Act 624 of 2025 bans pharmacy benefit managers (PBMs) from holding a permit to operate a drug store in Arkansas after Jan. 1, 2026. PBMs negotiate prescription benefits among drug manufacturers, distributors, pharmacies and health insurance providers, and the biggest ones also own pharmacies and insurers.
The Federal Trade Commission released an interim report in July 2024 saying PBMs are eliminating competition and increasing drug prices at the expense of patients. The report also states three pharmacy benefit managers — OptumRx, Express Scripts and CVS Caremark — manage 79% of prescription drug insurance claims for approximately 270 million people.
All three PBMs, in addition to Navitus Health Solutions and the Pharmaceutical Care Management Association (PCMA), filed four challenges to Act 624 between May and June. The U.S. District Court for the Eastern District of Arkansas combined the four complaints into one case in which U.S. District Judge Brian Miller heard arguments Wednesday.
The plaintiffs’ attorneys argued that Act 624 violates several aspects of the U.S. Constitution, including interfering with interstate commerce. Ryan Hale and Asher Steinberg of the Arkansas Attorney General’s office disputed the plaintiffs’ allegation that the state is engaging in “economic protectionism” and repeated lawmakers’ statements that Act 624 is meant to protect local businesses and Arkansans’ access to health care by “eliminating anticompetitive practices.”
Local independent pharmacists from throughout Arkansas have told state officials PBMs routinely break or skirt around Act 900 of 2015, which required pharmacy benefit managers to pay pharmacies at least the national average of what drugstores pay wholesalers for drugs.
Lawmakers and the Arkansas Pharmacists Association have claimed PBMs also routinely violate two 2018 laws that prohibit them from reimbursing their affiliated pharmacies in Arkansas at a higher rate than their locally owned competitors.
However, “the state has put nothing in front of the court to say these companies are violating the law in such a way that the additional law is needed to solve some regulatory stopgap,” plaintiffs’ attorney Jeffrey Wall told the court.
PCMA’s attorney, Michael Kimberly, argued that Act 624 is an unconstitutional bill of attainder, meaning it imposes a legislative punishment without due process. The revocation of a pharmacy license is “a kind of punishment that traditionally follows a hearing and an opportunity to present a defense,” but Act 624 does not allow for that, Kimberly said.
Hale said Act 624 is not a bill of attainder because it is for “non-punitive legislative purposes” and “operates prospectively, not retroactively.”
Kimberly disagreed. “There’s a carve-out for PBMs that don’t meet the description of the PBMs the Legislature is attempting to punish, and the distinction is past conduct,” he said.
Act 624 exempts the state’s largest employer, Walmart, from the ban on PBMs owning pharmacy permits. The law does not mention Walmart by name, but it exempts any pharmacy that “exclusively services the employees and dependents of the pharmacy employer while utilizing the affiliated pharmacy benefits manager in this state.” The plaintiffs’ complaints argue this exemption is unfair.
The plaintiffs also claim Act 624 will restrict Arkansans’ access to mail-order and specialty pharmacy services, which are the only means of obtaining specific drugs. Express Scripts’ complaint states that Act 624 “imperils the health” of the 50,000 Arkansans it serves, including members of the military, their families and veterans because the PBM’s ESI Mail Pharmacy Inc. is the primary mail-order pharmacy provider for Tricare, the military’s health insurance program.
Daniel Volchok, Express Scripts’ attorney, said the PBM’s contract with the U.S. Department of Defense requires it to provide “uniform health care for service members.”
Act 624 allows the state pharmacy board to issue limited permits to PBMs if they provide “drugs that are otherwise unavailable in the market to a patient or a pharmacy that would otherwise be prohibited” under the law. Volchok said this provision is insufficient because it covers only a “subset” of medications approved by the Department of Defense for Tricare participants.
“Even if the state board were to do the most it is authorized to do… that would not allow ESI to do everything it is required to do under the contract,” Volchok said.
Kimberly also emphasized Act 624’s projected impact on the pharmaceutical industry, specifically the “harm to goodwill, relationships, contractual arrangements and the destabilization of an entire business model.”
“I understand the harm it would do to the industry,” Miller said, but indicated injury to the PBMs wouldn’t be the deciding factor.
“I have no problem at all, if I found the state of Arkansas went too far, to enjoin [the law],” he said.
If Miller enjoins Act 624, the case is expected to go to trial, with the plaintiffs seeking a permanent injunction on the basis of unconstitutionality.
