From the Arkansas Advocate:
A federal judge blocked Arkansas’ first-in-the-nation law regulating pharmacy benefit managers, stating in Monday’s order that it “likely violates” the U.S. Constitution’s commerce clause and is “likely preempted” by a veterans’ health care program.
Act 624 of 2025 would have banned 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.
Four PBMs, including the three largest in the nation, 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.
Both sides presented their arguments to U.S. District Judge Brian Miller on Wednesday. In Monday’s 17-page order, Miller granted the plaintiffs’ request for a preliminary injunction, and the case is expected to go to trial.
Miller agreed with the plaintiffs’ attorneys that Act 624 violates the Commerce Clause of the U.S. Constitution because it “appears to overtly discriminate against plaintiffs as out of state companies and the state has failed to show that it has no other means to advance its interests,” he wrote.
“This is true because section one of Act 624 specifically states that its purpose is to eliminate plaintiffs’ ‘business tactics that have driven locally-operated pharmacies out of business,’” Miller wrote. “…Although the state argues that it is merely targeting a form of business structure, this appears to only be a half-truth because the statute discloses that the state is also attempting to protect “locally-operated pharmacies” as opposed to just consumers and non-PBM affiliated pharmacies, including out of state non-PBM affiliated pharmacies like Walgreens.”
Miller called Act 624 Arkansas’ “latest and most aggressive” attempt to regulate PBMs in recent years. Act 900 of 2015 required PBMs to pay pharmacies at least the national average of what drugstores pay wholesalers for drugs, and two 2018 laws prohibited PBMs from reimbursing their affiliated pharmacies in Arkansas at a higher rate than their locally owned competitors. An additional statute prohibits PBMs from excluding a pharmacy from a health benefit plan if the pharmacy “is willing to accept the health benefit plan’s operating terms and conditions.”
Lawmakers, state insurance department officials, independent pharmacists and the Arkansas Pharmacists’ Association have repeatedly claimed that PBMs routinely violate Act 900 and the 2018 statutes, creating a struggle for independent pharmacies in rural areas to remain operational.
However, “based on the evidence in the record, it appears that these laws are sufficient for the state to achieve its stated purposes of curtailing plaintiffs’ business tactics and minimizing the conflicts of interest inherent in PBM-affiliated pharmacies,” Miller wrote.
He also agreed with plaintiff Express Scripts’ claim that Act 624 impedes its mail-order pharmacy’s requirement to provide prescription medication to members of the military, their families and veterans in Arkansas. ESI Mail Pharmacy Inc. is the primary mail-order pharmacy provider for Tricare, the military’s health insurance program.
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. Daniel Volchok, Express Scripts’ attorney, said last week that this provision is insufficient because it covers only a “subset” of medications approved by the Department of Defense for Tricare participants.
The plaintiffs’ attorneys made several other arguments for an injunction that Miller said did not have merit. In one such argument, an attorney for OptumRx, one of the three largest PBMs along with Express Scripts and CVS Caremark, argued that Act 624 violates the federal Employee Retirement Income Security Act of 1974.
The law, known as ERISA, sets certain standards for employee benefit plans, but Act 624 “does not regulate PBMs in their capacity as employee benefit plan administrators” and instead simply regulates pharmacy licensure, Miller wrote.
An Iowa law meant to regulate PBMs was partially blocked in federal court last week because its mandates of certain cost-sharing arrangements between pharmacies and PBMs potentially violated ERISA, according to the judge’s ruling. Similarly to Arkansas, supporters of the new Iowa law said it would help rural and small pharmacies remain in business.
Miller also rejected the plaintiffs’ argument that Act 624 is an unconstitutional bill of attainder, meaning it imposes a legislative punishment without due process. He said the law does not name specific plaintiffs even though it targets “a very narrow group.”
“While Act 624 is tainted by its protectionist rhetoric so much as to render it unconstitutional under the Commerce Clause, it was not enacted in a wholly arbitrary manner,” Miller wrote.
CVS Health, which includes plaintiff CVS Caremark, expressed opposition to Act 624 during this year’s legislative session and said the law would force the company’s 23 Arkansas pharmacies to close.
In a statement Monday, CVS Health praised Miller’s ruling and said it is “actively looking to work together with the state to reduce drug prices and ensure access to pharmacies.”
