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The Lawsuit, in Plain Terms
80 percent. As of 2023, according to Federal Trade Commission data, just three companies—CVS Caremark, Express Scripts, and OptumRx—process nearly 80 percent of the 6.6 billion prescriptions dispensed annually in the United States. That level of market concentration has drawn legislative fire from all 50 states. Now, as of June 23, 2026, the industry is fighting back in federal court.
According to Google News, drawing on coverage from planadviser and related trade publications, the Pharmaceutical Care Management Association (PCMA)—the trade group representing the country's dominant pharmacy benefit managers—filed federal lawsuits on June 16, 2026, against Illinois and Tennessee. Both suits rest on the same legal theory: ERISA preemption. The practical objective in each case is identical—invalidate state-level PBM reform laws before they reshape how the industry operates.
Illinois' Prescription Drug Affordability Act, signed on July 1, 2025, targets three PBM practices directly. It prohibits PBMs from steering patients toward pharmacies they own, bans spread pricing (the practice of pocketing the gap between what a PBM charges an insurer and what it actually pays a pharmacy), and establishes a $25 million annual grant program funded by taxes levied on PBMs themselves. Tennessee's FAIR Rx Act—Senate Bill 2040—takes a more structural approach, prohibiting PBMs from owning or controlling pharmacies within the state outright. CVS Health, which operates CVS Caremark alongside thousands of retail pharmacy locations, filed its own separate federal suit against Tennessee in parallel with PCMA.
The Federal Rule That Keeps Winning in Court
ERISA—the Employee Retirement Income Security Act of 1974—contains a preemption clause that overrides state laws "relating to" employer-sponsored benefit plans. In plain terms: when a large employer self-insures its health benefits (meaning it pays claims directly rather than purchasing coverage from an insurance carrier), ERISA gives that employer significant latitude to design those benefits as it sees fit, and states have historically had limited authority to override those choices.
PCMA's position in both filings is that the Illinois and Tennessee laws cross a constitutional line—they do not merely regulate costs, PCMA argues; they dictate how plan sponsors must structure pharmacy networks and impose reporting requirements that would increase costs for self-insured employers, crossing into territory ERISA expressly protects. The Sixth Circuit Court of Appeals gave that argument substantial reinforcement in April 2026, ruling in McKee Foods v. BFP that Tennessee's earlier any-willing-provider provisions had "eliminated a plan sponsor's discretion to design the pharmacy benefits for their own workforce." That circuit ruling—issued just weeks before the June 16 filings—handed industry lawyers a current, on-point precedent.
The case working in reformers' favor is the Supreme Court's 2020 decision in Rutledge v. PCMA, which allowed Arkansas' cost-regulation framework to survive preemption challenge. The Court drew a workable line: states can regulate what a PBM charges, but laws that determine which pharmacies must be included in a network, or that constrain how plan administrators exercise discretion over benefit design, are more legally vulnerable. Subsequent circuit decisions have tested that line aggressively. Oklahoma's any-willing-provider mandate was struck down in 2023. Arkansas' House Bill 1150—which banned PBM pharmacy ownership as of January 1, 2026—was preliminarily enjoined by U.S. District Judge Brian Miller on likely Commerce Clause grounds, adding a second constitutional theory to an already crowded litigation landscape.
Chart: As of 2023, 77% of commercial plan beneficiaries and 88% of Medicare Part D enrollees were covered by plans where the insurer and PBM shared the same corporate parent—a conflict-of-interest structure at the center of state reform efforts. Source: FTC data.
What makes the current filings strategically notable is the political backdrop against which they land. As of April 2026, 45 state attorneys general had signaled support for PBM transparency measures—a clear signal that legislative appetite for reform is not diminishing, even as courtroom doctrine has recently moved in industry's favor.
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What the Numbers Actually Reveal About PBM Economics
The financial stakes behind these lawsuits are not abstract. A 2022 FTC report covering the period from 2017 to 2022 documented that PBMs marked up specialty generic drugs by thousands of percent, generating over $7.3 billion in revenue from dispensing drugs above their acquisition costs during that window alone. The FTC's settlement with Express Scripts, finalized on February 4, 2026, is projected to drive down patient out-of-pocket costs by up to $7 billion over the next ten years—a settlement whose scale implicitly acknowledged how heavily existing PBM practices had weighed on patient wallets.
Collectively, as of current industry estimates, PBMs generate approximately $315 billion annually from five revenue streams: rebate sharing, pharmacy spread, revenues from PBM-owned mail-order and specialty pharmacies, administrative fees from plan sponsors, and DIR fees—direct and indirect remuneration, which are retroactive charges billed to pharmacies after a prescription is already dispensed. Spread pricing alone accounts for approximately 10 to 15 percent of PBM revenue, which is precisely the practice Illinois' Prescription Drug Affordability Act targets for elimination.
The vertical integration picture in the chart above tells the conflict-of-interest story in numbers: when the company managing your drug benefits also owns the pharmacy dispensing those drugs and is held under the same corporate roof as your insurer, the structural incentives for cost transparency are compromised by design. California's spread-pricing prohibition, which took effect January 1, 2026, adopts a pass-through pricing model that limits PBM compensation to flat management fees—an approach that has so far avoided the ERISA preemption arguments that network-access mandates attract, suggesting cost-regulation reforms may have considerably more durable constitutional footing than structural ones. This pattern of integrated systems evading oversight is not unique to pharmacy benefits; it mirrors the dynamic that the AI Calcium Scoring FDA clearance story on health.newslens.me identified—healthcare regulators increasingly confronting entities where clinical decisions and financial incentives are held under one corporate structure.
Missouri Attorney General Catherine Hanaway's suit against 19 PBM companies and drug manufacturers for allegedly manipulating healthcare markets and inflating insulin prices adds an antitrust dimension that runs parallel to the ERISA preemption battle. And the 2026 Consolidated Appropriations Act enacted PBM reform provisions for commercial group health plans—though those provisions do not take effect until plan years beginning January 1, 2029, meaning structural federal relief remains years out and state laws remain the most immediate pressure point in the interim.
Where Your Exposure Sits — and Three Steps to Reduce It
Who actually faces risk here depends on where you sit in the system. Patients covered by self-insured employer plans—which represent the majority of commercially insured Americans—are largely beyond the reach of state PBM laws because of ERISA. If PCMA wins these lawsuits, state reform laws get enjoined, and those patients are left without additional protection. If PCMA loses, the state laws survive, but only for the slice of the insured population not already shielded by federal preemption. Independent pharmacists face the most acute near-term exposure: a preliminary injunction can suspend state protections while litigation proceeds, sometimes for years, meaning the income floor those laws were meant to establish never materializes in practice.
Legal technology and AI-powered auditing tools are becoming increasingly relevant to this space. Machine learning systems can parse complex rebate agreements and formulary structures—the kind of multi-layer pricing opacity the Illinois law would compel PBMs to disclose. Automated compliance monitoring software could help plan sponsors and state regulators track adherence with new reporting requirements, creating documented compliance trails that matter whether or not the underlying state statute ultimately survives preemption review.
Your Summary Plan Description (SPD) will specify this. If your employer self-insures, ERISA largely shields that plan from the state-level PBM protections currently at stake in these lawsuits. If you are in a fully insured plan—where your employer buys group coverage from an insurance carrier—state laws apply to you more directly and would offer greater protection if they survive litigation. Knowing which category you fall into is the first, non-negotiable step in understanding your actual legal exposure under the current uncertainty.
Even where ERISA preempts state law, spread pricing and steering are contractual terms that can be renegotiated independent of any litigation outcome. The FTC's February 4, 2026 settlement with Express Scripts establishes a transparency benchmark worth invoking. Request a reconciliation report showing the dollar-for-dollar gap between what your PBM charges the plan and what it actually reimburses pharmacies. If your PBM declines to provide this, document the refusal—it is a data point that may carry weight in regulatory proceedings or future contract disputes.
PCMA's request for injunctive relief could suspend state-level protections before they generate any real economic benefit. Maintain detailed contemporaneous records of below-acquisition-cost reimbursements, DIR fee clawbacks, and any documented instances of patient steering away from your pharmacy. That documentation is material in state administrative enforcement proceedings, PBM arbitration, and any future damages litigation where quantifying economic harm to independent pharmacies is at issue—and courts routinely require it.
Frequently Asked Questions
What is ERISA preemption and why does it keep blocking state PBM laws?
ERISA—the Employee Retirement Income Security Act of 1974—includes a broad clause that overrides state laws "relating to" employer-sponsored benefit plans. Because most large employers self-insure their health benefits, ERISA gives those employers wide latitude to design benefit structures without state interference. PBM trade groups argue that laws governing pharmacy network composition or requiring spread-pricing disclosures dictate plan design decisions that ERISA reserves to plan sponsors. The Supreme Court's 2020 Rutledge v. PCMA ruling carved out an exception for pure cost regulations, but the Sixth Circuit's April 2026 ruling in McKee Foods v. BFP narrowed that carve-out by distinguishing cost rules from network-access and plan-design mandates. Circuit courts have now blocked network-access laws in Oklahoma (2023) and Tennessee (2026), while cost-only statutes like California's 2026 spread-pricing ban have so far survived.
How do pharmacy benefit managers actually make money, and how much do they generate?
As of current industry estimates, PBMs generate approximately $315 billion annually from five revenue streams: (1) rebate sharing—negotiating manufacturer rebates and retaining a portion rather than passing full savings to the plan sponsor; (2) spread pricing—charging plan sponsors more than they reimburse pharmacies and keeping the difference; (3) revenues from PBM-owned mail-order and specialty pharmacies; (4) administrative and management fees from plan sponsors; and (5) DIR fees—retroactive charges billed to pharmacies after prescriptions are already dispensed. Spread pricing accounts for approximately 10 to 15 percent of total PBM revenue. From 2017 to 2022, the FTC documented that PBMs generated over $7.3 billion specifically from marking up specialty generic drugs above their acquisition costs.
Are pharmacy benefit managers bad for consumers, or do they actually lower drug prices?
The honest answer is: it depends heavily on whether PBM financial incentives align with patient outcomes—and there is substantial evidence that they frequently do not. PBMs do negotiate bulk manufacturer rebates that can reduce net costs for plan sponsors. But the FTC has documented that rebate structures can also incentivize manufacturers to maintain artificially high list prices, because larger list prices generate larger rebates. Patients in their deductible phase and uninsured individuals pay list price, not net price, so high list prices impose real costs on vulnerable patients even when insured plan sponsors benefit from rebate income. The February 4, 2026 FTC settlement with Express Scripts—projected to reduce patient costs by up to $7 billion over ten years—implicitly acknowledged that existing practices were extracting meaningful costs from real patients.
Do state PBM reform laws apply to people covered through employer health plans?
As of June 23, 2026, all 50 states have enacted some form of PBM regulation—20 states passed 33 PBM bills in 2024 alone, and 26 states enacted additional PBM regulations in 2025. But whether those laws actually reach you depends entirely on your plan type. Self-insured employer plans—where your employer directly pays health claims—are largely governed by ERISA, not state law, meaning most state PBM reforms do not apply to those enrollees. Fully insured plans (where your employer buys coverage from an insurance carrier) and individual market plans are subject to state regulation. Medicare Part D operates under a separate federal framework. The gap between "all 50 states passed a PBM law" and "this law protects you" is precisely the ERISA chasm these lawsuits are designed to widen.
Bottom line: In my read, the June 16, 2026 PCMA lawsuits are less a legal long-shot and more a calculated bet on favorable circuit precedent—and recent rulings suggest it is a bet with real odds. The Rutledge carve-out for cost regulation is narrower than state legislators hoped when they drafted these laws, and McKee Foods handed industry lawyers a 2026 circuit-level data point they will use aggressively. That does not mean state reform is doomed; it means the constitutional ceiling for what states can mandate inside ERISA-governed plans is lower than the 50-state legislative push implied. The more durable path to structural PBM reform almost certainly runs through the federal provisions in the 2026 Consolidated Appropriations Act—effective January 1, 2029—and through continued FTC enforcement on the model of the Express Scripts settlement. States are generating political pressure; federal law and regulators remain the instruments with structural reach into the self-insured plans where most Americans actually get their coverage.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. The legal landscape described here is subject to change as courts issue rulings in pending litigation. Consult a licensed attorney for guidance specific to your situation. Research based on publicly available sources current as of June 23, 2026.