After a multi-million dollar battle waged by CVS Caremark, and fueled by years of data
painstakingly gathered by community pharmacies,Tennessee has struck a blow against
vertical integration in the prescription drug supply chain that will echo across every state capitol in the country.
The fight for a fair pharmacy marketplace just cleared its highest hurdle yet. On April 21,
2026, the Tennessee General Assembly passed the Freedom, Access, and Integrity in
Registered Pharmacy Act (the FairRx Act) with a resounding 86-to-7 vote in the
House and 24-to-9 in the Senate. The bill now heads to Governor Bill Lee's desk and, if signed, will take effect July 1, 2028. What it does is deceptively simple: it prohibits any
company from simultaneously owning or controlling a pharmacy, a pharmacy benefit
manager (PBM), and a health insurance issuer in the state of Tennessee. In practice, it
puts CVS Caremark, which owns all three, at a crossroads.
But this moment didn't come from nowhere. It is the product of a years-long, data-driven
grassroots battle waged by community pharmacists who refused to let the evidence of
abuse disappear into spreadsheets and silence.
To understand why this legislation matters, you have to understand the conflict of
interest at its core. PBMs like CVS Caremark sit at the center of prescription drug
transactions — they set reimbursement rates for every pharmacy in a network, including
their own. As bill sponsor Sen. Bobby Harshbarger (R-Kingsport) put it, the system is
built on a fundamental unfairness: a company is simultaneously setting the rules and
playing the game.
One independent pharmacist told a House member what it means on the ground: "I
have to pay a higher price to them than the pharmacies that they own, but I still have to
deal with them." That's not a marketplace — it's a rigged table.
"If you're playing the other team and the other team's owned by the referees, it is
going to be hard to win."
— Rep. Scarbrough, Tennessee House of Representatives
Legislative conviction is one thing. Quantitative, audited evidence is another — and
that's precisely what the Tennessee Department of Commerce and Insurance (TDCI)
delivered in February 2026. Under authority granted by Tennessee's landmark 2022
PBM reform laws, the TDCI conducted a comprehensive audit of Caremark's 2024
operations. What it found was damning.
The audit identified 11 formal findings and 5 additional observations, documenting
systemic violations across four major categories:
• Discriminatory Reimbursement: Caremark reimbursed its own CVS pharmacies at higher rates for 661 of 3,646 medications sampled including a staggering 16,510% higher rate for Cinacalcet 60 mg and 9,927% higher for Tadalafil 20 mg compared to independent pharmacies filling the same prescriptions.
• Illegal Spread Pricing: The audit confirmed Caremark continued to charge plan sponsors more than it paid pharmacies, a practice that has been banned in Tennessee since 2021. A separate audit of Express Scripts found it collected $30 million from Tennessee employers in a single year through the same tactic.
• Dispensing Fee Failures: Caremark failed to pay the required dispensing fee to low-volume and rural pharmacies in 21.7% of tested claims.
• Appeals Process Violations: Caremark denied 27.9% of pharmacy appeals without providing the legally required window for pharmacies to submit information, and routinely failed to pay approved appeal amounts within required deadlines.
This wasn't an isolated incident. By September 2025, TDCI had already entered into
consent orders with both Caremark and Express Scripts, imposing hundreds of
thousands of dollars in penalties and requiring detailed corrective action plans. The
February 2026 audit report on Caremark's 2024 conduct confirmed that even after those penalties, the violations continued.
Sen. Harshbarger cited these findings directly in arguing for SB 2040: "This audit
confirms what Tennessee pharmacists and patients have been saying for years: PBMs
are using their position to favor their own pharmacies and undermine fair competition.
These findings reinforce the need for SB 2040."
CVS Caremark did not accept this challenge quietly. The company reportedly spent
$7.5 million in advertising to combat the bill's passage, a figure that speaks volumes about how much it values the vertically integrated model the FairRx Act targets. The campaign was multifaceted and, at times, aggressive:
• CVS organized pharmacists to lobby on Capitol Hill.
• It threatened to close all 134 of its Tennessee pharmacy locations and eliminate
2,000 jobs if the bill passed.
Shell companies and political groups launched attacks on legislators, attempting
to tie them to opposition against President Trump's drug pricing agenda.The Tennessee Attorney General, Jonathan Skrmetti, was sufficiently alarmed by CVS's tactics that he sent a formal warning letter to the company's CEO over political advocacy messages the company sent to customers through its own pharmacy text notification system. When a corporation uses its prescription pickup alerts as a lobbying platform, it is a measure of just how threatened they felt.
Despite it all, the legislature held firm and held firm decisively.
Tennessee didn't act in a vacuum. Arkansas was first-in-the-nation to pass legislation barring PBMs from owning pharmacies, but a federal judge temporarily blocked it on Commerce Clause grounds. Tennessee's drafters learned from that experience. The
FairRx Act was explicitly written to regulate "qualifications, licensure, ownership, and
control of pharmacies as a condition of professional practice within the state" language designed to withstand the constitutional challenge CVS has already pledged
to bring.
Arkansas proved the political will existed. Tennessee proved the legal framework could
be built to last. That precedent is now available to every other state in the country.
Here is the part of this story that every community pharmacist reading these words
needs to understand: this victory was built on your participation.
The TDCI audit that became the legislative smoking gun was not conjured from thin air.
It was made possible by Tennessee's MAC and Acquisition Cost laws, laws that
require PBMs to reimburse pharmacies based on actual acquisition costs and give
pharmacies the right to appeal underpayments. But those laws only generate
enforceable evidence when pharmacies actually use them: when they document
underpayments, file appeals, and report violations to the state insurance department.
The consent orders against Caremark and Express Scripts, the TDCI's escalating audit
program, Sen. Harshbarger's evidentiary foundation for SB 2040, all of it traces back to community pharmacies generating the quantitative record that regulators and
legislators needed to act. Without pharmacies taking advantage of existing statutes,
enforcement agencies and legislators simply don't have the data to build a strong case.
The FairRx Act is proof that they do, and that it works.
The Core Lesson
Legislative reform is not handed to community pharmacy, it is built claim by claim, appeal by appeal, audit by audit. Every time your pharmacy documents an underpayment and files for MAC appeal review, you are contributing to the evidentiary record that drives state action. Tennessee's FairRx Act is the most powerful validation yet of that strategy.
With multiple states now taking intense legislative and regulatory action to restrict PBM-
retail vertical integration, a momentum shift is underway. Tennessee joins a growing
coalition of states that have concluded that three PBM conglomerates controlling 80% of
the national market, and using that power to squeeze out local competitors, is not a
marketplace. It is a monopoly in slow motion.
The FairRx Act's passage gives other state legislatures a battle-tested template: robust
MAC and acquisition cost laws to generate data, a serious audit infrastructure to
document violations, and carefully constructed ownership-separation language to
survive federal court challenge. The playbook is written. Tennessee executed it. Other
states are watching.
CVS Caremark spent $7.5 million trying to stop one state. It lost. The question for
the rest of America's community pharmacists is simple: are you generating the
data that will make the next Tennessee possible in your state?
Learn how Pharmacy Marketplace is helping Community Pharmacies recoup underwater claims through our PBM Appeals Tool, part of our comprehensive platform that helps pharmacies price shop medications across secondary wholesalers. Join the movement now and see a demo of our platform.