LUGPA Policy Update: State Efforts to Prohibit PBM Ownership of Pharmacies

March 2026

At-a-Glance Essentials

What’s Happening:
Several states are considering or enacting laws that prohibit Pharmacy Benefit Managers (PBMs) from owning or controlling pharmacies, targeting conflicts of interest created by vertical integration.

Why It Matters:
PBMs that own pharmacies can steer patients, set reimbursement rates for competitors, and influence drug formulary practices that may increase costs and limit patient access.

Impact on Urology Practices:
PBM ownership restrictions could improve competition, protect independent pharmacies and in-office dispensing programs, and reduce administrative burdens for physician practices.

Key Takeaway:
State reforms and potential federal legislation aim to curb PBM market power and promote more transparent, competitive prescription drug markets.

Growing State Efforts to Limit PBM Vertical Integration

As federal PBM reform efforts move slowly, states are increasingly pursuing legislation to limit PBM ownership of pharmacies. Policymakers argue that allowing PBMs to both manage pharmacy benefits and operate pharmacies creates significant conflicts of interest.

Several states introduced or advanced legislation in 2025–2026 that would prohibit PBMs from owning, controlling, or holding licenses for retail, mail-order, or specialty pharmacies.

Key Examples

Arkansas (Act 624, 2025)
Arkansas enacted the first state law banning PBM ownership of pharmacies. The law was scheduled to take effect in 2026, but it is currently on hold due to a federal court injunction pending litigation. The outcome could influence similar laws nationwide.

Tennessee (HB 1959 / SB 2040)
Proposed legislation would prohibit PBMs from owning or controlling pharmacies directly or indirectly through affiliated entities.

Arizona (SB 1545)
Under consideration, this bill would bar PBMs from holding pharmacy permits, with enforcement by the state Board of Pharmacy.

Oklahoma (HB 4457)
This proposal would prohibit PBMs and their affiliates from holding pharmacy licenses for retail drug sales.

Other states, including New Jersey and New York, have introduced similar proposals. Meanwhile, federal legislation such as the Patients Before Monopolies Act would establish nationwide restrictions on PBM ownership of pharmacies.

Why This Matters

Three large PBMs currently control the vast majority of the U.S. prescription drug market. When PBMs also own pharmacies, they can act as both:

• Price setters (determining reimbursement rates for pharmacies), and
• Market participants (operating their own pharmacy networks).

Critics argue this structure enables practices such as:

• Steering patients to affiliated pharmacies
• Underpaying independent pharmacies
• Favoring high-rebate drugs in formularies
• Increasing overall drug spending

These practices can contribute to higher costs for patients and reduced competition in local pharmacy markets.

Implications for LUGPA Members

PBM ownership restrictions could have several implications for independent urology practices.

Fairer Competition
Limiting PBM ownership could reduce incentives for PBMs to favor their own pharmacy networks, improving market conditions for independent pharmacies and physician dispensing programs.

Better Patient Access
Restrictions on patient steering could allow urologists greater flexibility in directing patients to pharmacies that support coordinated care.

Reduced Administrative Burdens
Greater transparency and fewer conflicts of interest could help reduce reimbursement challenges and administrative complexity related to drug dispensing.

However, legal challenges—such as the ongoing litigation in Arkansas—may delay implementation and create uncertainty for multi-state providers.

LUGPA Perspective

LUGPA supports efforts to increase transparency, accountability, and fair competition in the prescription drug supply chain. Reforms that address PBM market power can help protect independent practices, support medically integrated dispensing models, and improve patient access to essential medications.

LUGPA will continue monitoring state legislation and federal PBM reform proposals while engaging policymakers on policies that support independent physician practices and patient-centered care.