Latest PBM Reform Developments Keep Vertical Integration in the Crosshairs

The PBM industry continues to evolve through legislative action, litigation, and voluntary industry changes. Below is a brief round-up of recent developments including new federal and state legislation targeting vertical integration, an ERISA preemption challenge to California’s PBM reform law, and a new pharmacy care model announced by Optum Rx.

State and Federal Legislation Targets Vertical Integration

Patients Before Monopolies Act

Congress is again targeting vertical integration in the insurance and PBM industries. The Patients Before Monopolies Act (PBM Act), first introduced in December 2024, was re-introduced in both chambers on May 13, 2026, with bipartisan sponsors. This bill follows the Break Up Big Medicine Act, a broader bill banning common ownership between insurers, PBMs, pharmacies, wholesalers, and a wide range of health care providers, which appears to have stalled in committee.

The 2024 and 2026 versions of the PBM Act share the same core prohibition: it would be unlawful to directly or indirectly own or control both a pharmacy and any insurance company or PBM. The 2026 bill, however, introduces several notable changes:

• Accelerated Timeline: The 2026 version of the PBM Act shortens the divestment period for violations of the common ownership prohibition from three years (under the 2024 bill) to one year. The 2026 version also requires the Federal Trade Commission (FTC) and the Assistant Attorney General of the Antitrust Division at Department of Justice (DOJ) to issue guidance “specifying milestones for divestment” within 30 days of enactment.
• Stronger Enforcement Provisions: Any person required to divest a pharmacy under the 2026 bill who fails to meet the established divestment milestones must transfer 10% of their profits on a monthly basis into an escrow account. These funds will be returned to the person upon timely divestment. If the divestment deadline is missed, a divestiture trustee will be appointed with authority to sell the pharmacy.
• Broader Standing: Both the 2024 and 2026 versions of the bill authorize civil actions against those violating the law by the Inspector General of the Department of Health and Human Services, the DOJ Antitrust Division, the FTC, or a state attorney general. The 2026 bill, however, also adds a private right of action for any individual alleging damages as a result of a violation of the act. If the plaintiff in a civil action prevails, the court may award treble damages and attorney fees.

These new features —  the shortened divestment period, milestone guidance requirement, and private right of action —  mirror the enforcement mechanisms that were included in the Break Up Big Medicine Act.

Tennessee Enacts the FAIR Rx Act

At the state level, legislatures are also pursuing restrictions on vertical integration in the PBM and insurance industries. Tennessee’s Freedom, Access, and Integrity in Registered Pharmacy (FAIR Rx) Act (S.B. 2040) — which we previously reported on — was substantially amended by the legislature then signed by the governor on May 22, 2026.

As enacted, the FAIR Rx Act mirrors the federal PBM Act’s core prohibition: no person or entity may, directly or indirectly, own, operate, control, or direct the operation of both a pharmacy and a health insurance issuer or PBM. The prohibition applies to ownership interests exceeding 5%. Subject to limited exceptions, it takes effect on July 1, 2028.

Tennessee follows Arkansas in enacting legislation restricting vertical integration of PBMs and pharmacies. The Arkansas law is on hold following a preliminary injunction issued by the U.S. District Court for the Eastern District of Arkansas. An appeal of the preliminary injunction remains pending in the Eighth Circuit. Meanwhile, other state PBM reform laws continue to draw legal challenges.

Optum Rx Challenges California S.B. 41

On May 8, 2026, Optum Rx, Inc. (a PBM) and Emisar Pharma Services (an affiliated GPO) sued to block enforcement of California S.B. 41, a comprehensive PBM reform bill that was signed into law on October 11, 2025, arguing that key provisions of the law are preempted by ERISA.

On ERISA-preemption grounds, the complaint challenges three categories of provisions in S.B. 41 applicable to fully insured plans:

• Formulary Exclusivity Restriction: This provision prohibits PBMs from providing formulary exclusivity to drug manufacturers unless they can demonstrate that the exclusivity results in the lowest cost to the payer and lowest cost-sharing for participants.  
• Pharmacy Network Provisions: These provisions include anti-discrimination and anti-steering mandates, any-willing-provider requirements, and other restrictions on preferencing PBM-affiliated pharmacies.     
• PBM Compensation Restrictions: These provisions mandate that PBMs be paid only a flat fee unrelated to drug prices, savings, or rebates, require 100% passthrough of rebates, and prohibit spread pricing.

Plaintiffs argue that these provisions intrude on plan sponsors’ core design decisions and violate ERISA’s national uniformity mandate. These preemption arguments echo the reasoning in the recent Sixth Circuit holding in McKee Foods Corp. v. BFP Inc., which affirmed that ERISA preempts Tennessee’s pharmacy anti-steering and any-willing-provider laws. The Optum Rx complaint also adopts some of the reasoning of the court in McKee that is particularly relevant to state laws targeting PBMs. The plaintiffs argue that laws nominally regulating PBMs function as regulations of ERISA plans themselves; because PBMs administer benefits on behalf of plans, restrictions on PBMs effectively operate directly on plan design.

Optum Rx Announces New Pharmacy Care Model

Even while PBMs and related entities challenge state PBM laws in court, PBMs continue to announce voluntary changes to their business practices that appear in part to be in response to recent federal and state legislative activity. On May 11, 2026, Optum Rx announced “a new pharmacy care model that fundamentally changes how pharmacy benefits are priced and delivered.” Under the new model, each client will be offered per-member-per-month fees independent of drug prices or prescription volume. Optum Rx will also provide full transparency into fees earned by Optum Rx and its GPO, including disclosure of payments from pharmaceutical manufacturers. Optum Rx also announced new digital tools for patients, including one that provides a full cost breakdown of a prescribed drug, including services fees.

We will continue to track legislative, regulatory, and litigation developments affecting PBMs.  For more information on recent developments in the PBM industry, see our PBM Policy and Legislative Update.

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