While the Tennessee General Assembly considers SB 2040 and HB 1959, which would prohibit pharmacies from owning or operating pharmacy benefit managers (PBMs), a similar law passed last year in Arkansas is currently blocked from taking effect, and now on track for review by the Eighth Circuit Court of Appeals.
U.S. District Court Judge Brian Miller issued a preliminary injunction blocking Arkansas Act 624 from taking effect last year in response to a lawsuit filed CVS Pharmacy, Express Scripts, and OptumRx, and the Pharmaceutical Care Management Association.
Like Tennessee’s proposed legislation, the Arkansas law would block companies from owning or controlling both pharmacies and PBMs, the third-party companies that negotiate pharmacy benefits and prescription drug prices with insurance companies.
The judge ruled the plaintiffs were likely to succeed in their lawsuit based on their argument that Arkansas Act 624 violates the Constitution’s dormant Commerce Clause, which courts have determined prohibits states from passing legislation that hinders interstate commerce. Miller, who was appointed by former President George W. Bush, also said the plaintiffs were likely to succeed based on their claim the Arkansas law violated the federal preemption for TRICARE, the health system for uniformed service members, retirees, and their families.
“Act 624 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,” wrote Miller in his injunction last year, before writing that the legislative history of the law was, “brimming with protectionist rhetoric.”
Miller additionally wrote the plaintiffs were likely to prove, “Act 624 is explicitly preempted by TRICARE’s ‘health care delivery’ provision because Act 624 prohibits PBM-owned pharmacies from delivering healthcare to Arkansas patients,” and that the law, “frustrates the ‘stability,’ ‘uniformity,’ and ‘national’ character of TRICARE.”
The appeal remains pending before the Eighth Circuit, and no oral argument date has been set.
Should the case reach the U.S. Supreme Court, the lower court’s opinion on the constitutionality of state regulation of interstate commerce may come under scrutiny from the Court’s conservative members.
Because the Constitution’s Commerce Clause authorizes Congress to regulate commerce between the states, jurists have inferred a dormant Commerce Clause that limits states’ power to enact laws that unduly burden or discriminate against businesses from other states.
However, Justice Clarence Thomas has repeatedly questioned this interpretation in legal dissents since the early 1990s, including most famously in a 1997 legal dissent, when Thomas wrote, “The negative Commerce Clause has no basis in the text of the Constitution, makes little sense, and has proved virtually unworkable in application.”
Since being confirmed to the high court in 1991, Thomas has issued or joined at least six dissents that included criticisms of the dormant commerce clause, including in 2019, when he joined the dissent written by Supreme Court Justice Neil Gorsuch in the 2019 lawsuit that successfully challenged Tennessee’s two-year residency requirement for retail liquor licenses.
“Unlike most constitutional rights, the dormant Commerce Clause doctrine cannot be found in the text of any constitutional provision but is (at best) an implication from one,” wrote Gorsuch.
The Trump-appointed justice added, “Under its banner, this Court has sometimes asserted the power to strike down state laws that discriminate against nonresidents on the ground that they usurp the authority to regulate interstate commerce that the Constitution assigns in Article I to Congress.”
Even if the Arkansas law reaches the Supreme Court and survives, litigation filed in Tennessee would proceed on a different appellate path, as the Volunteer State falls under the U.S. Court of Appeals for the Sixth Circuit.
The different appellate court could offer an opportunity for the PBMs behind the Arkansas litigation to refine their arguments before reaching the high court again.
The chief of staff for the Special Operations Association of America (SOAA) told The Tennessee Star last month that it expects Tennessee to face similar litigation to Arkansas if the legislation passes the General Assembly, and that SOAA would support any veterans organization working against the bill.
“We will happily partner with any Tennessee veterans group,” said SOAA spokesman Nate Wisan. “If there was a Tennessee veteran-based organization that takes that challenge and spearheads it, I’m sure we’d come alongside them.”
The State Senate Health and Welfare Committee advanced SB 2040 in an 8-1 vote last week, while the State House Insurance Subcommittee is slated to review HB 1959 on Wednesday.
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Tom Pappert is a 2025 recipient of the Dao Prize and the lead reporter for The Tennessee Star. He also reports for the Star News Network. Follow Tom on X. Email tips to [email protected].
