Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS—E.D. Ark.: Arkansas statute prohibiting PBM-owned pharmacies preliminarily enjoined, (Jul 30, 2025)

By Jeffrey H. Brochin, J.D.

The pharmacies demonstrated a likelihood of success on the merits of their claims because the statute appeared to overtly discriminate against out of state companies, thereby regulating interstate commerce.

A federal district court in Arkansas has granted the motion for preliminary injunctive relief filed by Express Scripts, Inc., and various pharmacy benefits managers in a lawsuit challenging the state’s enactment of Act 624, which prohibited PBM-owned pharmacies from operating in the state. Although the state argued that the purpose of the law was only to target a form of business structure, the court found that the state was in fact attempting to protect locally operated pharmacies as opposed to just consumers and non-PBM affiliated pharmacies, and that such purpose ran afoul of both the Commerce Clause and TRICARE’s express and implied preemption provisions (Express Scripts, Inc. v. Richmond, No. 4:25-cv-00524-BSM (E.D. Ark. July 28, 2025)).

Prohibiting vertical integration. Pharmacy benefit managers (PBMs) serve as intermediaries between prescription drug plans and the pharmacies that beneficiaries use. Their functions include determining coverage and copayments, and reimbursing the pharmacy for the prescription, (less the amount of the beneficiary’s copayment), and the prescription-drug plan, in turn, reimburses the PBM. Some PBMs own their own pharmacies, and while such vertical integration can increase the pharmaceutical industry’s efficiency, it can also create an inherent conflict of interest and an opportunity for PBMs to engage in predatory practices.

In order to address this latter issue in the state of Arkansas, the state legislature passed Act 624 which prohibits PBMs from acquiring a direct or indirect interest in, or otherwise holding, directly or indirectly a permit for the retail sale of drugs or medicines in the state. Simply put, Arkansas lawmakers decided that they no longer wanted to allow PBMs to own or operate pharmacies in the state. Act 624 becomes effective on January 1, 2026, and in response, an industry trade association and various PBMs, filed suit to stop it from taking effect. Before the court was the PBMs’ motion for preliminary injunction of Act 624, which, for the reasons cited below, the court granted.

Arguments for preliminary injunction. The PBMs argued that Act 624 violated: (1) the Commerce Clause; (2) the Privileges and Immunities Clause; (3) the Supremacy Clause because it was preempted by (a) TRICARE, (b) ERISA, and (c) Medicare; (4) the Bill of Attainder Clause; (5) the Takings Clause; and (6) the Equal Protection Clause. The court began its inquiry by restating the requirements for a preliminary injunction as: (1) there is a likelihood of success on the merits; (2) it (the movant) will suffer irreparable harm if the injunction is denied; (3) the harm to the movant, if the injunction is denied, outweighs the harm to the non-movant if the injunction is granted; and (4) an injunction is in the public’s interest.

Notably, where a preliminary injunction is sought to enjoin the implementation of a duly enacted state statute, the moving party must make a more rigorous showing that it is likely to prevail on the merits. Here, the court found that the PBMs met that burden as to their Commerce Clause argument and TRICARE preemption argument, but not as to the other assertions.

Commerce Clause. The Commerce Clause seeks to ensure free trade among the states and gives Congress the power to regulate interstate commerce. Conversely, it prohibits states from unjustifiably discriminating against interstate commerce. If a state law overtly discriminates, the state must show, “under rigorous scrutiny,” that it has no other means to advance a legitimate local interest. A state law that does overtly discriminate is therefore presumed invalid.

The court found that Act 624 appeared to overtly discriminate against the PBMs as out of state companies, and, that the state had failed to show that it had no other means to advance its interests. In particular, section one of Act 624 specifically states that its purpose is to eliminate the PBMs’ “business tactics that have driven locally-operated pharmacies out of business.” The court found that such phrasing “artlessly disclosed” the state’s avowed purpose to discriminate against interstate goods. Although the state argued that it was merely targeting a form of business structure, that appeared to only be a half-truth because the statute disclosed that the state was also attempting to protect “locally operated pharmacies” as opposed to just consumers and non-PBM affiliated pharmacies, including out of state non-PBM affiliated pharmacies. Accordingly, the court ruled that there was a likelihood of success on the merits as to the Commerce Clause argument and granted preliminary injunction based on that claim.

TRICARE preemption. The court next turned to the claim that Act 624 would likely be found to violate TRICARE’s preemption provision. The court observed that TRICARE contains an express preemption clause that overrides any “law or regulation of a State or local government relating to health insurance, prepaid health plans, or other health care delivery or financing methods” that is “inconsistent with” or “necessary to implement or administer” the TRICARE program.

Based on that language, the court found that Act 624 was both expressly and impliedly preempted by TRICARE. Act 624 was explicitly preempted by TRICARE’s “health care delivery” provision because Act 624 prohibited PBM-owned pharmacies from delivering healthcare to Arkansas patients; and Act 624 was also implicitly preempted by TRICARE because Act 624 impeded the TRICARE program’s ability to accomplish the purposes for which Congress enacted it. Furthermore, Act 624 would frustrate the “stability,” “uniformity,” and “national” character of TRICARE, essentially giving the state’s pharmacy board a virtual power of review over the federal determination of who the Department of Defense could contract with. Therefore, the court found a likelihood of success on the merits as to the TRICARE preemption claim, and granted preliminary injunction based on that claim.

Remaining claimsy. After ruling on the foregoing, the court found that as to the Privileges and Immunity Clause, Supremacy Clause, ERISA preemption and Medicare preemption claims, the Bill of Attainment Clause claim, the Takings Clause claim, and the Equal Protection Clause claim, the PBMs were unlikely to succeed on the merits, and the court therefore did not grant the preliminary injunction based on those claims.

The case is No. 4:25-cv-00524-BSM.

Judge: Miller, B.

Attorneys: Allyson N. Ho (Gibson, Dunn & Crutcher LLP) for Express Scripts Inc., Express Scripts Pharmacy Inc. and ESI Mail Pharmacy Service Inc. Ben C. Hall (Barber Law Firm PLLC) for CVS Pharmacy Inc., Caremark Rx LLC, Arkansas CVS Pharmacy LLC and CP Acquisition LLC. Jordan Broyles, Arkansas Attorney General's Office, for Rodney Richmond, Arkansas State Board of Pharmacy, Brian Jolly, Debbie Mack, Lenora Newsome, Clint Boone and Walter Lyn Fruchey.

Companies: Express Scripts Inc.; Express Scripts Pharmacy Inc.; ESI Mail Pharmacy Service Inc.; CVS Pharmacy Inc.; Caremark Rx LLC; Arkansas CVS Pharmacy LLC; CP Acquisition LLC; Arkansas State Board of Pharmacy

Cases: AcquisitionsMergers Antitrust ArkansasNews