Impacted: Commercial clients with members in Tennessee

What you need to know

For your awareness, the Tennessee General Assembly has passed Tennessee Senate Bill (SB) 2040, legislation that would prohibit a pharmacy benefit manager (PBM) or entity providing health coverage from directly or indirectly owning a pharmacy that dispenses drugs to Tennessee residents, beginning July 1, 2028. The bill has cleared both chambers and is pending transmission to the governor for consideration. Prime is closely monitoring this legislation and will continue to share updates as more information becomes available. 

Overview

SB 2040 would prohibit a PBM or health insurance issuer from owning, operating, controlling or directing the operation of the whole or part of any pharmacy (where ownership interest is greater than 5%). Although the requirement is effective July 1, 2028, a pharmacy that is affiliated with a PBM or health insurance issuer may continue to operate through Dec. 31, 2028, if the pharmacy demonstrates that it is actively pursuing a bona fide sale to an unaffiliated entity. The bill has several carve-outs, including: 

• Limited distribution drugs that are orphan drugs or subject to Risk Evaluation and Mitigation Strategies (REMS). 
• Employers that own and operate a pharmacy solely to serve their own employees, retirees and dependents and administer their own pharmacy benefits. 
• Hospital or health system pharmacies.
• Pharmacy services provided to federal health care programs (e.g., TRICARE).

Where it stands

The bill has passed both chambers and will be presented to the governor next. Once delivered, the governor will have 10 days to sign or veto the bill; if no action is taken, it becomes law. Based on the current legislative momentum and our analysis, we believe it is likely the bill will become law in Tennessee, with the governor expected to sign it in early May.

Outlook and next steps

If enacted, SB 2040 would represent the second state (after Arkansas) to restrict PBM-pharmacy affiliation and may signal additional state-level proposals. In Arkansas, a court-ordered injunction has delayed enforcement while litigation is ongoing, and similar legal activity could follow signature of this law. 

Prime will continue to monitor actions taken by the governor and any potential legal challenges that may influence implementation. Should the bill be signed, we will work to identify which PBM-affiliated pharmacies are affected and when they need to transition, review potential member impact and further evaluate what needs to be done to follow the new rules. As we learn more, we’ll share our findings and offer advice to help reduce disruption and improve pharmacy network options. 

Questions

Reach out to your Prime account team representative.