Tennessee’s FAIR Rx Act Is Now Law: What Independent Pharmacies Should Know
When Governor Bill Lee signed Senate Bill 2040 on May 22, 2026, the measure became Public Chapter 1111 and Tennessee’s Freedom, Access, and Integrity in Registered Pharmacy Act, better known as the FAIR Rx Act, moved from proposal to law. Within hours, CVS filed suit in federal court to stop it, warning that the rule could force it to close as many as 134 of its Tennessee stores, and Express Scripts has since brought a challenge of its own. It is the same path that played out in Arkansas, where a comparable statute has been enjoined while the litigation runs its course.
For most community pharmacies in Tennessee, the regulatory reach of the law itself is narrower than the headlines suggest, though the direction it signals for how pharmaceutical care gets delivered here over the next several years deserves a closer look.
What the Law Actually Does
The prohibition is aimed at common ownership of a pharmacy together with both a health insurance carrier and a pharmacy benefits manager, and it reaches only when an ownership interest climbs above five percent. The act took effect when it was signed, but the ownership restriction does not apply until July 1, 2028, and a pharmacy caught by the rule may continue operating through December 31, 2028 if it can show the Board of Pharmacy that it is actively pursuing a bona fide sale.
The statute also sets aside several arrangements that resemble the target without falling under it. Hospital and health-system pharmacies are not treated as benefits managers, independently owned pharmacies remain free to offer mail-order, specialty, and delivery services to their own patients, and the rule reaches neither FDA-designated orphan drugs with limited distribution nor drugs governed by a federal risk evaluation and mitigation strategy. Employers that run a pharmacy or administer benefits solely for their own employees, retirees, and dependents sit outside it, as do pharmacy services delivered under federal contracts with the Department of Defense, Veterans Affairs, the Indian Health Service, or the Office of Personnel Management.
Enforcement runs through the Attorney General rather than the Board of Pharmacy, with civil penalties reaching up to $10,000 per violation and each day a violation continues counting as its own violation. The Board still refers potential violations to the Attorney General and keeps its broader authority over professional conduct, which reaches considerably further than this one statute.
Why a Narrow Rule Still Matters
As a practical matter, the combination the law forbids describes only a small number of national players that hold a health insurance company, a pharmacy benefits manager, and a pharmacy all at once, so for community pharmacies the direct regulatory impact is slight. The trend behind it is the larger story. Arkansas was the first state to force the split, Tennessee is the second, and similar proposals have surfaced in statehouses around the country even where they have not yet advanced. Each of these efforts works to separate three roles that have quietly grown together over the last two decades, and Tennessee’s stated aim is to return the benefits manager to its original job of managing pharmacy benefits.
In a recent RxLaw Group conversation, Matt Gibbs and Dr. Anthony Pudlo, CEO of the Tennessee Pharmacists Association, traced how the benefits manager grew from a claims processor into the entity that now sets reimbursement, and what the FAIR Rx Act is meant to correct. As Matt put it, “It’s difficult when one person holds all the cards, and it’s difficult to make the playing field fair.” The full conversation is below.
As those roles have blurred, patients have been left with fewer places to fill a prescription while community pharmacies, pharmacists, technicians, and staff have absorbed the pressure of thinner reimbursement and shrinking patient counts. Whether the courts let the law stand or follow Arkansas toward an injunction, the questions it raises about reimbursement, access, and who controls a dispensing decision are not going away.
What to Do Now
A pharmacy that has been working through PBM contracts, reimbursement disputes, or audit pressure has good reason to get clear on where it stands before the next round of change arrives. RxLaw Group works with community pharmacies, pharmacists, technicians, and staff on PBM disputes, reimbursement challenges, vendor and contract review, and audit response, and Matt Gibbs can talk through what the FAIR Rx Act means for a specific situation.