When Arkansas lawmakers rushed through Act 624 this spring, they cast it as a bold defense of independent pharmacies. The law prohibited pharmacy benefit managers (PBMs)—the intermediaries that negotiate prices with drug manufacturers, manage insurance formularies, and reimburse pharmacies for prescriptions—from owning pharmacies or having common ownership with Arkansas pharmacies. While this may have seemed like a win for locally owned businesses, barely sixty days later a federal court enjoined it as unconstitutional, setting it up to likely be dismantled.
Fundamental flaws in the law are what led a judge to stop the law swiftly in its tracks. By attempting to bar national PBMs from owning or operating pharmacies, Arkansas tried to do in statute what the Constitution forbids: erect economic barriers against out-of-state commerce and usurp federal authority over military health benefits. Those twin defects—protectionism at the state level and intrusion into the federal domain—made Act 624 vulnerable the moment it was signed, something that should give pause to legislators elsewhere contemplating similar measures.
The business models of PBMs have long drawn scrutiny in Arkansas. Because many are vertically integrated—operating specialty pharmacies or sharing common ownership with large retail chains—lawmakers in recent years have adopted targeted legislation to address reimbursement practices and prohibit steering prescriptions to their related pharmacy, while the state’s insurance department has enacted additional transparency mandates.
Act 624, however, went much further. Rather than instituting additional rules about how PBMs interact with independent pharmacies, the bill categorically banned them and their affiliates from holding pharmacy permits in the state. Effectively, this required PBMs to close or divest themselves of their affiliated pharmacies by January 2026.
Arkansas defended the law as a structural safeguard against conflicts of interest, but the district court’s injunction made clear why such a sweeping measure could not stand. With regard to violations of the Commerce Clause, the judge concluded that 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.”
As the court observed, “the legislative history of [Act 624] is brimming with protectionist rhetoric.” The statute itself states that its purpose is to eliminate “business tactics that have driven locally-operated pharmacies out of business.” And even though Arkansas already had narrower laws that addressed those same policy concerns, they pressed forward with Act 624 which imposed an “excessive” burden on interstate commerce when “less burdensome means” were readily available.
The law also ran headlong into the Supremacy Clause of the Constitution. TRICARE, the federal program providing health coverage for nearly 40,000 residents in Arkansas, contracts with PBM-owned and affiliated pharmacies to deliver mail-order and specialty drugs. Act 624 would have forced those facilities to close, directly interfering with federal operations. But 10 U.S.C. § 1103, expressly preempts any state law that obstructs “health care delivery” under TRICARE. The court found Act 624 “both explicitly and impliedly preempted” because it not only gives state regulators the right to veto which companies TRICARE may use to deliver pharmacy benefits but it also undermines the “stability,” “uniformity,” and “national” character of the program.
The speed with which Act 624 was enjoined should serve as a warning beyond Arkansas. Legislators in states as across the country have already signaled interest in pursuing similar bans, and others may follow when their sessions convene but they should not repeat the mistake Arkansas made. The constitutional roadmap is clear. Laws animated by protectionist intent will be struck down under the Commerce Clause. And, measures that let state officials interfere with the operation of federal programs will not be allowed to stand. The only certainty such statutes create is expensive litigation, prolonged uncertainty, and likely defeat.
Act 624, for all its stated good intentions, was an unconstitutional attempt to advantage local businesses by walling off competition. It should be overturned and other states should resist the temptation to follow its example. Protectionist pharmacy bans are not only bad policy but bad law. Legislatures should take the lesson now: good intentions cannot rescue unconstitutional statutes, and bad policy dressed as reform is destined to collapse under judicial scrutiny.
Frank Francone is a California attorney admitted to practice before the United States Supreme Court. He led major civil litigation at the trial and appellate levels for 25 years. Until recently, he served as a policy fellow in law and politics at the Centennial Institute.
