Act 624 seeks to protect “locally-operated pharmacies” from supposed “anticompetitive business tactics” by larger national chains. Openly targeting out of state pharmacies would be a blatant constitutional violation, so the Governor attempted to side-step it by targeting the one group that actually brings down drug prices in America: PBMs. It’s true that some PBMs share a corporate affiliation with a pharmacy, an arrangement that brings economies of scale that further reduce costs to patients. Such operations include home delivery pharmacies and other pharmacies that typically supply drugs across state lines, as well as brick-and-mortar pharmacies.
The State ignores the protections that Arkansas law already affords to pharmacies that are not affiliated with a PBM. In fact, Arkansas law already requires PBMs to reimburse nonaffiliated pharmacies at the same or higher rate than affiliated pharmacies. CVS, for example, has repeatedly explained that its PBM reimburses nonaffiliated pharmacies at a higher rate than its own pharmacies.
The law violates the U.S. Constitution in multiple, independent ways. First, the law’s effects raise the unavoidable inference that the law is a blatantly protectionist measure that flouts the “antidiscrimination principle” that lies “at the very core” of the Dormant Commerce Clause. The law bars only pharmacies owned by out-of-state entities participating in the Arkansas marketplace, and does not affect a single pharmacy owned by an Arkansas-based pharmacy.
The vast majority of PBM-affiliated pharmacies operating in Arkansas are out-of-state entities and the vast majority of in-state pharmacies, by contrast, are not affiliated with a PBM. As a result, the law’s ban on PBM-affiliated pharmacies turns out to be a nearly perfect proxy for banning only out-of-state pharmacies. Remarkably, the law as enacted, bars only out-of-state pharmacies from participating in the Arkansas marketplace.
That relationship is by design. In the eyes of the law’s proponents, out-of-state national chains like CVS were delivering high quality care at low pricing and winning patients at the expense of in-state competitors. Many advocates for the bill saw it as a means by which the State could tilt the playing field in favor of locally owned pharmacies. Numerous lawmakers and interest groups openly celebrated the law because it promised to drive Rhode Island-based CVS in particular out of the State.
In expelling PBM-affiliated pharmacies like CVS from Arkansas, HB 1150 represents an assault on free commerce between the States and the foundational principles of fair-market competition that underpin the Union. The law improperly seeks to leverage the State’s licensing power—which is meant to ensure public safety and health—to pick economic winners and losers. The immediate winners are apparent. Act 624 paves the way for in-state pharmacies to fill the vacuum left by CVS and other out-of-state competitors.
But the law will produce its fair share of losers, too. Non-Arkansas-headquartered pharmacies like CVS who are affiliated with PBMs will be forced to stop serving the State unless they radically restructure their organizations. For CVS Health, that is no choice at all, because its business model is predicated on taking the efficiencies that flow from its PBM affiliation to pass along lower prices and more convenient services for customers, as well as serving nationwide health plans that have Arkansas residents as members.
If the act goes into effect as scheduled on January 1, 2026, CVS will have to cease not only its operations at 23 CVS Pharmacy locations across the State, but also its mail-order and specialty-pharmacy services. The law will likely shut down a substantial portion of all mail-order and specialty-pharmacy prescriptions flowing into the State because the majority of such providers are out-of-state pharmacies with PBM affiliations.
The costs will also ripple beyond Arkansas’s borders. Many employer-sponsored and federal government-sponsored health benefit plans must design networks for beneficiaries across the 50 States. But the law will require these networks to be designed in Arkansas-specific ways to minimize administrability costs. And if other States follow Arkansas’s lead, then it may become impracticable for employers and the federal government to administer uniform nationwide plans through a web of patchwork rules from different jurisdictions.
CVS Health faces here-and-now economic injuries. Without injunctive relief, CVS has only a matter of months to shutter its operations and retreat from Arkansas’s markets before the law takes effect on January 1, 2026. Unsurprisingly, winding down operations at 23 retail pharmacies and other services that provide critical medicine to tens of thousands of Arkansans takes time. Absent an injunction, CVS faces the choice of either beginning that long process in an orderly way to ensure that patients find other ways of obtaining medical care or betting on this litigation in hopes of invalidating the law at the last second—at great economic cost if the law goes into effect. This is not a choice that the Constitution allows Arkansas to impose.