Arkansas Bans PBMs from Owning Pharmacies, Escalating Scrutiny of Vertical Integration in Pharmacy Distribution

In a first-of-its-kind move, Arkansas Governor Sarah Huckabee Sanders has enacted legislation prohibiting pharmacy benefit managers ("PBMs") from owning or operating pharmacies within the state. The law—Act 624—takes effect on January 1, 2026, and is likely to require significant restructuring by vertically integrated healthcare entities operating in Arkansas, particularly those combining PBM and retail pharmacy operations. Whereas prior state regulation of PBMs has focused on reimbursement, transparency, and pharmacy access, Arkansas has taken a structural approach—imposing a categorical separation of PBM and pharmacy ownership that mirrors remedies more commonly seen in antitrust enforcement.

While the full legal and commercial impact remains to be seen, the law adds pressure on a sector already facing scrutiny from regulators, legislators, and courts.

Key Features of the Arkansas Law

• Ownership Prohibition: PBMs will be prohibited from owning, managing, or controlling pharmacies licensed in the state.
• License Revocation: The Arkansas Board of Pharmacy is empowered to revoke pharmacy licenses held by PBMs or their affiliates.
• Effective Date: The ban takes effect January 1, 2026, giving vertically integrated PBMs limited time to restructure or divest affected assets.

Exceptions to the Law’s Ownership Ban

While Act 624 adopts a broad structural prohibition on PBM ownership of pharmacies, it affords some leeway to preserve access in specific scenarios while maintaining the statute's core objectives.

The law contains a specific exemption for pharmacies that serve only their own employees and their employees' dependents. A pharmacy that has a direct or indirect interest in a PBM, is the PBM's sole Arkansas client, and exclusively serves the employees and dependents of the pharmacy employer may continue to operate under the new law.¹ The exemption appears intended to accommodate closed-loop employer arrangements that are unlikely to raise broader market power concerns. Even so, the carveout is narrow and reinforces the law's structural premise—PBMs' ownership of pharmacies is the exception, not the rule. Companies relying on the exemption should be prepared to verify eligibility and maintain documentation to satisfy regulatory scrutiny.

In addition, the law permits the Arkansas Board of Pharmacy ("Board") to temporarily permit certain vertically integrated PBMs to hold ownership interests in pharmacies, by issuing limited use permits for "certain rare, orphan, or limited distribution drugs that are otherwise unavailable in the market to a patient or pharmacy.²If the Board determines that such a drug is otherwise unavailable, it will convert the retail permit to a limited use permit for at least 90 days. The Board may issue limited use permits through September 1, 2027, on which date the Board’s authority to issue these permits will expire.

The Board is also empowered to extend or renew retail permits for pharmacies that offer same-day patient access for pharmacist services, prescriptions for controlled substances, mental health services, or other "critical patient healthcare services" for an unspecified period subject to the Board’s discretion.

Implications for Specialty Drug Manufacturers

Manufacturers of rare, orphan, or specialty pharmaceuticals—particularly those with limited distribution models—may face heightened uncertainty under the Arkansas framework. While the Board of Pharmacy may authorize limited use permits if products are otherwise unavailable, the temporary nature of these permits and their expiration in 2027 introduce longer-term access and channel strategy risks. Manufacturers should also consider how changes to pharmacy ownership structures may affect patient support programs, data sharing for adherence and outcomes tracking, and upcoming product launches planned for 2025-2026. Arkansas may serve as an early test case for evolving pharmacy access dynamics that could shape broader national strategies.

Implementation Uncertainty: What Counts as "Ownership or Control"?

The law's broad language raises practical compliance questions that regulated entities will need to resolve ahead of 2026:

• Indirect ownership and affiliates: Will parent company or sister-entity ownership trigger enforcement?
• Contractual rights or preferred relationships: Do long-term leases, exclusivity clauses, or profit-sharing arrangements constitute "control"?
• Multistate operators: Will PBMs need to silo Arkansas operations, divest local pharmacies, or restructure entirely?

Absent further rulemaking or interpretive guidance, companies may face difficult judgment calls—and legal risk—during the transition period.

A Shift Toward Structural Separation in Healthcare?

Unlike prior Arkansas laws that focused on transparency,³ reimbursement terms,⁴ or patient steering, the law draws a hard line on business structure. In doing so, Arkansas is drawing from antitrust's structural remedy playbook: prohibiting common ownership where state policymakers believe market power may distort competition.

This is notable considering ongoing federal investigations and lawsuits involving vertically integrated healthcare companies.⁵ While federal enforcers have at times emphasized the potential efficiencies of vertical integration, the Arkansas legislature has signaled that in this context, structural separation is the only effective fix.

Broader Impact: Implications for Other Participants in the Drug Distribution Chain

The law is part of a broader state-led movement to regulate PBMs through licensing, transparency, and conduct restrictions.⁶ But this law goes further, reflecting mounting skepticism among state policymakers regarding the compatibility of vertical integration in the PBM space with fair pharmacy access and competition.⁷

For pharmaceutical manufacturers and non-integrated stakeholders, the law may signal a realignment of market power and contracting dynamics in the pharmacy channel:

• Channel strategy impact: If integrated PBMs divest pharmacy assets, drug manufacturers may see changes in drug distribution pathways, contracting relationships, or formulary strategies.
• Access and contracting volatility: Disruptions to pharmacy ownership could reshape reimbursement dynamics or alter leverage during price negotiations.
• Opportunity for independent pharmacy partnerships: Manufacturers may find new opportunities for engagement with non-affiliated pharmacies.
• Market power reshuffling: Shifts in negotiating dynamics could alter the balance of leverage between vertically integrated PBMs and other market participants, including insurers that operate independently of pharmacy ownership structures.
• Benchmarking PBM relationships: Manufacturers and payors may wish to evaluate their PBM partners' exposure to similar laws and plan for service continuity.
• Patient support infrastructure: Pharmaceutical manufacturers with patient assistance programs, hub services, and adherence initiatives connected to PBM-owned specialty pharmacies may face disruption to these support systems and should assess continuity plans.
• Data continuity planning: Manufacturers currently utilizing integrated PBM-pharmacy platforms for outcomes tracking and patient insights may need to identify alternative data sources to maintain visibility into adherence patterns and real-world evidence generation.

A Shifting Regulatory Landscape: State and Federal Momentum

The law is one of several recent developments reflecting growing momentum among states to impose structural or behavioral limits on PBMs:

• Indiana, New York, and Vermont are evaluating recently proposed bans on PBM ownership of pharmacies and affiliated entities.⁸
• Alabama recently enacted the Community Pharmacy Relief Act,⁹ imposing new requirements on PBM reimbursement practices and limiting steering behaviors.
• California, Arizona, Colorado, and Connecticut are considering broader PBM reforms that touch on licensing, transparency, and market conduct.¹⁰

Taken together, these initiatives signal mounting legislative momentum for structural or behavioral limits on PBMs at the state level.

The federal government is also facing calls to act:

• A bipartisan coalition of 39 state attorneys general has urged Congress to prohibit PBMs from owning or operating pharmacies, citing risks to competition and access.¹¹
• Pending legislative proposals—such as the Patients Before Monopolies Act—seek to codify structural separation between PBMs and pharmacies nationwide.¹²

These developments reflect intensifying bipartisan scrutiny of the broader pharmaceutical distribution and reimbursement ecosystem and could influence the contours of future federal reform efforts.

Looking Ahead

With the Arkansas law taking effect in 2026, affected businesses have a limited window to assess ownership structures and prepare compliance strategies. At the same time, the law's structural approach could foreshadow additional state action—in Arkansas or in other states—or shape the contours of potential federal reforms.

The law may also have adverse impacts on the labor market if PBMs are required to restructure their operations in Arkansas. While PBMs have not indicated that they will challenge Act 624, the Arkansas law may elicit litigation from parties, such as pharmacy employees, harmed by the law's market effects.

Pharmaceutical companies planning product launches in Arkansas during 2025-2026 may face added complexity as the transition period unfolds. Manufacturers, particularly those with specialty products, may wish to develop contingency distribution plans to ensure uninterrupted patient access.

Companies operating at the intersection of PBMs and retail pharmacies should expect continued scrutiny—and prepare for a regulatory environment that may no longer view vertical integration as benign. Manufacturers, insurers, and other market participants across the healthcare supply chain should likewise assess how a shifting structural landscape may impact their strategic positioning, commercial partnerships, and policy risk profiles.

William Weingarten (White & Case, Law Clerk, New York) contributed to the development of this publication.

_{1 See H.B. 1150, 95th Gen. Assemb., Reg. Sess. (Ark. 2025), codified at ARK. CODE § 17–92–416(f).
2 ARK. CODE § 17–92–416(d)(1).
3 ARK. CODE § 23-92-505(b).
4 ARK. CODE § 23-79-2503.
5 See Complaint, Caremark Rx, LLC, FTC Docket No. 9437 (Sep. 20, 2024) (alleging PBMs are inflating insulin prices in violation of the FTC Act); see also Complaint, Michigan v. Express Scripts, Inc. et al., No. 2:25-cv-11215 (E.D. Mich. Apr. 28, 2025), ECF No. 1 (alleging that PBMs fixed and suppressed the compensation amounts paid to non-PBM-affiliated pharmacies in Michigan for prescription drugs, creating pharmacy deserts”); Petition, Kansas v. Eli Lilly & Co. et al., No. 5:23-cv-04002 (Dist. Kan. Jan. 11, 2023), ECF No. 1-1.
6 See, e.g., Sanders Signs Legislation to Ban Anti-Competitive PBM Practices (Apr. 16, 2025), https://governor.arkansas.gov/news_post/sanders-signs-legislation-to-ban-anti-competitive-pbm-practices/.
7 See Letter of State Attorneys General to Congress (Nat. Ass’n of Attorneys Gen.) (Apr. 14, 2025), at https://www.naag.org/wp-content/uploads/2025/04/4-14-Pharmacy-Benefit-Managers-_-FINAL-e.pdf.
8 See A.B. 6546, 2025-2026 Reg. Sess. (N.Y. 2025) (New York bill proposing to prohibit the dual ownership of a pharmacy and a PBM in the State of New York); H.B. 0156, 2025-2026 Reg. Sess. (Vt. 2025) (recently introduced Vermont bill titled, “An act relating to prohibiting pharmacy benefit managers from owning or operating a pharmacy in Vermont”); S.B. 0140, 124th Gen. Assemb., Reg. Sess. (2025) (proposing a prohibition on insurers, PBMs, and pharmacies to contract together if they share ownership).
9 ALA. CODE § 27-45A-10.
10 See SB-41, 2025-2026 Reg. Sess. (Cal. 2024) (California bill purporting to amend state law to require pharmacy benefit managers to apply for and obtain a license from the Department of Insurance to operate as PBMs); SB-1164, 56th Leg., 2d Sess. (Ariz. 2025) (Arizona bill purporting to regulate conduct of PBMs in connection with formulary changes and cost-sharing arrangements); HB25-1094, 75th Gen. Assemb., Reg. Sess. (Colo. 2025) (Colorado bill proposing insertion of a mandatory provision in contracts between PBMs and health benefit plans that would require PBMs to disclose prescription drug cost information and to authorize the health benefit plan to execute an audit to ensure compliance with the contract); SB-446, Jan. Sess. (Conn. 2025) (Connecticut bill purporting to impose rebate transparency and clawback restrictions and to establish a duty of care owed by PBMs).
11See Letter of State Attorneys General to Congress (Nat. Ass’n of Attorneys Gen.) (Apr. 14, 2025), at https://www.naag.org/wp-content/uploads/2025/04/4-14-Pharmacy-Benefit-Managers-_-FINAL-e.pdf.
12 See S. 5503, 118th Cong., 2d Sess. (2024).}

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