Here, we look at five notable state-level bills currently under consideration and their potential impacts.

Divesting PBMs from retail pharmacies (Arkansas)

Arkansas House Bill (HB) 1150, which recently became law, seeks to redefine the relationship between PBMs, health care payers, and the pharmacies they work with. The bill prohibits PBMs and health care payers from directly or indirectly owning retail pharmacies licensed in Arkansas. Similar bills have been introduced in Indiana, New York, and Texas, but so far, HB 1150 has gained the most traction.

Why it matters

This bill attempts to address concerns lawmakers position as conflicts of interest and anti-competitive practices and promote a more “transparent and fair playing field” for independent pharmacies. Vertical integration has been a hot topic at the federal level as well, and has been cited by the Federal Trade Commission and the House Committee on Oversight and Reform as an area of concern.

If passed into law, the bill will take effect January 1, 2026, but is likely to face significant legal challenges from vertically integrated PBMs that operate retail pharmacies in the state. However, it could serve as a litmus test for similar legislation across the U.S.

Requiring rebate pass-through (California)

California’s Senate Bill (SB) 41 is an updated version of a previous PBM reform bill vetoed by Governor Gavin Newsom. This time, the bill has stronger provisions addressing transparency, rebate practices and network management. It requires 100% of rebates to be passed through “to the health care service plan, health insurer, or program.” The stated goal is to reduce premiums or offset cost-sharing, and to achieve this, it mandates reporting on PBM compensation and relationships with group purchasing organizations. It also introduces strict requirements for PBMs operating in the state, such as prohibiting steering to affiliated pharmacies and ensuring reimbursement parity for any willing pharmacy networks.

Why it matters

By mandating full rebate pass-through and requiring “any willing provider” inclusion in pharmacy networks, SB 41 challenges some of the industry’s most entrenched practices. Given the sweeping nature of the provisions in this bill, it has the potential to have broad implications for the PBM landscape and could pave the way for wider adoption of similar reforms in other states.

Mandating minimum reimbursements for pharmacies (Illinois)

Illinois HB 3705 is a multi-faceted bill that looks to tackle a breadth of elements, including transparency, fair compensation for pharmacies, and what state lawmakers term anti-competitive practices by PBMs. It introduces a mandated minimum reimbursement of national average drug acquisition cost (NADAC) plus $15.55 for critical access pharmacies, with a stated policy goal of ensuring they remain viable in underserved areas. It also prohibits spread pricing, where the PBM reimburses the pharmacy less than 90% of what they collect from the plan sponsor and imposes rebate transparency requirements that mandate that at least 90% of payments from pharmaceutical manufacturers go back to plan sponsors.

Why it matters

The pharmacy reimbursement provisions of the bill will have cost implications for plan sponsors if it goes into effect on January 1, 2026. PBMs are likely to pass along the added cost to plan sponsors. Proponents of the bill argue that, if implemented, the law could help ensure pharmacies in smaller regions stay operational. However, some evidence suggests — something PBMs are likely to point to — that independent pharmacies are increasing year over year.

Prohibiting steering (Alabama)

Passed recently and signed into law by the state governor, Alabama’s SB 252 focuses on steering practices and pharmacy reimbursement. Based on a broad definition of steering, PBMs would be restricted from influencing an individual’s choice of pharmacy or from requiring the use of a mail-order pharmacy or PBM affiliate. The bill also prohibits spread pricing and certain PBM rebate practices. Interestingly, however, the bill appears to grant an exception to these rules if the health benefits plan requires it by contract. In addition, PBMs would be required to reimburse independent pharmacies at the state Medicaid rate (average acquisition cost plus a $10.64 dispensing fee).

Why it matters

By addressing steering — one of the most criticized practices by PBMs — Alabama’s SB 252 seeks to prioritize patient choice while striking a balance with plan contracting choices. Its reimbursement provisions are an attempt by lawmakers to level the playing field for independent pharmacies. The bill has staggered implementation dates, with some provisions going into effect immediately while others would be delayed until October 1, 2025.

Tackling ERISA complexity (New Jersey)

New Jersey’s A4953/S3842 stands out due to its attempt to regulate administrative services Oonly (ASO) plans governed by the federal Employee Retirement Income Security Act (ERISA). This could set a precedent for state-level influence over ERISA plans, which have historically been a federal domain. The bill also prohibits PBMs from preferring higher-cost brand medications over lower-cost generic alternatives and, controversially, introduces a fiduciary duty requirement for PBMs. It also includes out-of-network reimbursement parity requirements to limit cost discrepancies between in- and out-of-network pharmacies.

Why it matters

While federal ERISA preemption could complicate this bill’s implementation, it is another attempt by lawmakers to regulate ERISA plans that have traditionally been exempt from state law. It aligns with a growing trend of states testing the limits of their authority. The Alabama bill, for example, also strikes the current ERISA exemption from its state PBM law.

Tip of the iceberg

These bills represent just a fraction of what’s happening at the state level, but collectively, they highlight a growing trend of state lawmakers stepping in to take measures they feel are needed to help reduce prescription drug costs. Whether by addressing vertical integration, promoting higher reimbursement for community pharmacies, or restricting patient steering, these initiatives are attempting to tackle long-standing complaints against PBM business practices.

At the same time, this poses a challenge for plan sponsors with members in multiple states by creating a complex patchwork of regulatory requirements. Many of these bills are also likely to have a financial impact — in some cases, significant — for employers as PBMs seek to mitigate the impact of higher fees and reimbursement rates. And as there often are, there may be other unintended consequences.

However, this widespread pattern of states taking on bills they see as important in curbing prescription drug prices seems to be a clear message that, in an area as complex and contentious as health care reform, that if lawmakers in Washington won’t lead, states will.

Wes Hill is Managing Counsel and Senior Director, Regulatory & Intellectual property RxBenefits.