Shown verbatim: the complete text as captured from the official PDF posted by the Tennessee General Assembly, fetched 2026-09-25. Page and line markers are part of the official record; nothing is edited or removed. This is the chaptered version. The official bill page.
...
:(~i(AGRI ~
• r ...1. . •
I
...... -
ff J Stoie etlfle8Sl!e
PUBLIC CHAPTER NO. 1111
SENATE BILL NO. 2040
By Harshbarger, Haile, Reeves; Mr. Speaker McNally; Hatcher, Lowe, Watson, Yager, Hensley,
Bowling, Pody
Substituted for: House Bill No. 1959
By Scarbrough; Mr. Speaker Sexton; Atchley, Russell, Reedy, Butler, Stinnett, Sparks, Williams,
Marsh, Faison, Darby, Gary Hicks, Lafferty, Crawford, Grills, Kumar, Tim Hicks, Cochran, Raper,
Bricken, Capley, Sherrell, Moody, Alexander, Helton-Haynes, Garringer, Haston, Behn, Barrett,
Powers, Eldridge, Greg Martin, Reneau, White
AN ACT to amend Tennessee Code Annotated, Title 63, relative to the ownership or control of
pharmacies by pharmacy benefits managers.
WHEREAS, the General Assembly finds that protecting the health and welfare of
Tennesseans requires access to affordable and safely dispensed prescription medications through a
fair and transparent pharmacy system; and
WHEREAS, increasing consolidation of health insurers and pharmacy benefits managers
(PBMs) with pharmacies has created conflicts of interest that can restrict patient choice, increase
costs, and jeopardize continuity of care; and
WHEREAS, the General Assembly recognizes the importance of promoting patient choice,
preserving pharmacy access, particularly in rural and medically underserved areas, and protecting
public health by preventing conflicts of interest that result in inflated costs, reduced transparency,
and steering of patients to PBM-owned entities; and
WHEREAS, the General Assembly further recognizes that pharmacists play a vital role in
medication safety, counseling, and chronic-disease management, and that these public health
functions must be preserved through competitive and independent pharmacy access; and
WHEREAS, eliminating the conflict of interest inherent when a pharmacy benefits manager
both sets and receives reimbursement, commonly described as the "fox guarding the hen house," is
necessary to ensure transparent pricing, maintain trust in the pharmacy system, and promote better
health outcomes for Tennessee patients; and
WHEREAS, it is the intent of this act that it not be construed to prohibit any duly licensed,
unaffiliated pharmacy from providing mail-order, specialty, or delivery-based services under new,
unaffiliated ownership; and
WHEREAS, this act is intended to strengthen the integrity of Tennessee's healthcare delivery
system by separating financial control from patient care decisions, improving affordability, and
protecting rural and community pharmacy access; now, therefore,
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. This act is known and may be cited as the "Freedom, Access, and Integrity in
Registered Pharmacy (FAIR Rx) Act."
SECTION 2. Tennessee Code Annotated, Title 63, Chapter 10, Part 3, is amended by adding
the following as a new section:
(a) As used in this section:
SB 2040
(1) "Affiliate" means a person or entity that directly or indirectly controls, is
controlled by, or is under common ownership or control with another entity;
(2) "Board" means the board of pharmacy;
(3) "Control" means the power, directly or indirectly, to direct, manage, or
influence the operations or policies of a pharmacy, whether through ownership,
contract, shared governance, overlapping management, audit authority, exclusive
provider agreement, formulary management clause, or other arrangement conferring
material influence over the professional practice of pharmacy, including dispensing
decisions, patient steering, clinical operations, or the independent judgment of a
licensed pharmacist;
(4) "Health insurance issuer" has the same meaning as defined in § 56-7-
2802;
(5) "Pharmacy" has the same meaning as defined in § 63-10-204; and
(6) "Pharmacy benefits manager" has the same meaning as defined in § 56-7-
3102.
(b) On and after July 1, 2028, a person or entity shall not:
(1) Directly or indirectly own, operate, control, or direct the operation of, the
whole or any part of a pharmacy; and
(2) Directly or indirectly own, operate, control, or direct the operation of, the
whole or any part of:
(A) A health insurance issuer; and
(B) A pharmacy benefits manager.
(c) Subsection (b) applies when the percentage of ownership interest held by a
person, entity, or affiliate is greater than five percent (5%).
(d)(1) For purposes of subsection (b), a hospital or health-system pharmacy is not a
pharmacy benefits manager.
(2) This section does not limit the ability of independently owned or unaffiliated
pharmacies to provide mail-order, specialty, or delivery services directly to patients of
such pharmacies.
• (3) This section does not apply to an FDA-designated orphan drug with limited
distribution, or to a drug that is subject to an FDA-required risk evaluation and
mitigation strategy (REMS) that includes limited distribution.
(e) A pharmacy that is affiliated with both a pharmacy benefits manager and a health
insurance issuer in violation of subsection (b) may continue operations through December
31, 2028, if the pharmacy demonstrates to the board that it is actively pursuing a bona fide
sale to an unaffiliated entity. For purposes of this subsection (e), "bona fide sale" means an
arm's-length transfer evidenced by a written letter of intent or purchase agreement filed with
the board. The board may grant a single extension, not to exceed six (6) months, upon proof
of substantial progress toward completion of such sale.
(f)(1) The attorney general and reporter is authorized to enforce this section.
(2) The board shall refer information of potential violations of this section to
the attorney general and reporter.
(3) A violation of this section is subject to a civil penalty of up to ten thousand
dollars ($10,000) per violation. Each day a violation continues constitutes a separate
violation. ••
(g) A pharmacy, health irsurance issuer, or pharmacy benefits manager aggrieved by
a determination under this section may request a hearing under the Uniform Administrative
Procedures Act, compiled in title 4, _chapter 5. Any hearing must occur within sixty (60) days
of filing the request for hearing, and be concluded within thirty (30) days after the date of the
• hearing. A stay shall not issue unless the appellant shows substantial likelihood of success
and irreparable harm.
2
SB 2040
(h) An action to contest the enforcement or validity of this section must be filed
exclusively in the chancery court for Sumner County.
(i) This section does not prohibit an employer from owning or operating a pharmacy or
administering pharmacy benefits solely for its own employees, retirees, and dependents
under an employee benefit plan.
U) This section does not apply to pharmacy services provided pursuant to a contract
with the United States government for the administration of a federal healthcare program by
the department of defense, department of veterans affairs, Indian health service, or office of
personnel management.
SECTION 3. The board of pharmacy is authorized to promulgate rules to effectuate this act.
The rules must be promulgated in accordance with the Uniform Administrative Procedures Act,
compiled in Tennessee Code Annotated, Title 4, Chapter 5.
SECTION 4. If any provision of this act or its application to any person or circumstance is
held invalid, then the invalidity does not affect other provisions or applications of the act that can be
given effect without the invalid provision or application, and to that end, the provisions of this act are
severable.
SECTION 5. This act takes effect upon becoming a law, the public welfare requiring it.
3
SENATE BILL NO. 2040
PASSED: April 21, 2026
RANDY
SPEAKER OF THE
C.~
CAMERON SEXTON, SPEAKER
HOUSE OF REPRESENTATIVES
f l APPROVED this r& ~ 2026
day of
~UA.
BILL LEE, GOVERNOREvery fact on this page links to its source, starting with the official bill record.