The Arizona Legislature has introduced a significant wave of proposed legislation in its 2026 session targeting pharmacy benefit manager (PBM) practices. These bills reflect an ongoing trend of ambitious state-level efforts to reshape the relationship between PBMs, insurers, and retail community pharmacies. If enacted, these legislative proposals could prove critical in protecting community pharmacies against monopolistic, predatory, and discriminatory practices that are commonplace among the nation’s largest PBMs.
Background
Understanding Arizona’s recent legislative proposals requires context from both state and federal developments. At the state level, Arizona enacted Senate Bill 1382 (SB 1382) in 2023, establishing certificate-of-authority requirements for PBMs that took effect on January 1, 2025. Under this law, PBMs must obtain licensure from the Arizona Department of Insurance and Financial Institutions (DIFI), maintain network adequacy, and comply with record retention and audit requirements.
At the federal level, the Consolidated Appropriations Act of 2026, signed into law on February 3, 2026, introduced significant PBM reforms applicable to Medicare Part D. These reforms include transparency reporting obligations, “any willing pharmacy” provisions, and restrictions on certain PBM fee arrangements.
Arizona’s 2026 legislative proposals build upon this dual-layered state and federal framework. Rather than retreading familiar ground, these bills target the structural, financial, and regulatory practices that most directly affect community pharmacy viability, addressing gaps that neither SB 1382 nor federal law adequately resolved.
Senate Bill 1545: Prohibition Against PBM-Owned Pharmacies
Senate Bill 1545 (SB1545) is among the most structurally significant proposals before the Arizona Legislature. If enacted, the bill would prohibit PBMs from acquiring or holding, directly or indirectly, a retail pharmacy permit in Arizona. A PBM found in violation of this prohibition would face revocation or nonrenewal of its pharmacy permit by the Arizona Board of Pharmacy. The bill includes a narrow exception permitting the Board to issue a limited service pharmacy permit for rare, orphaned, or limited distribution drugs that would otherwise be unavailable to Arizona patients.
The bill further requires that, at least 60 days before January 1, 2027, any pharmacy affected by the prohibition must notify patients and prescribers that it can no longer dispense retail drugs. An exemption is provided for pharmacy employers that serve as the sole client of their affiliated PBM in Arizona and exclusively service their own employees and dependents. The bill carries an effective date of December 31, 2026.
SB 1545 represents a renewed legislative effort to sever vertical integration between PBMs and retail pharmacies in Arizona. An earlier Arizona law with a similar prohibition was enjoined by a federal court before it could take effect in January 2026.
Impact on Community Pharmacies. If enacted, SB 1545 would fundamentally alter the competitive landscape for retail community pharmacies. By preventing major vertically integrated PBMs (such as CVS Caremark, OptumRx, and Express Scripts) from operating their own retail outlets in Arizona, the bill would reduce the competitive advantage those PBM-owned pharmacies enjoy through preferential reimbursement rates, steering, and access to proprietary claims data. Independent pharmacies could expect to capture a greater share of prescription volume that would otherwise be directed to PBM-affiliated pharmacies. Furthermore, the preclusion of these vertically integrated entities is likely to cause a significant reduction in the overall number of community pharmacies being terminated by these large PBMs, as doing so would pose a financial risk to the PBM. This is in contrast to the current incentive structure where a PBM would see a net gain in revenue by terminating network pharmacies as the affected patients would be steered into the PBM’s vertically integrated pharmacies.
Senate Bill 1710: Patient Steering Prohibitions
Senate Bill 1710 (SB 1710) targets PBM patient-steering practices and mandates annual transparency reporting. The bill’s anti-steering provisions prohibit PBMs from directing patients to affiliated pharmacies through data mining, direct patient contact, or the imposition of financial penalties. Critically, the bill also includes a reimbursement parity requirement that would ban PBMs from paying their own affiliated pharmacies more than independent pharmacies for the same products and services.
The bill also protects access to clinician-administered drugs, ensuring that patients may receive prescription drugs in their physician’s office, hospital outpatient center, or other clinical setting without being forced to use a PBM-affiliated pharmacy (or face higher costs). With a proposed effective date of March 1, 2027, PBMs would be required to submit annual transparency reports to DIFI that detail rebates received from manufacturers, administrative fees, reimbursements paid to pharmacies, and their complete corporate vertical integration structure (which would include vertically integrated pharmacies in the event that SB 1545 is not signed into law or otherwise becomes unenforceable).
Impact on Community Pharmacies. SB 1710 addresses one of the most frequently cited harms to independent pharmacies: the practice of PBMs directing patients away from community pharmacies and toward PBM-owned mail-order or specialty pharmacies. PBMs funnel these patients away from community pharmacies in a number of ways, including but not limited to financial incentives, penalties, and targeted outreach.
The reimbursement parity provision is particularly significant because it would require PBMs to pay independent pharmacies the same rate as their own affiliated pharmacies for equivalent products and services. This could meaningfully improve the financial viability of independent pharmacy dispensing operations and deter PBMs from steering patients into their vertically integrated pharmacies by leveling the financial burdens potentially associated with choosing the neighborhood “Mom & Pop” pharmacy over nationwide chains. The transparency reporting requirements would also give regulators, legislators, and the public visibility into how PBMs distribute manufacturer rebates and set reimbursement rates across different pharmacy types, transparency that may direct greater scrutiny toward PBMs as the public continually seeks to minimize the otherwise bloated costs of healthcare services.
Senate Bill 1225: Cost Sharing Requirements (Rebate Pass Through & POS Cost-Sharing)
Senate Bill 1225 (SB 1225) addresses pharmacy cost sharing requirements and drug rebates. Specifically, SB 1225 would require pass-through or point-of-sale cost-sharing reductions and further preclude PBMs or third-party payors from retaining any portion of a rebate or other price concession. Arizona already requires, under A.R.S. § 20-1126, that insurers and PBMs count certain cost-sharing amounts toward patient out-of-pocket maximums and deductibles for drugs without generic equivalents. SB 1225 thereby seeks to expand upon or modify this existing framework.
Impact on Community Pharmacies. Legislation requiring rebate pass-through or point-of-sale cost-sharing reductions can benefit community pharmacies by reducing “sticker shock” at the pharmacy counter, which is a leading driver of prescription abandonment. When patients face unexpectedly high out-of-pocket costs, they may decline to fill a prescription, resulting in lost revenue for the dispensing pharmacy and potentially adverse health outcomes for the patient. If SB 1225 mandates that rebates be applied at the point of sale rather than retained by PBMs, it will further aid in reducing a PBM’s incentive to steer patients toward higher-list-price drugs, ultimately bringing greater transparency and predictability to the dispensing process.
House Bill 2196: Modifying PBM Reimbursements and Updating Appeals Process
House Bill 2196 (HB 2196) addresses pharmacy reimbursement by PBMs and establishes a formal appeals process. First, the bill would prohibit PBMs from reimbursing pharmacists or pharmacies for a prescription drug or device in an amount less than the actual cost paid by the pharmacist or pharmacy. Second, the bill would establish a dispensing fee floor, requiring PBMs to pay a professional dispensing fee at a rate no less than the fee-for-service methodology used in the AHCCCS (Arizona Medicaid) state plan as approved by the Centers for Medicare & Medicaid Services (CMS). Third, the bill would require PBM contracts with pharmacies to include a procedure for appealing reimbursement rates, with a seven-business-day filing window and a seven-business-day resolution period. Fourth, if a PBM prevails on appeal, it must identify a national or regional wholesaler that has the drug in stock at a price equal to or less than the challenged reimbursement cost.
Impact on Community Pharmacies. HB 2196 is arguably the most financially consequential bill for community pharmacies in this legislative session. The practice of PBMs reimbursing pharmacies at rates below their acquisition cost has been widely cited as a primary driver of independent pharmacy closures across the country. This is a tactic easily replicated by PBMs seeking to eliminate independent competition in the pharmacy services sector. By establishing a reimbursement floor tied to actual acquisition cost plus a Medicaid-benchmarked dispensing fee, the bill would ensure that dispensing prescriptions is not a loss-making activity for community pharmacies. The formal appeals process would also provide pharmacies with a structured mechanism to challenge below-cost reimbursement, rather than being forced to accept PBM-dictated rates or exit the network.
Conclusion
The 2026 Arizona legislative session presents a comprehensive, multi-front effort to reform the regulatory and economic environment in which retail community pharmacies operate. These PBM-focused bills (SB 1545, SB 1710, SB 1225, HB 2196, HB 2813, and HB 4124) collectively address vertical integration, patient steering, reimbursement adequacy, cost sharing, transparency, and workers’ compensation pharmacy benefits.
For retail community pharmacies, the cumulative effect of these proposals, if enacted, would be substantial. PBMs would face significant new restrictions on their ability to leverage vertical integration to direct patients to affiliated pharmacies, reimburse independent pharmacies below cost, or operate with limited transparency. Community pharmacies and their legal counsel should closely monitor the progress of each of these bills as the session advances and consider engaging with legislators and industry associations to advocate for their interests.
How Frier Levitt Can Help
Frier Levitt provides comprehensive legal representation to pharmacies across the country in matters involving PBM relationships. We are dedicated to protecting the rights of pharmacies and guiding them through regulatory challenges and audit responses. If your pharmacy is having PBM network issues or concerns, Frier Levitt’s experienced attorneys are available to provide informed guidance and effective advocacy. Contact us today.
Read Article 2 of this series on 2026 Arizona Legislature Updates: Arizona Board of Pharmacy Amendments: Enforcement Caps, Board Continuation, and Ownership Changes
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