Government Cannot Fix What Government Helped Create

Tennessee SB2040 & HB1959

Tennessee’s SB2040, the FAIR Rx Act, is built on a real frustration. Pharmacy Benefit Managers (PBMs) have become powerful middlemen in a system that no longer seems to serve patients. Vertical integration between PBMs, insurers, pharmacies, and even drug manufacturers has created clear conflicts of interest. Rebates, formulary manipulation, and steering practices leave many consumers wondering whether anyone in the chain truly prioritizes affordability or transparency.

That frustration is justified.

But SB2040 represents the wrong solution to a problem government helped create in the first place.

The proper role of government is to protect life, liberty, and property—not to dictate how businesses structure themselves. Government’s responsibility is to enforce contracts, punish fraud, and ensure equal treatment under the law. It should not be in the business of deciding who may own what type of company or micromanaging private corporate arrangements.

SB2040 bans PBMs from owning or controlling pharmacies. It expands the regulatory authority of the Tennessee Board of Pharmacy, creates broad disclosure requirements, authorizes daily civil penalties, and mandates operational changes. While the bill is framed as protecting patients and rural pharmacies, it ultimately increases government control over private enterprise.

History tells us where that road leads.

When government inserts itself into business decisions, compliance costs rise. Administrative burdens multiply. Legal risk increases. Smaller operators struggle to keep up. Prices rise—not because of free markets—but because regulation adds friction and uncertainty. Choices shrink as consolidation becomes a defensive response to regulatory complexity.

We should also be honest about something else: politicians rarely act without political incentives. Expecting a group of elected officials and regulators to solve a problem born of lobbying, corporate favoritism, and federal distortions is wishful thinking. Healthcare was “fixed” once before with sweeping federal intervention. The Affordable Care Act was sold as the solution to rising costs and access problems. Instead, premiums increased, networks narrowed, and consumer choice declined.

The PBM model originally emerged to help employers negotiate better drug prices for employees. Over time, however, the system became entangled with federal insurance mandates, third-party payment distortions, opaque rebate structures, and regulatory capture. The result is a bloated, complex arrangement where incentives are misaligned and the patient often comes last.

But that does not justify expanding state power.

If the system is distorted, the solution is not more distortion layered on top. The answer is greater transparency, freer contracting, removal of barriers to entry, and allowing true competition to discipline bad actors. When government picks winners and losers—even in the name of reform—it often entrenches the very forces it claims to restrain.

There is a solution to the PBM problem. It lies in restoring market discipline, eliminating regulatory favoritism, and re-centering healthcare around patients and voluntary exchange—not in empowering boards and agencies to dictate corporate ownership structures.

Good intentions are not enough. Tennessee should resist the temptation to fight centralized corporate power with centralized government power. One concentration of authority does not cure another.