PBM regulation affirmed: Kentucky’s SB 188 survives preemption challenge

Senate Majority Floor Leader Max Wise announced that Attorney General Russell Coleman has issued an opinion confirming Kentucky’s 2024 pharmacy benefit manager (PBM) reform law is enforceable and applies broadly to protect patients and pharmacies. The opinion—OAG 25-11, dated September 24, 2025—addresses two questions with national resonance: whether Senate Bill 188’s anti-steering provisions withstand ERISA preemption, and whether PBMs headquartered outside a state are subject to that state’s regulation when their coverage impacts its residents.

According to the opinion written by Assistant Attorney General Matthew Cocanougher, the anti-steering provisions in Section 4 of SB 188 are likely enforceable under the U.S. Supreme Court’s 2020 Rutledge decision. The opinion also concludes that PBMs domiciled outside Kentucky are subject to regulation under SB 188 when they do business affecting Kentuckians. The request for guidance came from Wise on June 19, 2025, following conflicting interpretations of the new law’s reach.

SB 188 passed in 2024 with sweeping bipartisan margins—35-1 in the Senate and 97-0 in the House—before being signed into law on April 5, 2024. Sponsored by Wise, the law targets PBM practices that steer patients to affiliated pharmacies and extends fair-market protections to the commercial market. It builds on Wise’s 2020 reforms in SB 50 that created a single state-managed PBM for Medicaid and banned spread pricing, steering, and hidden fees.

The enforcement dispute surfaced when the Department of Insurance, in a February 17, 2025 letter, took the position that portions of SB 188—particularly the anti-steering section—were preempted by ERISA and therefore unenforceable. The department also signaled limits on regulating some out-of-state PBMs. Pharmacist groups, including the Kentucky Pharmacists Association and the Kentucky Independent Pharmacy Alliance, challenged that view and urged full enforcement; DOI later issued Bulletin 2025-03 restating its stance. Wise then sought an Attorney General opinion to resolve the impasse.

In OAG 25-11, the Attorney General applies the Rutledge framework and concludes that Section 4 regulates PBM administration, not ERISA plan administration, and thus does not trigger preemption merely by affecting costs or incentives. The opinion notes SB 188 does not dictate plan design, benefits, or formulary content; it addresses PBM-pharmacy conduct such as incentives, discrimination among network pharmacies, limits that favor affiliates, and interference with a patient’s choice among in-network pharmacies. On jurisdiction, the opinion reads SB 188’s “coverage in this state” language to reach PBMs when their activity impacts Kentucky residents, even if the PBM or plan is domiciled elsewhere.

Independent pharmacists framed the decision as a practical win for patient access and fair competition. “Independent pharmacies have long shouldered the burden of unfair PBM practices, and we are grateful to Sen. Wise for never giving up this fight,” said Rosemary Smith, founder of the Kentucky Independent Pharmacy Alliance, also thanking the Attorney General for the clarity provided. Wise said the opinion confirms the legislature’s intent to protect patients and strengthen independent pharmacies in every community and called for full implementation.

For stakeholders beyond Kentucky, the opinion underscores how state PBM reforms can coexist with ERISA so long as they regulate PBM conduct rather than plan design—an approach other states are evaluating as they consider anti-steering and network-access safeguards.