On May 6, 2025, Tennessee Governor Bill Lee signed S.B. 1414 into law, making Tennessee the 14th state, and the 6th in 2025,to enact legislation protecting contract pharmacy access in the 340B program. The law, which took effect July 1, 2025, introduces some of the most unique provisions seen in any state’s 340B legislation to date.

So, what does this mean for covered entities, contract pharmacies, and patients across Tennessee? Let’s break it down.

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1. Blocking Future Manufacturer Restrictions

• Beginning back on  July 1, 2025, drug manufacturers may not impose new restrictions on 340B contract pharmacy arrangements.
• Important caveat: the nearly 40 manufacturer restrictions already in place nationwide as of June 1, 2025, will remain in effect. This makes Tennessee’s law more limited than some other state laws that attempt to override existing restrictions.

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2. The “Winners-Only” Contract Pharmacy Model

• Tennessee is the first state in the nation to adopt a “winners-only” framework.
• Under this model, contract pharmacies must exclude any claims that would result in a net financial loss for the covered entity.
• The goal is to ensure that all 340B arrangements benefit covered entities financially, but this provision could reduce revenue for retail pharmacies and potentially lead some to scale back or exit 340B contract arrangements.

3. Manufacturer Prohibitions

The law bars manufacturers (and their agents) from actions that would disadvantage covered entities, including:

• Denying or limiting access to 340B drugs.
• Imposing additional data submission requirements beyond federal law.
• Forcing claim reversals or resubmissions tied specifically to 340B status.
• Creating unique audit, credentialing, or inventory requirements for 340B providers.
• Adding restrictions on the number of contract pharmacies a covered entity may use.

4. Enforcement and Penalties

• Violations carry civil penalties of $50,000 per incident, with each package of drugs counting as a separate violation.
• Enforcement authority lies with both the Commissioner of Commerce & Insurance and the Attorney General, giving the law multiple enforcement pathways.

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How This Impacts Tennessee Covered Entities

Short-Term

• Covered entities will not see relief from existing manufacturer restrictions, meaning many current challenges remain in place.
• However, the law provides assurance that additional restrictions cannot be layered on in the future.

Long-Term

• The winners-only rule could reshape contract pharmacy relationships. Covered entities may need to renegotiate terms, while retail pharmacies weigh the financial impact of continuing participation.
• This model could ultimately lead to more 340B savings flowing back to providers and patients, but at the expense of some contract pharmacy partners.

Strategic Considerations

• Evaluate current contract pharmacy arrangements to ensure they comply with the winners-only requirement.
• Assess financial models: How will excluding loss-generating claims affect both your pharmacy partnerships and patient access?
• Plan for compliance and documentation: Tennessee’s law includes strict penalties, making it important to have robust reporting and oversight in place.

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Why It Matters

• Pharmacy sustainability: Ensures pharmacies—especially those in rural or underserved areas—can keep operating under 340B without being squeezed by manufacturers.
• Affordable access: Keeps 340B drugs accessible and affordable for patients who rely on safety-net providers.
• Level playing field: Prevents discriminatory practices that target 340B providers differently than others.
• State leadership: Tennessee joins states like Arkansas, Louisiana, Mississippi, Missouri, and West Virginia that have passed similar laws—courts have upheld these, and in some cases manufacturers have rolled back restrictions as a result

Why Providers Are Applauding the Law

Healthcare leaders across Tennessee have voiced strong support for S.B. 1414:

• The Tennessee Primary Care Association praised it for safeguarding access to essential care.
• Leaders from Cempa Community Care and the Tennessee Pharmacists Association described it as a “major win” for patients and providers who rely on 340B.
• Sponsors Sen. Richard Briggs and Rep. Esther Helton-Haynes were credited with challenging industry pressure to protect the state’s safety net.

RxTrail’s Perspective

Tennessee’s law reflects a growing state-level pushback against manufacturer restrictions, while also breaking new ground with the winners-only requirement. For covered entities, this means:

• More stability in future contract pharmacy arrangements.
• More complexity in managing claims and pharmacy relationships.
• An urgent need to align compliance, finance, and pharmacy teams around this new model.

340B is complex, and each new state law shifts how you need to think about compliance and strategy. This Tennessee bill is a positive step that removes unnecessary roadblocks and supports long-term sustainability.

At RxTrail, we don’t just track these changes, we help you adapt your systems, reporting, and strategy so your organization stays compliant and your patients stay cared for.

Tennessee’s S.B. 1414 represents both opportunity and challenge. While it prevents new manufacturer restrictions, it also reshapes how contract pharmacy relationships must be structured moving forward. Covered entities will need to take a proactive approach to compliance and strategy to make the most of the protections this law offers.

Schedule a discovery call with RxTrail to explore how these changes could impact your program and how to position your organization for success.

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