Nolan Mettetal, a pharmacist-turned-state senator, is savoring a rare victory over the powerful pharmacy benefit management industry.

Last month, Mettetal convinced his fellow Mississippi lawmakers to support a controversial bill that gives the state pharmacy board some power over loosely regulated PBM companies like

Medco

(MHS)

and

Caremark

(CMX)

. The bill, hotly contested and once considered doomed, passed both Mississippi chambers without a single dissenting vote and went on to gain the governor's blessing on Wednesday.

"We have allowed PBMs to go along pretty much at will and do as they have wished," Mettetal told

TheStreet.com

on Thursday. "It's time to do a little more about it."

Mississippi's new law requires PBMs to act more promptly when paying pharmacies and updating drug prices. It also establishes monetary penalties for PBMs that fail to comply with those rules.

Mettatal had originally backed a far-reaching proposal that would have empowered the state pharmacy board to license and broadly regulate PBMs that operate in the state. But while that measure had to be abandoned, he felt lucky to pass any new PBM rules at all.

"The opposition was absolutely unbelievable," he said. "It was not uncommon to see 10 or 15 lobbyists out there working against us. And they told us upfront, 'We have the votes to beat you.' They didn't want any PBM language in there -- period."

Phil Blando, a spokesman for the Pharmaceutical Care Management Association, told

TheStreet.com

this week that his group had in fact opposed Mississippi's proposal. However, he portrayed the new law as "a really minor bill in terms of the broader issues we're facing at the state legislative level."

Yet just last week, before Mississippi's governor signed the bill into law, Blando told

Pension & Benefits Daily

that PCMA had "very serious concerns" about the state's "very unprecedented and sweeping proposal."

So far, the PBM industry has managed to defeat or at least delay nearly every proposed PBM regulation that has come along. But a few laws -- including a particularly tough one in Maine -- have gone into effect, and other proposals continue to surface at state capitols.

Meanwhile, PBM stocks have come under growing pressure in recent weeks. Medco, the largest player in the group, slipped 89 cents to $55.08 on Thursday. The stock has fallen nearly 10% since setting an all-time high of $60.64 last month.

Caremark has fared just as poorly. The company's stock dropped $1.08 to $46.64 on Thursday, leaving it down 13% from its own record high.

Union Fight

Earlier this week, Credit Suisse analyst Glen Santangelo found himself puzzling over that recent pattern.

"Shares of PBM stocks are down roughly 5% over the last eight trading days on seemingly no incremental news," Santangelo noted. And "we believe the recent slide across the group is unwarranted."

Thus, Santangelo recommended buying Medco and Caremark alike.

Still, both companies face their share of challenges. Mettetal says that pharmacists have complained about Medco, in particular, for allegedly paying claims late. Meanwhile, the company has come under fire from members of its own workforce.

Hundreds of unionized Medco employees have found themselves fighting over health care coverage -- including pharmacy benefits -- at the company's big mail-order center in Las Vegas.

"At PacifiCare, we could have gotten our prescription card for half the price that Medco was charging us as employees," local United Steelworkers representative Jack Hammond told

TheStreet.com

on Thursday. "That's part of the rub. Medco's saying, 'You can't go to an outsider when we're in that business.' And we're saying, 'We understand. But just because we work with you, we don't want to pay twice as much.'"

The union, which represents Medco workers in other regions as well, is primarily fighting against a clause that allows the company to change its benefits without returning to the bargaining table. Medco says that its other unionized staffers operate under that same clause, and this week actually blocked its unionized Las Vegas employees from working until they agree to do the same.

Medco told

TheStreet.com

that its operations have continued without interruption to either clients or patients. But Hammond foresees possible problems ahead.

"They've got temporary workers from a temporary agency" filling in," he says. "These people, in our opinion, haven't been adequately trained. And it's not like they're making toys or something. These are people's lives they're messing with."

Both parties hope to reach an agreement and move on. Otherwise, Hammond says, they could face off in a courtroom hearing next month.

PBM Bull

JPMorgan analyst Lisa Gill, long a PBM bull, portrays the Las Vegas lockout as an immaterial issue for the company.

"The company believes they can continue to operate under the contingency plan as long as they need -- (and) the company actually incurs lower costs under this scenario -- although it plans to continue good faith negotiations with the union," Gill wrote on Wednesday. And "while prior articles have pointed to risk to the company's union business (which we estimate to be in the neighborhood of $3 billion in total), we don't believe the company will lose PBM accounts as a result of the lockout."

Gill recommends buying Medco's stock, and blames recent weakness in the company's shares on "confusion in the marketplace" rather than legitimate problems facing Medco and PBMs in general. Specifically, Gill believes that a recent comment from Medicare left some investors worried about calls for added transparency from the group. However, she says, Medicare has simply asked for disclosures that PBMs already were planning to supply.

Medco, which portrays itself as the most transparent PBM giant, recovered some ground shortly after the Medicare update. But Gill is still waiting for Caremark -- arguably her favorite PBM of all -- to do the same.

"We continue to point to significant weakness at CMX," Gill wrote on Tuesday. "In our view, this stems primarily from the misperception that CMX is less transparent than MHS and that this could be more of an issue for them. We recommend using the sell-off today as a buying opportunity" for Medco and Caremark alike.

JPMorgan has helped manage a public offering of Medco securities over the past 12 months. It counts both Medco and Caremark as clients of the firm.