Tennessee targets PBM ownership

Tennessee lawmakers have voted to bar pharmacy benefit managers from owning pharmacies, putting CVS Health’s business model in the state at risk. (capitol.tn.gov) The Tennessee House passed Senate Bill 2040 on April 21 by an 86-7 vote, one day after the Senate approved it 24-9. The measure, called the FAIR Rx Act, now heads to Gov. Bill Lee. (capitol.tn.gov) Pharmacy benefit managers, or PBMs, are the companies that sit between drugmakers, insurers and pharmacies, deciding which drugs are covered and how pharmacies get paid. Tennessee’s bill would ban a PBM from holding or controlling a pharmacy license starting Jan. 1, 2027. (kff.org) (capitol.tn.gov) The bill also orders the state Board of Pharmacy to identify likely violators by Oct. 1, 2026 and requires those pharmacies to notify patients and prescribers by Nov. 1, 2026 that they may have to stop dispensing drugs. Pharmacies tied to a PBM could keep operating through Dec. 31, 2026 if they are pursuing a sale, with one extension of up to six months. (capitol.tn.gov) CVS says the law would force it to close 134 Tennessee pharmacies, shut 25 MinuteClinic locations and eliminate more than 2,000 jobs. The company told WKRN it is preparing a court fight and said the bill would not lower drug costs. (wkrn.com 1) (wkrn.com 2) Supporters of the bill, led by Sen. Bobby Harshbarger and Rep. Rick Scarbrough, say the point is to separate the company that sets pharmacy reimbursement rules from the company getting paid under those rules. Harshbarger, a pharmacist, said in committee that the measure does “one thing”: stop the rule-setter from owning the pharmacy being reimbursed. (wpln.org) The push grew after a Tennessee Department of Commerce and Insurance audit of Caremark, CVS’s PBM, was posted in March. State officials said the audit covered the company’s condition and affairs as of Dec. 31, 2024. (tn.gov 1) (tn.gov 2) News outlets covering the audit said Tennessee lawmakers focused on findings that CVS and other PBMs reimbursed affiliated pharmacies at higher rates than unaffiliated stores. Tennessee Lookout reported the three biggest PBMs control nearly 80% of the market, citing KFF. (tennesseelookout.com) (kff.org) That concentration has drawn federal scrutiny too. The Federal Trade Commission said in a July 2024 interim report that vertically integrated PBMs may profit by inflating drug costs and squeezing independent pharmacies. (ftc.gov) CVS has fought back with a public campaign in Tennessee, including more than $1.3 million in television ads, according to WKRN. If Gov. Lee signs the bill, the next fight is likely to move from the Capitol to the courts. (wkrn.com)