CVS to Tennessee: The legislation is tone deaf

NASHVILLE — As the parent company of Caremark, CVS would have to close or sell its outlets in Nashville, and the rest of Tennessee, if state legislation barring ownership of pharmacies by PBMs becomes state law.

“This legislation addresses a structural issue within the pharmacy marketplace,” said Republican State Sen. Bobby Harshbarger, who sponsored the bill. “When a PBM sets reimbursement rates, designs pharmacy networks, audits competing pharmacies, and simultaneously owns the pharmacy it directs patients to, that alignment creates an inherent conflict of interest. This bill addresses that structure through licensure standards.”

Independent pharmacies are particularly vulnerable to competition from PBM-owned pharmacies, say state lawmakers.

The bill was passed by the state Senate Health and Welfare Committee but has not advanced in the Tennessee House.

A CVS spokeswoman said “We’re committed to working with policymakers to improve the health care system, protect access to pharmacies, and lower health care costs for the patients we see every day. …The legislation at hand contains no language addressing: spread pricing, reimbursement, or formularies. The only thing this legislation does is force the closure of 134 CVS pharmacies, a bad deal for Tennessee, for more than 1.5 million patients we serve and for over 2,000 good paying jobs.”

Likewise, Cigna’s Evernorth PBM said the bill “could cut off access to medicine for families, active-duty military members and more, while disrupting care for more than 180,000 Tennesseans.”

Harshbarger said changes in ownership occur regularly within healthcare markets without disrupting patient care or pharmacy operations. When ownership changes, the physical location remains, pharmacists remain employed, prescriptions continue to be filled, and patients maintain access.

“Recent statements have suggested that the legislation would result in pharmacy closures,” he said. “That characterization is inaccurate. Divestiture requires a change in ownership, not a cessation of services.” 

Even if the legislation is approved, it likely faces legal challenges. In Arkansas, a federal judge has blocked enforcement of a similar statute, effectively pending final resolution of a lawsuit brought by PBMs seeking to overturn it.

U.S. District Judge Brian Miller concluded that the law probably violates the Constitution’s Commerce Clause by unfairly treating out-of-state companies and puts an excessive onus on interstate commerce. The statute’s preamble says its intent is to end “business tactics that have driven locally-operated pharmacies out of business,” which the court viewed as protectionist language aimed at operations from outside of Arkansas.

“Although the state argues that it is merely targeting a form of business structure, this appears to only be a half-truth,” Miller wrote. “The statute discloses that the state is also attempting to protect ‘locally operated pharmacies’ as opposed to just consumers and non-PBM affiliated pharmacies, including out-of-state non-PBM affiliated pharmacies like Walgreens.”