NASHVILLE, Tenn. (WTVF) — A bill moving through the Tennessee legislature could force CVS to close all of its pharmacy locations in the state — and it's dividing the pharmaceutical industry.
The legislation would prohibit a person or entity from simultaneously owning or controlling a pharmacy and a pharmacy benefit manager, or PBM.
"The bill prohibits a person or entity from simultaneously owning or controlling a pharmacy in both a covered entity and a pharmacy benefit manager," said State Sen. Bobby Harshbarger (R-Blountville.)
To understand what's at stake, it helps to know what a PBM does. Tom Campbell, the dean of the College of Pharmacy at Lipscomb University, explained that a PBM is essentially a middleman that negotiates the cost of drugs between pharmacies and insurance companies. "What are the reimbursement rates for those drugs, to those individual pharmacies? So they do all the negotiations related to that process," Campbell said.
Supporters of the bill argue that when a large pharmacy chain also owns the PBM, independent pharmacies can't compete. "Whereas an independent pharmacy owner doesn't have access to that, and so all they're left with is very low reimbursement rates. In fact, in some cases, dispensing prescriptions at a loss," Campbell said.
CVS is one of the largest pharmacy chains that also owns a PBM — called Caremark — and the company is strongly opposed to the bill. CVS has 134 locations in Tennessee.
Adam Rodgers, a district leader for CVS Health who has worked for the company for 15 years, warned that the legislation could have severe consequences. "It would essentially result in us closing all of our CVS locations," Rodgers said.
Rodgers said that kind of outcome would hurt patients, particularly in urban areas where CVS stores serve as neighborhood pharmacies. "That access is really important at a neighborhood level, for the people who live in a community. They need to be able to go to the corner drug store — whether that's a CVS, independent owner, Walgreens or whoever that might be," Rodgers said.
When asked whether CVS could sell off its PBM operations and remain open in Tennessee, Rodgers said he didn't have an answer. "In full transparency, I don't have an answer to that because I work for the retail side and we have no contact with the PBM," Rodgers said.
Other big pharmacies like Walgreens, Publix and Walmart do not own their own PBMs.
The Senate Health Committee, which includes three current or former pharmacists among its members, has been a driving force behind the bill. State Sen. Shane Reeves (R-Murfreesboro) argued that the current structure is damaging the profession. "The profession has changed, and this vertical integration is tearing our profession apart. I mean, surely you see that?" Reeves said.
Other senators acknowledged the complexity of the issue. "This is very challenging for me," said State Sen. Becky Massey (R-Knoxville) who was the lone dissenting vote. She cited the CVS Pharmacy closures and the fact she has a sizable CVS distribution center in her Knoxville area district.
State Sen. Ferrell Haile (R-Gallatin) who is a retired pharmacist, made clear he has long been invested in the outcome. "If you sense that I'm passionate about this, I've been fighting this for a long long time," Haile said.
The bill has advanced out of the Senate Health Committee but has several more stops before it could become law. The Tennessee House hasn't advanced the bill yet. Rodgers said he hopes there is still room for compromise. "I think there's always ways to have conversations about things beyond taking the far extreme option that we're having here that results in the closing of all of our facilities in the state," Rodgers said.
CVS released this statement following the vote:
"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. Today’s hearing discussed issues some have with pharmacy benefit managers, but 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."
There are also lingering questions about whether a PBM pharmacy ownership ban could impact military and TennCare patients. Sen. Harshbarger said he would make sure those concerns were addressed before the bill is heard in Senate Finance Committee.
Tennessee is not alone in taking up this issue. Arkansas made history by banning PBMs from owning pharmacies, though that law is temporarily blocked as it faces legal challenges. If the bill passes in Tennessee, it would likely join that legal battle.
Indiana, Louisiana, New York, Texas, and Vermont have also made efforts to create more restrictions and guardrails for PBMs. Legislation was introduced at the federal level as well, but talks stalled at the end of 2024.
Do you have more information about this story? You can email me at Chris.Davis@NewsChannel5.com.
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