Harshbarger PBM bill gains momentum, passes TN House subcommittee

NASHVILLE — Legislation passed a Tennessee House subcommittee Wednesday which would shake up the structure of pharmacy ownership in the state. The bill prevents pharmacy benefit managers from also owning a pharmacy. It aims to break up a trend of ownership consolidation, which has led to the three largest PBMs in the U.S. managing 79% of all prescription drug claims in the country in 2023. The bill is sponsored in the House by state Rep. Rick Scarbrough, R-Oak Ridge, and it passed the House Insurance Subcommittee in a 6-2 vote along party lines. Its companion bill, sponsored by state Sen. Bobby Harshbarger, R-Kingsport, passed a Senate committee last week in a 8-1 vote with the support of the committee's lone Democrat, Jeff Yarbro, D-Nashville. PBMs negotiate prescription drug prices with drug manufacturers. Proponents of the legislation argue it is an inherent conflict of interest for a single company to own multiple steps in the drug supply chain, as the PBM can set favorable prices for pharmacies it is affiliated with while increasing drug costs for others. An Federal Trade Commission interim staff report from 2024 found that the ownership structure has allowed PBMs "to profit at the expense of patients and independent pharmacists." CVS Caremark, the PBM associated with the larger CVS Health Corporation, is the largest PBM in the country. It managed 34% of all prescriptions filled in the U.S. in 2024 according to the FTC report. Opponents of the legislation argue the bill will cause large pharmacies such as CVS and Express Scripts to shutter their doors in Tennessee. A CVS spokesperson said this would include all of the company's 134 pharmacies in the state. Michael Power, vice president of state affairs at the Pharmaceutical Care Management Association, estimated the total number could be as much as 600. "[The bill] is bad for Tennessee, for the more than 1.5 million patients we serve and for the more than 2,000 colleagues who will lose good paying jobs," said Amy Thibault, executive director of corporate communications at CVS. While introducing his bill to the Senate, Harshbarger argued his legislation requires no closures whatsoever — it only requires PBMs to divest from pharmacies, and vice versa. He said it would be a decision made by the company, not one required by his legislation. "The bill does not close pharmacies," said Harshbarger. "I want to be clear – divestment does not equal closure." Thibault said the prospect of finding a buyer for CVS' 134 pharmacies would be "unlikely." She said that when CVS purchased Rite Aid after the company filed for bankruptcy last year, CVS was one of only a few potential buyers. "It is unlikely another pharmacy could or would buy 134 CVS pharmacies, or the others impacted by the bill," said Thibault. Whether there were alternatives to those closures was a primary point brought up in the subcommittee meeting Wednesday by state Rep. Sabi Kumar, R-Springfield, a retired surgeon and chair of the House Insurance Committee. Kumar asked Power whether companies could restructure their business models to comply with the legislation, without having to outright shudder their doors. Power responded, saying since he did not represent CVS, he could not speak to what their business model could potentially look like. "You have created a sense of panic that pharmacies are going to close and people are going to lose their jobs and so on," said Kumar. "Again, I appeal to you that scaring the public about the loss of their services…that is very strong. And I think we should be very careful in taking that radical a step." If the bill passes, companies would be required to divest ownership by Jan. 1, 2028. Both Senate and House bills will need to pass through committees before making it a floor vote.