(The Center Square) – A bill moving through the Tennessee General Assembly has raised consumer alarms from organizations for and against it.
House Bill 1959/Senate Bill 2040, known as the Fair RX Act, would require pharmacies to divest their pharmacy benefit managers, known as PBMs, which oversee prescription drug plans for consumers and employers.
A House Finance, Ways and Means subcommittee will consider the bill on Tuesday. In the Senate, the Finance, Ways and Means Committee advanced the bill to the full chamber for a vote.
PBMs were first developed more than 50 years ago to expedite claims processing, but they have overstepped their original intent, said Anthony Pudlo, CEO of the Tennessee Pharmacist Association, which supports the bill, in an interview with The Center Square.
One issue is a concept known as vertical integration. For example, a pharmacy that owns its PBM would pay its affiliates at a higher rate than nonaffiliated pharmacies, according to Pudlo.
“Vertical integration, if we can halt it, those saving would be passed down to the employer with reduced health premiums, this siphoning off money off of taxpayers and the public will be felt,” Pudlo said.
CVS Health, owner of CVS Pharmacy and pharmacy benefit manager CVS Caremark, is running an advertising campaign that says the bill could force the company to close 134 stores.
CEO J. David Joyner said in a March 17 letter to lawmakers that the bill could have a more significant effect.
“In Tennessee, as in most states, Caremark doesn’t only contract with CVS Pharmacy, but with other chains, grocers, independents, almost anywhere people can get their medication,” Joyner said in the letter provided to The Center Square by CVS. “It is simply not feasible to cease a nationwide network in one state. That leaves me with only one way to comply with this legislation, ending pharmacy operations in Tennessee.”
CVS employs more than 6,000 people in Tennessee, Joyner said.
Pudlo said the bill could keep independent pharmacies in business.
“If you talk to any independently owned pharmacy, they struggle to have any level of negotiation with the big PBMs,” Pudlo said. “They’re also being audited by that company and then they can see everything that they’re doing and then they can control how much that pharmacy wants to get paid. I even refer to it as you have a PBM that ends up being the judge, jury and executioner of a local, independent pharmacy because they control the contracts as well as they audit their competition and then change the rules to make it work for their own pharmacies.”
The bill could also affect Tennessee’s TennCare, the state’s Medicaid program, and state employee insurance programs.
The number could reach as high as $24 million to the state, largely due to specialty drug costs. Specialty pharmacies affected by the bill can acquire the medications at 16% less, Stephen Smith, TennCare director, told the March 17 meeting of the Senate Finance, Ways and Means Committee.
Bojan Savic, executive director of the Tennessee Fiscal Review Committee, said there is a disagreement about the cost.
“I would say the main reason for the disagreement is behind the assumption that pharmacies will close,” Savic said. “The assumption in the fiscal note is that those pharmacies have options to restructure, divest and that they can remain in operation, at least for the most part.”
Even if the law passes, it could face a legal challenge. Arkansas lawmakers passed a bill banning PBMs from owning pharmacies in their state. A federal judge issued an injunction stopping the bill from taking effect, saying it “likely violates the Commerce Clause.”
Congress could also take up similar legislation. A bipartisan bill filed by Massachusetts Democrat Elizabeth Warren and Arkansas Democrat Josh Hawley in the U.S. Senate would ban companies from owning a medical provider or management services organization, a PBM or an insurer. The bill is assigned to the Senate Judiciary Committee.
“Americans are paying more and more for health care while the quality of care gets worse and worse,” Hawley said in a news release. “In their quest to put profits over people, Big Pharma and the insurance companies continue to gobble up every independent healthcare provider and pharmacy they can find.”
