“Ban the middlemen” has become the easy applause line in healthcare politics. Tennessee’s version is SB 2040, which would prohibit pharmacy benefit managers (PBMs) from owning, controlling, or holding any beneficial interest in pharmacies, including mail-order and specialty operations that ship into the state.
That sounds like a tough stand for “fairness.” But it’s a state-mandated corporate breakup that substitutes political judgment for competition – and risks making access worse for patients.
Some argue that this vertical integration creates conflicts of interest and steers patients toward certain providers. That concern deserves scrutiny. But banning a business model is not how effective markets work. Markets punish bad actors through profit and loss. Bans punish many patients by shrinking options and inviting costly disruption.
CVS is warning that this “pharmacy closure bill” could result in the closure of 134 pharmacy locations in Tennessee. Other drug companies will likely close as well. Even if only half of those locations close, that would still be a massive disruption for a state with a large rural population.
A law that can credibly trigger widespread business closures should set off alarm bells for anyone who claims to prioritize access. If lawmakers really want to reduce conflicts, they should target specific conduct rather than impose a blanket ownership ban.
SB 2040 goes far beyond policing bad behavior. It attempts to centrally plan the market structure. Worse, this approach is already showing cracks in court.
Arkansas tried a first-in-the-nation PBM ownership ban, and a federal judge issued a preliminary injunction blocking it before it could take effect. Iowa’s broad PBM mandates also ran into legal trouble with a preliminary injunction against key provisions.
Tennessee should pause before copying a policy trend that is increasingly unstable—and that may leave patients stuck in the middle of a legal and operational mess.
Ultimately, Tennessee can’t fully fix drug pricing from Nashville, because so much of healthcare’s dysfunction is driven by poor federal policy. And drug expenses account for less than 10% of the more than $5 trillion in total healthcare spending, so focusing only on them won’t do much to empower patients or improve healthcare affordability.
But Tennessee can provide a meaningful, free-market approach that expands supply, reduces barriers to care, and empowers pharmacists, who are the most accessible healthcare professionals in many communities.
Instead of trying to “win” a headline battle against PBMs, lawmakers should pursue reforms that increase capacity and competition at the point of care. A strong blueprint already exists in a Beacon Center report, which focuses on removing state-level restrictions that limit what pharmacists can do and how efficiently pharmacies can operate.
Start with the workforce bottleneck. Tennessee’s restrictions on pharmacist-to-technician ratios were a classic example of anti-competitive micromanagement that reduced throughput, increased wait times, and raised operating costs. This restriction was reduced in 2024 through a ruling change, but not legislation, so it could come back. The state should eliminate state-imposed ratio caps and let pharmacists decide staffing based on real-world needs and safety.
Next, reduce barriers that keep pharmacists from providing routine care. This includes cutting red tape that makes it harder for pharmacies to administer CLIA-waived tests, which are categorized as “simple laboratory examinations and procedures that have an insignificant risk of an erroneous result.” This was partially achieved in 2024, but the pharmacy must still file a form with the state after the federal waiver is approved.
In addition, the state should expand services that meet community needs—especially when physician access is limited. More pharmacist-provided testing and treatment is not “scope creep.” It is supply expansion—more care options, closer to home, often at lower cost.
Tennessee can also simplify rules that require unnecessary agreements for routine services. This could be achieved by reducing bureaucratic hurdles around vaccinations and other common services so pharmacists can respond to public health needs without jumping through paperwork hoops that add cost but not safety.
If Tennessee wants lower costs and better access, it should increase the supply of care and reduce state barriers—not try to restructure ownership in a federally distorted drug market and hope prices fall. There have been positive efforts in this direction in Tennessee over the last few years, but more work is needed.
SB 2040 is a political shortcut. It creates a new layer of state control, risks pharmacy closures, and may end up tangled in litigation—while doing little to address the real constraints Tennesseans feel every day. A better approach is based on free-market principles: stop chasing villains, stop banning business models, and start removing Tennessee’s own obstacles to competition.
