CVS threaten closures if passed
A legislative effort in Tennessee is challenging the role of Pharmacy Benefit Managers (PBMs) in the state’s pharmaceutical system. Tennessee Senator Bobby Harshbarger recently filed SB2040, a bill that, if enacted, would prevent PBMs from owning or operating retail or mail-order pharmacies and would prohibit them from holding pharmacy licenses within the state.
Understanding Pharmacy Benefit Managers
PBMs function as intermediaries between insurance companies, drug manufacturers, and pharmacies. They manage prescription drug benefits for employers and insurers, negotiating drug prices and processing claims with the stated goal of reducing costs. However, PBMs have faced increasing criticism for allegedly contributing to high drug prices and reducing reimbursements for independent pharmacists.
Market Concentration
According to available data, the four largest PBMs control approximately 67% of the national market. This concentration of power is often coupled with vertical integration, where a single company owns businesses across different levels of the supply chain. For example, CVS Caremark is a PBM owned by CVS Health, which also owns the insurance company Aetna.
The Debate Over SB2040
Senator Harshbarger, a pharmacist, believes this vertical integration allows large corporations to prioritize their own subsidiaries, potentially harming independent pharmacies. He likened the situation to a biased referee, stating, “A good analogy is when you’ve got two ball teams playing one another and the referee happens to own the other team. Tell me how that works.”
CVS Pharmacy’s Concerns
Representatives from CVS Pharmacy have actively opposed SB2040, characterizing it as a “pharmacy closure bill.” They contend that if the bill passes, CVS would be forced to close its 134 pharmacies in Tennessee, along with its 25 Minute Clinics located within those stores. Amy Thibault, CVS Health corporate communications executive director, explained that the business model doesn’t support operating stores without a pharmacy.
Senator Harshbarger disputes the claim that the bill mandates closures, asserting that any closures would be a business decision made by the companies themselves. He pointed to a similar bill passed in Arkansas, where he claims predictions of widespread closures did not materialize, calling such warnings “fearmongering.” CVS is still operating in Arkansas, though ‘Arkansas Act 624’ is currently facing legal challenges following a preliminary injunction issued in July of 2025.
Harshbarger clarified that the bill aims to require companies like CVS to separate their PBM operations from their pharmacy businesses, a process he defines as “divestment,” not closure.
What Could Happen Next
If SB2040 is passed, CVS and other PBM-affiliated pharmacies could choose to divest their PBM ownership, allowing them to continue operating pharmacies in Tennessee. Alternatively, they may decide to close pharmacies, a decision Senator Harshbarger believes would be a business response to the new regulations. A legal challenge to the bill, similar to the one underway in Arkansas, is also a possible outcome. The Tennessee pharmaceutical landscape could see a shift in market share if independent pharmacies were to absorb patients from any closed locations.
Frequently Asked Questions
What do PBMs do?
PBMs manage prescription drug benefits for insurers and employers, negotiating prices and processing claims.
What is vertical integration in the context of PBMs?
Vertical integration occurs when a PBM is owned by a company that also owns an insurance company or a pharmacy, potentially creating conflicts of interest.
What does SB2040 propose to do?
SB2040 would prohibit PBMs from owning or operating retail or mail-order pharmacies and from holding pharmacy licenses in Tennessee.
How might changes to PBM regulations affect access to prescription drugs in Tennessee?