Full Breakdown
Tennessee Bill Challenges CVS Health's Business Model
3/21/2026, 2:48:03 AM
Proposed Legislation and Its Implications
A bill currently under consideration in the Tennessee legislature seeks to prohibit a single company from owning both a retail pharmacy and a pharmacy benefit manager (PBM). If enacted, this legislation could compel CVS Health, headquartered in Woonsocket, Rhode Island, to divest from its retail pharmacy operations in Tennessee, potentially leading to the closure of over 130 stores and the loss of more than 2,000 jobs. The bill is part of a broader movement across several states aimed at reforming the pharmacy marketplace by separating entities that negotiate drug prices from those that dispense medications.
Tennessee state Senator Bobby Harshbarger, a pharmacist and Republican sponsor of the bill, argues that it addresses a "structural conflict in the pharmacy marketplace." He asserts that the legislation does not eliminate PBMs or reduce access to medications but aims to enhance competition and transparency in drug pricing.
Industry Response and Concerns
CVS Health has expressed strong opposition to the bill, arguing that the separation of PBMs and pharmacies is impractical. A CVS spokesperson noted that there is no viable market for selling its pharmacies in Tennessee, citing the recent bankruptcy of Rite Aid as an example of the challenges in the pharmacy sector. The company warns that the bill could harm the 5 million patients it serves in Tennessee and jeopardize the jobs of its employees.
Critics of the current PBM model, including legal experts, argue that the ownership structure limits price competition and negatively impacts consumers. Robert Tsigler, an attorney with experience in regulatory matters, stated that having PBMs and pharmacies under the same corporate umbrella allows for price control that can disadvantage patients.
Conversely, Greg Lopes, a vice president for the Pharmaceutical Care Management Association, labeled the Tennessee bill as "dangerous for patients' health," claiming it would not effectively lower drug prices. He referenced a study indicating that similar legislation could lead to increased drug costs nationwide and higher hospitalization rates.
Broader Legislative Trends
The Tennessee bill is part of a growing trend, with states like Arkansas already passing laws to separate PBMs from pharmacy ownership. Other states, including New York, Vermont, Texas, and Indiana, are also exploring similar legislative efforts. This movement has gained traction amid bipartisan scrutiny of PBM practices, with 63 bills aimed at reforming the industry having passed in 18 states over the past year.
In Rhode Island, where CVS is based, lawmakers have opted for a more measured approach, focusing on transparency and oversight without pursuing drastic reforms to CVS's business model. Senate President Val Lawson indicated that CVS was informed of legislative developments in advance, suggesting a collaborative approach rather than confrontational.
Legal Challenges and Future Outlook
In a related development, Rhode Island Speaker K. Joseph Shekarchi has filed a class-action lawsuit against CVS, alleging that the company operated a racketeering enterprise concerning its PBM contracts. CVS has denied the allegations, asserting its commitment to lowering prescription drug costs through negotiations with pharmaceutical manufacturers.
The outcome of the Tennessee bill could have significant implications for CVS Health and the broader pharmacy landscape. While some experts downplay the potential fallout from store closures, others warn that the bill could spark a nationwide movement for similar reforms, posing a substantial challenge to CVS's business operations.
Verbatim Quotes
- “This legislation separates pharmacy benefit managers from owning or controlling the pharmacies they reimburse or steer patients toward,” — Bobby Harshbarger, Tennessee State Senator
- “When one company is negotiating drug prices and owns the pharmacy that fills the prescriptions, they have the ability to control both ends of the transaction,” — Robert Tsigler, Attorney
- “5 million patients we serve, and for the more than 2,000 colleagues who will lose good paying jobs,” added Thibault.” — Amy Thibault, CVS Spokesperson
- “CVS is a billion-dollar-a-year PBM with vast operations across the US,” — Kent McKinney, Health Care Economist
The unfolding situation in Tennessee reflects a critical juncture in the ongoing debate over pharmacy benefit managers and their role in the healthcare system.
