CVS sues Tennessee in latest challenge to state PBM laws
CVS Health has filed a lawsuit against Tennessee, challenging a state law that prohibits pharmacy benefit managers (PBMs) from owning retail pharmacies—both of which are core pieces of the healthcare company’s business.
In addition to operating retail pharmacy locations nationwide, including in Tennessee, CVS also has its own PBM: Caremark, which manages prescription drug plans and provides services related to those benefits.
The company is asking a federal judge to block SB 2040, arguing it’s unconstitutional. The bill was signed into law last Friday, the same day CVS filed its complaint with a U.S. District Court.
As the law states, PBMs operate as middlemen between drug companies and pharmacies, and arguably have an impact on setting prices in retail pharmacies through their role in establishing rates for health insurance purposes.
Supporters of the legislation argued that there is an inherent conflict of interest when healthcare corporations have insurance, pharmacy and PBM arms, as is the case with CVS. The cause has gained bipartisan support nationwide, with lawmakers concerned these vertical companies control the supply chain and limit patient choice.
Lee ultimately signed SB 2040 into law in the state, set to go into effect in 2027.
Legal challenges filed in multiple states
Other states, including Arkansas, have passed similar legislation. CVS is also challenging the constitutionality of that state’s law as well.
CVS contends that these regulations violate the U.S. Constitution’s Equal Protection Clause, which ensures all entities are treated fairly under the law, and the Supremacy Clause—which provides that federal law supersedes conflicting state law.
“We will exhaust all options we can to continue to provide pharmacy and health care services to our 1.5 million Tennessee pharmacy patients,” CVS spokesperson Amy Thibault said in a statement. “This unconstitutional law puts special interests and local politics ahead of patients, restricting their access to life-saving medications and undermining fair competition.”
It remains to be seen if the challenges will be successful.
In Tennessee, CVS has 134 pharmacy stores and employs 2,000 people. As it stands, it will be forced to divest from those retail pharmacies if it wants Caremark to operate in the state.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.