PBM bill heads to floor vote in TN Senate

NASHVILLE — The Tennessee Senate Finance, Ways and Means passed a bill Tuesday that would bring drastic reforms to the ownership structures of pharmacies in the state. SB2040 prevents pharmacy benefit managers from also owning a pharmacy. Pharmacy benefit managers, or PBMs, act as middlemen between pharmacies, insurance companies and drug manufacturers, often negotiating drug prices. Under the bill, sponsored by state Sen. Bobby Harshbarger, R-Kingsport, PBMs that currently own pharmacies would be required to divest as late as December of 2028. SB2040 passed the Senate Finance, Ways and Means Committee in a 9-2 vote with the support of the committee's two Democrats. Two Republicans voted in opposition to the bill, including Senate Majority Leader Jack Johnson, R-Franklin, and Finance, Ways and Means Committee Vice-Chair John Stevens, R-Huntingdon. The bill heads to a final vote on the Senate floor. There was no discussion on the bill during the Tuesday committee — most of those conversations occurred last week during a previous Finance Ways and Means meeting in which government officials debated the legislation's price tag. During that committee, Jim Bryson, commissioner of the Tennessee Department of Finance and Administration, said his department expects an increase of $29.1 million in state expenditures to the state's insurance program for teachers, state and local government employees. In addition, TennCare Director Stephen Smith estimated the state will see an increase of $24 million to its Medicaid program. However, Bojan Savic, executive director of the General Assembly's Fiscal Review Committee, disagreed with those numbers. Savic said Bryson and Smith's estimates are based on the assumption that a large number of pharmacies will close as a result of this legislation. Speaking on behalf of the Fiscal Review Committee, Savic said he foresees the number of pharmacy closures being insignificant. However, Savic conceded that there is potential for the legislation to result in increased expenditures to TennCare and the State Group Insurance Program. According to the fiscal note attached to the bill, those increases would be most pronounced in the short to mid-term following implementation of the legislation. All three government leaders noted a degree of uncertainty in their cost predictions. Whether the bill will lead to mass pharmacy closures has been a constant question mark hanging over discussions on the legislation. Harshbarger said his bill is intended to address vertical integration, an organizational structure where multiple steps along a single supply chain are owned by the same company. He said this structure has led to unfair business practices and uncompetitive markets in the pharmaceutical industry. Those claims are backed, at least in part, by a 2024 Tennessee Department of Commerce and Insurance audit which found CVS had engaged in spread pricing and other illegal business practices. CVS-Caremark, the largest PBM in the country, has pushed back against Harshbarger's legislation. Leadership with the company has repeatedly stated the legislation would force the closure of CVS' 134 Tennessee pharmacies, which they claim would cause a steep decline in healthcare for many Tennesseans. Harshbarger maintains this would be a decision made by the company, not one required by his bill.