Why It Matters
Tennessee lawmakers approved legislation prohibiting pharmacies from operating pharmacy benefit managers, a measure that singles out CVS Health as the only company in the state owning both. The move follows a state audit showing PBMs reimbursed affiliated pharmacies at higher rates than independent competitors, raising questions about market fairness in drug pricing.
What Happened
The Tennessee legislature passed the bill by overwhelming margins: 86-7 in the House and 24-9 in the Senate. CVS Health announced plans to sue the state over the measure, echoing its legal response to similar legislation in Arkansas.
CVS operates the only integrated model in Tennessee that combines a pharmacy chain, a PBM called CVS Caremark, and an insurance company through its ownership of Aetna. The legislation would force the company to divest one of these operations to continue doing business in the state.
Republican state Senator Bobby Harshbarger, a pharmacist who sponsored the bill, said the measure addresses anticompetitive practices. The Tennessee Department of Commerce and Insurance audit that prompted the legislation found PBMs reimbursed partner pharmacies for drugs at significantly higher rates than non-affiliated pharmacies.
By the Numbers
Three companies control nearly 80 percent of the PBM market nationally, according to health policy research organization KFF. Those firms are owned by CVS, Cigna, and UnitedHealth, all of which also operate insurance companies.
CVS has warned it may close 134 pharmacy locations in Tennessee if the law takes effect. The company previously threatened to shutter nearly two dozen Arkansas pharmacies over that state’s version of the legislation.
In Arkansas, a federal judge blocked a similar 2025 law from implementation, citing federal statutes limiting state regulation of interstate commerce. That case remains pending.
Zoom Out
The Tennessee measure reflects growing state-level scrutiny of PBM business practices. Independent pharmacies nationwide have argued that vertically integrated healthcare companies use their position as middlemen to favor their own retail operations while squeezing competitors on reimbursement rates.
CVS spokesperson Amy Thibault called the Tennessee bill “misguided legislation” that “will not lower drug costs” and said it benefits independent pharmacies at the expense of patients who would lose access to their current pharmacists.
The Tennessee Pharmacy Association, representing independent pharmacies, has been the primary advocate for the legislation.
What’s Next
CVS plans to file suit against Tennessee, following the legal strategy it employed in Arkansas. Whether a federal court will block enforcement as it did with the Arkansas law remains to be seen. The Tennessee measure’s fate will likely hinge on whether courts view it as legitimate state regulation of in-state business practices or as impermissible interference with interstate commerce.