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Tennessee lawmakers approve ban on PBM ownership of pharmacies despite disputed fiscal impact
Summary
The legislature passed a bill preventing pharmacy benefit managers from owning pharmacies, aiming to boost independent pharmacies and shift rebates to patients. Sponsors said the measure lowers drug costs; opponents raised state cost estimates of tens of millions a year that fiscal review did not corroborate.
State lawmakers on the Williamson County Policy Talks forum described a newly passed law that bars pharmacy benefit managers (PBMs) from owning retail pharmacies, a change supporters say will improve reimbursements for independent pharmacies and reduce drug costs.
Senator Joey Hensley, who described the measure as a response to ‘‘vertical integration’’ in the pharmacy industry, said the law prohibits entities from both operating a PBM and owning a pharmacy in Tennessee. Hensley said PBMs negotiate rebates from manufacturers, determine preferred-drug lists and control reimbursement rates; the bill aims to ensure rebates benefit pharmacies and patients rather than being captured by integrated parent companies.
Supporters argued the policy protects independent pharmacies that have been squeezed by lower reimbursements. ‘‘If you want to own a pharmacy, that’s fine, but you can’t own a PBM and a pharmacy,’’ Hensley said. He said the change gives companies time to modify business models and said he expects the law to help independent pharmacies statewide.
But the bill’s fiscal impact was contested. Senator Jack Johnson said he voted against the measure in committee and on the floor because the commissioner of finance and administration and the director of TennCare told the finance committee the law would raise costs for the state insurance plan and for TennCare — figures Johnson cited as about $29 million and $24 million per year respectively. He said those agency estimates combined would equal roughly $53 million annually, while Tennessee’s independent fiscal-review staff assigned the bill a zero fiscal note.
‘‘We don’t go from $53 million to zero,’’ Johnson said, arguing the state should have ‘‘paid for it’’ rather than leave future General Assemblies to absorb the cost.
Hensley and other supporters said the figure depends on whether pharmacies close or adapt; he described CVS and other chains’ opposition advertising and said the sector could change business models to comply. The bill passed the legislature and, according to forum participants, had been sent to the governor’s desk for signature.
Next steps: if the governor signs the bill, state agencies including TennCare and the Department of Finance and Administration will need to implement new procurement and reimbursement rules. Observers on the broadcast said they will watch whether PBMs or integrated pharmacy chains alter operations in response, and whether independent pharmacies see improved reimbursements.
Reported by Dave Crouch’s Policy Talks with quotes from Senator Joey Hensley and Senator Jack Johnson. The forum noted agency cost estimates and the fiscal-review zero fiscal note without resolving the discrepancy.
