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Senate committee hears split analysis on PBM ownership ban in SB2040; TennCare warns of tens of millions in costs
Summary
Senate Bill 2040 would bar common ownership across pharmacies, PBMs and insurers above a 5% threshold beginning 2028. TennCare estimated multi‑million dollar impacts; Fiscal Review disputed core assumptions about closures and fee shifts, leaving the net fiscal effect uncertain and the bill held for further work.
Senate Bill 2040, introduced by sponsor Senator Harshbarger, would prohibit entities from owning both a pharmacy and a pharmacy benefit manager (PBM) or a health insurer when ownership exceeds 5%, with key exclusions and a transition period through 2028. The sponsor said the bill "establishes a licensure restriction on common ownership across pharmacies, pharmacy benefit managers, and health insurance issuers," and set an implementation window beginning Jan. 1, 2028.
TennCare officials told the committee they expect initial cost increases driven by changes in retail and specialty prescription access. TennCare Director Steven Smith testified that impacted specialty pharmacies can acquire drugs “at a cost that is 16% less” and that the computations tied to that difference “equate to about $38,000,000,” with an estimated portion borne by the state. TennCare also cited additional impacts from physician‑administered specialty drugs and shifts in dispensing‑fee mixes, estimating state exposure in the low tens of millions. Fiscal Review Executive Director Boyan Savic challenged key assumptions—particularly the idea that PBM‑owned pharmacies would simply close—stating the fiscal note assumes restructuring and divestiture and that the net impact “cannot be reasonably determined.”
Committee members pressed witnesses on whether reimbursement is set as a statewide average acquisition cost (with an appeals process) and on the distribution of high‑volume versus low‑volume pharmacies. Members also sought details on the number of pharmacies in the network and chain representation. The sponsor said he will move two amendments and agreed to hold the measure for further consideration next week so members can review fiscal analyses and amendment language.
