Governor signs ban on drug middlemen owning pharmacies

LITTLE ROCK — Arkansas became the first state in the nation to prevent healthcare conglomerates from operating drugstores here when Gov. Sarah Huckabee Sanders signed House Bill 1150 on Wednesday.

State law already regulates what pharmacy benefit managers (PBMs) pay to reimburse independent pharmacies, but pharmacists have complained that the companies violate the law. The state has also fined four PBMs a total of $1.47 million for paying Arkansas pharmacies below the legally required amount for prescription drugs.

PBMs negotiate prescription benefits among drug manufacturers, distributors, pharmacies and health insurance providers, and the biggest ones also own pharmacies and insurers. The Federal Trade Commission released an interim report in July 2024 saying these conglomerates are eliminating competition and increasing drug prices at the expense of patients.

HB 1150 headed to Sanders' desk April 9 after clearing the Senate with a bipartisan 26 votes, six days after it passed the House with 89 votes. The bill generated hours of discussion and public comment in the House and Senate committees on Insurance and Commerce this month.

"These massive corporations are attacking our state because we will be the first in the country to hold them accountable for their anticompetitive actions," Sanders said in a statement Wednesday.

CVS Health issued a statement last week urging Sanders to veto HB 1150, calling it "misguided policy." The organization, which includes the CVS Caremark PBM, issued another statement Wednesday afternoon.

"CVS Health welcomes a good faith discussion with policy makers in Arkansas and across the country on ways to make medicine more affordable and accessible," the statement said. "Unfortunately, HB1150 is bad policy that accomplishes just the opposite: it will take away access to pharmacy care in local communities, hike prescription drug spending across the state by millions of dollars each year, and cost hundreds of Arkansans their jobs."

Arkansas has 23 CVS pharmacies that CVS and other opponents of HB 1150 said will be forced to close under the new law. Arkansas Pharmacists Association CEO John Vinson said this is not true and pharmacies can still operate if they detach from PBMs.

Sanders, Vinson and other supporters of HB 1150 have said a lack of sufficient regulation of PBMs has allowed them to monopolize the pharmaceutical industry by setting their competitors' prices.

OptumRX, Express Scripts and CVS Caremark — the three largest PBMs — are each owned by much larger corporations that each also own a top-10 health insurer. Together they control about 80% of the U.S. prescription market, according to last year's Federal Trade Commission report.

The legal landscape

Act 1 and Act 3 of 2018 prohibit PBMs from reimbursing their affiliated pharmacies in Arkansas at a higher rate than their competitors, locally owned independent pharmacies. PBMs routinely break these laws, said Vinson and HB 1150's Republican sponsors, Sen. Kim Hammer of Benton and Rep. Jeremiah Moore of Clarendon.

PBMs have allegedly also violated Act 900 of 2015, which required PBMs to pay pharmacies at least as much as the national average of what drugstores pay wholesalers for drugs. Pharmacies sent the Arkansas Insurance Department (AID) thousands of complaints in 2024, claiming PBMs either illegally paid them below this national average or paid them at or just above this amount, independent pharmacists and AID's general counsel told lawmakers last year.

This led the Arkansas Legislative Council to require PBMs to include dispensing fees in their reimbursements for prescription drugs. The panel approved the rule a day after its Administrative Rules subcommittee rejected it.

Hammer told the Senate Insurance committee April 8 that the Legislature should not be "rewarding" violators of state law "by letting them stay in business."

"Congress is pursuing this issue. Why? Because states like Arkansas are not sitting on the sidelines and being quiet about it," Hammer said. "[If you say], 'Let's sit back and wait for Congress,' like sitting back and waiting for the Lord to come, it ain't going to happen soon enough."

After more than a century serving Hammer's constituents in Benton, Smith-Caldwell Drug Store closed in August 2023 due to financial insolvency and transferred its clients to Walgreens, a national chain that isn't part of a PBM.

Brad Lawson, a Little Rock-based healthcare supervisor for Walgreens, told lawmakers in December that unfair PBM reimbursements have forced the company to close several locations and plan further closures nationwide.

Walgreens declined to comment Thursday on HB 1150.

Opposition

In an April 4 interview with the Advocate, CVS leaders said the Caremark PBM not only complies with Arkansas law but also reimburses independent pharmacies at a higher rate than its own chain pharmacies. They also said employers whose health insurance plans include CVS will face higher costs.

"Patients are choosing us, they have a choice, and I think we're not allowing patients to have a choice in this bill," Chief Pharmacy Officer Lucille Accetta said.

When asked about HB 1150's potential financial impact on CVS, Accetta and Vice President of External Relations David Whitrap said the losses of pharmacists' jobs and patients' access to medication are higher priorities than money.

CVS closed 244 stores between 2018 and 2020 and 900 more stores between 2021 and 2024.

CVS District Leader of Pharmacy Operations Ashley Ellis spoke against the bill at both Insurance and Commerce committee meetings, saying she and her colleagues would lose their jobs if HB 1150 becomes law.

Ellis lives in Greenbrier, represented by Sen. Missy Irvin, R-Mountain View. Irvin was in the minority of Senate committee members to vote against HB 1150, and she said she would not vote for a constituent to lose her job.

Hammer said the potential loss of CVS employees' jobs is "a lie."

"If they want to argue these local [corporate] pharmacies shouldn't be going out of business because they get paid adequately, fine," he said. "Put your money where your mouth is. Prove it. Start paying yourselves like you're paying these others."

Several lawmakers said this month that they supported HB 1150 partly because they received emails urging them to vote against it that appeared to be from constituents but turned out to be from lobbyists opposing the legislation. Rep. Richard McGrew, R-Hot Springs, told the House Insurance Committee that CVS clients in his district had not consented to their names being used for this purpose.

Sen. Mark Johnson, R-Ferndale, told the equivalent Senate committee that he received similar misleading emails.

"This is not grassroots opposition to this bill," Johnson said. "This is astroturf."

Besides CVS Health, opponents of HB 1150 included the Arkansas Chamber of Commerce, the Navitus Health Solutions PBM, and the Omnicare and Accredo pharmacies.

Omnicare is owned by CVS Health, and Accredo is a subsidiary of Express Scripts.

Mail order concerns

Several PBMs are affiliated with interstate mail-order pharmacy operations, and House Bill 1150 includes mail-order pharmacy permits among those that PBMs would be prohibited from holding.

Opponents of HB 1150 said it would reduce patients' access to specialty drugs, some of which might only be accessible via mail-order services — including for military members and veterans who receive pharmaceuticals via the Tricare insurance program's partnership with Express Scripts.

HB 1150 allows the State Board of Pharmacy to issue limited permits to PBMs if they provide "drugs that are otherwise unavailable in the market to a patient or a pharmacy that would otherwise be prohibited" under the law. Hammer told the Senate this will allow Tricare beneficiaries to continue receiving medications while PBMs transition out of Arkansas.

Despite being a veteran on Tricare, Arkansas Attorney General Tim Griffin's pharmacy services have been moved from one provider to another by PBM interference, he said in January at a news conference announcing HB 1150. He also said he would defend the legislation in court if it were challenged.

On Monday, Griffin was the lead signatory of a bipartisan letter to Congress from attorneys general in 39 states and territories, advocating for the policy in HB 1150 to be enacted federally.

Griffin sued Express Scripts and OptumRX last year, alleging that they used data from drug manufacturers and distributors to maximize their financial gain instead of using it to mitigate the opioid addiction epidemic.

'Winners and losers'

Irvin was one of nine senators, mostly Republicans, to vote against HB 1150 last week. She disputed the claim that PBMs have a monopoly in the pharmaceutical industry, saying this is only an opinion without a court's declaration.

Senate Minority Whip Fred Love, D-Mabelvale, was the chamber's only Democrat to vote against the bill. Love's district does not have any local independent pharmacies, and his constituents will lose access to medications if corporate pharmacies like CVS close, he said.

"They've been talking to me saying, 'Guess what? This will hurt us,'" Love said. "So we're going to manufacture a pharmacy desert in southwest Little Rock? That's not good for my people."

Irvin also took issue with a statement April 8 from Greg Reybold, vice president of Healthcare Policy at the American Pharmacy Cooperative, that HB 1150 will "take the ball away" from PBMs in Arkansas' pharmacy industry.

"We're using the government to say, 'We're getting rid of your competition,'" Irvin said. "…It says that we're denying a permit to be approved for you, but not for you. You're picking winners and losers."

GOP Sen. Justin Boyd, a Fort Smith pharmacist and the vice chairman of the Senate Insurance committee, argued that PBMs' ability to set their competitors' prices is actually "picking winners and losers."

Another 2025 Arkansas law that supporters said will increase patients' access to medication is Act 52, which removed the state's ban on nonprofit hospitals holding pharmacy permits. The bill, co-sponsored by Irvin, initially failed in the Senate Public Health, Welfare and Labor Committee but later passed after being amended.

The Arkansas Pharmacists Association opposed Act 52 before it was amended. Vinson told the Senate Insurance committee that Act 52 will create new pharmacy jobs that could make up for any job loss brought about by HB 1150. Both laws will go into effect in August.