Proposed ban on drug middlemen owning retail pharmacies passes

A House panel Wednesday approved a bill aimed at preventing pharmacy benefit managers (PBMs) from holding a permit to operate a drug store in Arkansas.

Opponents outnumbered supporters in the public comment period of the House Insurance and Commerce Committee meeting, but a majority of the panel's 21 members voted to send House Bill 1150 to the full House.

PBMs negotiate prescription benefits among drug manufacturers, distributors, pharmacies and health insurance providers, and they rank prescription drugs with the highest-tiered products costing consumers the lowest out-of-pocket costs. 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.

"Pharmacy benefit managers are gaming the system to line their own pockets with taxpayers' and patients' money," said HB 1150 sponsor Rep. Jeremiah Moore, R-Clarendon.

He decried the "patently false" statements circulating about the potential impact of HB 1150 from those who oppose it, such as the idea that 2.7 million Arkansans would lose access to health care. HB 1150 has faced a marketing campaign against it in the two and a half months since it was filed, and Moore said the opposition has primarily come from PBMs.

Some of Wednesday's opponents of HB 1150 represented corporate health care organizations, including Russell Harper, a government relations executive with the Navitus Health Solutions PBM.

Harper said the bill "will result in lots of unintended consequences that will bring patient disruption, patient confusion and patient access issues to important drug treatments, not just in the commercial market, but in Medicare, Medicaid and Tricare." He claimed a wide swath of Arkansas pharmacies, including 23 within CVS and 26 within Kroger, would be at risk of closing if HB 1150 passes.

John Vinson, CEO of the Arkansas Pharmacists Association, denied the allegation that HB 1150 would force pharmacies to close by taking PBMs out of the competitive pharmacy market.

"It gives pharmacies a choice of whether they want to be a PBM or a pharmacy," Vinson said. "[They would] pick one or the other." Debate Several PBMs are affiliated with interstate mail-order pharmacy operations, and House Bill 1150 includes mailorder pharmacy permits among those that PBMs would be prohibited from holding.

Vinson said Wednesday that some PBMs force consumers to receive their medications via mail, which costs more than receiving them over the counter.

Mike Castleberry claimed HB 1150 would reduce mail-order pharmacies' presence in Arkansas to the point that patients would not be able to access necessary medication.

Castleberry is chief revenue officer at Consociate Health, which represents "self-funded employers" in Arkansas, and he said many pharmacies can only afford to provide specialty drugs if they use mail-order operations.

"The first phone call that y'all are going to get from your constituents [if HB 1150 passes] is someone who's on a specialty drug," he said.

Randy Zook, president of the Arkansas Chamber of Commerce, said lawmakers should not make laws that attack vertical integration in business, but Vinson and Moore both said PBMs' vertical integration is unique because they set 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.

CVS Caremark is a subsidiary of CVS Health, and District Leader of Pharmacy Operations Ashley Ellis expressed opposition to HB 1150 on Wednesday.

Ellis said pharmacists that work for PBM-owned and corporate pharmacies are still members of their local communities, and they have access to the medications and equipment that serve people with complex health needs while independent pharmacies do not necessarily have these things.

Rep. Richard McGrew, R-Hot Springs, said he received several emails from constituents who ostensibly opposed HB 1150 but said they "knew nothing about this" when he contacted them. He alleged that the emails came from lobbyists against HB 1150 who received his constituents' personal information from CVS, where they told him they receive prescription drugs.

McGrew questioned Ellis about this "breach of integrity," and Ellis said she was not aware of this.

Past legislative action Navitus Chief Pharmacy Officer Sharon Faust said Arkansas has been "a frontrunner" on regulating prescription drug access and prices, but HB 1150 would be "a step too far, a step further where you're actually limiting patient choice [and] reducing competition." Vinson and Moore said PBMs routinely reimburse their affiliate pharmacies at a higher rate than their competitors, locally-owned independent pharmacies.

This practice is outlawed in Arkansas by Act 1 and Act 3 of 2018, which became law after a special legislative session.

Arkansas lawmakers have been attempting to regulate PBMs for the past decade, starting with 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.

Despite this, pharmacies sent the Arkansas Insurance Department (AID) roughly 3,000 complaints in 2024, claiming PBMs either illegally paid them below this national average or paid them at or just above this amount, AID's general counsel told lawmakers last year. Independent pharmacists made similar claims in September, saying they were struggling to stay open in rural areas with limited healthcare resources.

The Arkansas Legislative Council approved a rule in December to require PBMs to include dispensing fees in their reimbursements for prescription drugs.

Removing PBM affiliated pharmacies from the market would require the employee benefits division of the Arkansas government "to reevaluate and restructure their pharmacy networks and implement new compliance measures," according to an actuarial statement measuring the fiscal impact of HB 1150.

"There could be minor cost or saving[s] to the plan from excluding certain retail pharmacies from their network, such as CVS Caremark," according to the statement.

"Such a change would require a significant number of EBD members to transfer their prescriptions to an in-network pharmacy and may reduce pharmacy network access."