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The Tennessee General Assembly is looking to lower prescription drug prices by addressing what critics call the unfair business practices of vertically integrated Pharmacy Benefit Managers, or PBMs.

PBMs are third party managers that manage prescription drug programs for large groups such as health insurers, government entities and self-insured employers. They negotiate prices with drug manufacturers to try and save those groups money, in theory.

Critics, such as the Tennessee Pharmacists Association, have accused major PBMs, and specifically CVS’s PBM Caremark, of negotiating prices favorably for their integrated/related pipelines, while leaving independent pharmacies with higher and less competitive rates for their customers.

“PBMs are the people who control all the pricing of everything and they’re the ones who set the formularies,” local Crescent Center Drugs pharmacist and owner Ryan Kragel explained. “They’re the ones who say how much we’re going to pay. If you need approval, they’re the ones you’ve got to go through to get it.”

Kragel said consumer protection should be a function of a healthy PBM process, but when the PBMs are owned/operated by the pharmacies they set prices for, they are incentivized to prioritize profits over deals for customers.

“(PBMs) do need to set some prices so providers don’t get astronomical on pricing, if that makes sense,” he said. “However, they’ve got way too much control now. I mean, they’ve got control of everything.”

As the Tennessee Pharmacists Association states:

“PBMs increasingly own the pharmacies they reimburse, allowing them to set prices and pay themselves – an inherent conflict of interest.”

The TN Department of Commerce and Insurance reported through audits done in 2024 and 2025 that Express Scripts and Caremark, two very large PBMs with vertical business/pharmaceutical relationships, charged non-affiliates such as independent pharmacies much higher rates than their own affiliates.

Differences can be as low as 20% for common medications, but the audits reveal differences of several thousand percentile points for some medications, including cancer treatments.

Kragel pointed out that rising drug costs are a large part of state employee insurance premiums, costs that are then covered by taxpayers.

“(The audit shows) they’re paying themselves, basically paying CVS Pharmacy up to 160 times more than what they’re paying us (non-affiliates),” he said.

The TN General Assembly is working on legislation (SB 2040/HB 1959) designed to curtail uncompetitive practices, and is currently scheduled for a Senate subcommittee.

The TPA says the legislation:

• Prohibits the Board of Pharmacy from issuing a pharmacy license when a PBM has an ownership or beneficial interest in a pharmacy.

• Allows for limited distribution or orphan drugs to still follow special channels when approved as such by the FDA.

• Eliminates the “fox guarding the henhouse” model where PBMs set prices and pay themselves

• Align Tennessee with Arkansas Act 624 (2025) and national PBM reform efforts

CVS Pharmacy and its PBM Caremark have been the most visible critics and opponents of the legislation.

The national pharmacy has threatened to close all of its 134 pharmacies in Tennessee if the bill passes. Morristown has two CVS stores.

They say the legislative initiative would necessitate a total market exit, but Kragel said they need to figure out who they are.

“I think they need to choose whether or not they want to be a pharmacy or a PBM,” he said.

Similar legislation in Arkansas is tied up in court and any ruling could affect the Tennessee legislation.

Even outside of non-competitive practices that affect local vs national pharmacies/groups, there are other issues.

Here’s what Mark Cuban said in a letter to the U.S. Senate:

“Because the whole system is built around list prices, everyone — PBMs, wholesalers, and insurers — has an incentive to keep WAC going up. And it almost always does. Patients are the ones who pay the price. And here’s the saddest part: self-insured employers, states, and anyone contracting with the big PBMs are signing off on this system. They approve plans that force patients to pay list price without realizing how badly their members are getting ripped off. We blame PBMs — but the real problem is the people and governments who keep signing these contracts without a clue.”