PBMs fight back against state restrictions

• But major changes could be slow to materialize because of the complex system and the pivotal role the middlemen play negotiating drug purchases for commercial health plans and employers.

State of play: CVS Health and Cigna, which owns Express Scripts, filed lawsuits last week seeking to stop Arkansas from enforcing a new law that largely prohibits them from owning retail pharmacies in the state.

• Both lawsuits argue that the Arkansas policy violates the Constitution's Dormant Commerce Clause. CVS Health argues that the law improperly leverages the state's licensing power.
• CVS Health says it will have to close 23 pharmacies in Arkansas under the law, which is effective Jan. 1, 2026. Cigna, which owns mail-order pharmacies operating in the state, says the law will harm the 50,000 Arkansas residents it serves.
• But the ramifications are nationwide, with many other states weighing new restrictions, including prohibitions on steering business to affiliated pharmacies.
• Texas and New York have introduced bills similar to Arkansas'. Other states are also getting aggressive: Alabama in March passed a law requiring PBMs to reimburse independent pharmacies at rates at least as high as Medicaid.

The Pharmaceutical Care Management Association, a PBM trade group, says such laws would hurt seniors and veterans using prescription drug home delivery and patients with complex medical conditions who rely on specialty pharmacies for their treatments.

The other side: The PBMs are only fighting Arkansas in the courts because they're worried other states will follow the lead of Gov. Sarah Huckabee Sanders (R) in trying to secure patient access and affordable prescriptions, Sanders' spokesman Sam Dubke wrote in an email.

Between the lines: PBMs play a pivotal role in the drug supply chain and have benefited from consolidation and vertical integration, allowing some companies to steer business to affiliated pharmacies or push contracts on independent pharmacies.

• The Federal Trade Commission during the Biden administration blamed CVS Caremark, Express Scripts and OptumRx for hiking the cost of drugs, including overcharging patients for cancer treatments. The Trump administration, which has said it wants to "cut out" drug middlemen," halted an FTC lawsuit against the companies in April.

Flashback: This isn't the first time PBMs have clashed with Arkansas in the courts. And the U.S. Supreme Court in 2020 unanimously ruled in the state's favor, deciding in favor of a law that forced PBMs to reimburse pharmacies at least what they pay in drug acquisition costs.

• The PCMA had brought the lawsuit, arguing that the policy preempted federal laws governing private health plans.
• Every state has passed some kind of legislation to regulate PBMs, per the National Academy for State Health Policy.

What to watch: The massive Republican budget bill moving through Congress also includes narrow PBM changes, including moving to flat-fee payment for services in Medicare Part D and prohibiting PBMs from charging Medicaid managed care insurers more for a drug than the price they pay a pharmacy for dispensing it.

Reality check: PBMs are adept at shifting their business models to keep up with the changing health care landscape, and likely won't see that much impact to their operations if legislative proposals moving through Congress pass, financial services firm TD Cowen wrote in a report released Monday.

• "While admittedly there has never been a time when so many proposed actions have been levied against the PBM industry, and it's probably fair to say the industry has lost control of the narrative, our analysis of the various proposals suggests that we are unlikely to see any significant disruption" to the biggest players' operations, per the report.