CVS Sues Arkansas Over Law Banning PBM Ownership Of Pharmacies

CVS Health Thursday sued the state of Arkansas, trying to thwart a law the healthcare company said would lead to the closure of all 23 CVS drugstores in the state.

At issue is legislation known as Act 624 that was signed into law last month by Republican Gov. Sarah Huckabee Sanders that prevents pharmacy benefit managers (PBMs) from owning and operating pharmacies. The law would be a first for a state in the U.S. and take aim at the rapidly growing business model of vertical integration that involves ownership of health insurers and medical care providers by the same company.

CVS, the nation’s largest retail pharmacy operator, also owns Caremark, one of the nation’s largest managers of pharmacy benefits for employers, private insurers and government health insurance programs. CVS also owns Aetna, the nation’s third largest health insurance company with more than 27 million health plan subscribers.

“We’ve filed a lawsuit to block Act 624, a harmful law that will shut down 23 CVS Pharmacy locations, eliminate hundreds of jobs, and drive-up costs for Arkansans,” CVS said in a statement Thursday evening of its lawsuit filed in U.S. District Court for the Eastern District of Arkansas. “This unconstitutional law puts local politics ahead of patients, restricting their access to life-saving medications and undermining fair competition.”

Gov. Huckabee’s office couldn’t be reached Thursday evening for comment. Huckabee, however, earlier this year called the law necessary to curb what she has called abusive business practices by PBMs. “These massive corporations are attacking our state because we will be the first in the country to hold them accountable for their anticompetitive actions,” she said.

But CVS Thursday said the legislation Huckabee signed into law will hurt patients and cut access to medical care. Rural states like Arkansas are already experiencing shortages of pharmacists, nurses and pharmacies and have experienced many hospital closures.

“Arkansas lawmakers crafted the law to exclude CVS Health’s pharmacy operations while protecting in-state pharmacy businesses, which often charge higher prices,” CVS said. “There is no way around the fact that Act 624 will limit patients’ options and increase the cost of their medicines.”

CVS said the law, violates the U.S. Constitution’s Dormant Commerce Clause, which “prevents states from discriminating against or unfairly burdening out-of-state business.”

“Act 624 also is unlawful because it violates Equal Protection rights and is preempted by federal law,” CVS said. “We have a right and responsibility to challenge this harmful policy to protect patient care and fair competition.”