Arkansas Breaks Up Pharmacy Middlemen
PLUS: Colorado bans junk fees and Trump aims to kill the IRS free file program.
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Last week, Arkansas Gov. Sarah Huckabee Sanders (the former White House press secretary) signed HB 1150, a bipartisan, groundbreaking law that makes Arkansas home to the most ambitious effort yet to rein in the harms of pharmacy benefit managers, more popularly known as PBMs.
The Arkansas law, which I’ll explain in more detail below, is a model other states and the federal government should also adopt in their effort to combat the scourge of high drug prices and the conflicts of interest that run rampant in the health care industry.
PBMs, for those unfamiliar, stand at the nexus of health insurers, drug manufacturers, and pharmacies. They determine which drugs are covered by insurance, how much pharmacies are reimbursed for selling those drugs, which pharmacies are in a given insurer’s network, how much to charge public programs such as Medicaid for certain drugs, and therefore the costs passed on to patients, taxpayers, and pharmacists.
The three largest PBMs in the U.S. — Caremark, Express Scripts, and OptumRx — handle 80 percent of the drug claims in the country. They are all also part of corporate conglomerates that own health insurance companies and affiliated pharmacies.
For example, Caremark is owned by CVS, which is one of the largest pharmacy chains in the country and also owns the insurer Aetna.
This consolidation gives PBMs massive power to increase prices for patients and to preference their own in-house pharmacies at the expense of independent pharmacies. While historically PBMs were meant to benefit patients through negotiating for lower drug costs, today, the opposite happens, with their never-ending conflicts of interest driving up profits for the PBMS and their corporate parents, and driving up costs for everyone else.
HB 1150, then has a very simple premise: PBMs can’t own pharmacies. Once the bill is enacted, PBMs and their parent corporations will no longer be allowed to own or operate Arkansas pharmacies, making it the first state to adopt such a rule explicitly breaking up one facet of America’s consolidated medical industry.
“For far too long, drug middlemen called PBMs have taken advantage of lax regulations to abuse customers, inflate drug prices, and cut off access to critical medications. Not anymore,” Sanders said. “These massive corporations are attacking our state because we will be the first in the country to hold them accountable for their anti-competitive actions, but Arkansas has never been afraid to be a conservative leader for America.”
“Today is a new day in Arkansas for our patients as the fox will no longer guard the henhouse,” said John Vinson, chief executive officer of the Arkansas Pharmacists’ Association. “This bipartisan legislation passed overwhelmingly to protect public health and safety for Arkansans. HB 1150 will stop the abusive self-dealing at PBM affiliated pharmacies that raises prescription drug prices and limits patient access.”
Indeed, one of the most pressing reasons laws such as this are needed is that PBMs systematically put independent pharmacies out of business by under-reimbursing them for the drugs they dispense, larding them down with abusive fees, and steering patients toward their own PBM-affiliated pharmacies (which are often mail-order, not even brick-and-mortar facilities). And independent pharmacies have no choice but to accept the onerous terms PBMs offer if they want to access the medications their patients need.
It’s simply unsustainable. At least 25 Arkansas pharmacies closed between January 2024 and February 2025, along with hundreds of pharmacies in states across the country.
In 2015, Arkansas officials approved a law mandating that PBMs compensate independent pharmacies and PBM-affiliated pharmacies on equal terms. But independent pharmacists in the state allege that law is being flagrantly and consistently violated, furthering the need for a full breakup.
Now, of course, the PBMs and their major pharmacy chains did not take this lying down. In fact, CVS allegedly organized a fake campaign of “patients” to lobby against the bill — which backfired spectacularly, as the Arkansas Advocate reported:
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.
The law goes into effect in January of next year, so after that time (with some limited exceptions) PBMs and their parent corporations will have to sell or otherwise disassociate themselves with the Arkansas pharmacies they own, opening the door for a score of independent pharmacists to jump in.
Other states, including New York, Vermont, and Texas, are considering similar measures to break pharmacies away from PBMs. A bipartisan coalition of 39 state attorneys general also called on Congress to pass a law barring PBMs from owning pharmacies — and conveniently, such a bill already exists. It’s called the Patients Before Monopolies Act, and has bipartisan backing in both the Senate and House.
So there is real momentum for this change at all the relevant levels of government.
There are plenty of other steps state and federal lawmakers can and should take to break up big medicine and eliminate the conflicts of interest that enrich corporations and harm patients and health care workers — but kudos to Arkansas for being the first out of the gate, and setting a standard for other states to follow.
UPDATE: Colorado Gov. Jared Polis this week signed into law a comprehensive ban on mandatory, undisclosed junk fees, making Colorado the fourth state with such a law on the books (joining Minnesota, California, and Massachusetts). You can learn more about active state legislation to ban junk fees at the End Junk Fees campaign hub here.
UPDATE II: The Trump administration is reportedly planning to end the IRS Direct File program, which allows taxpayers to directly file their taxes through a government website, despite its successful use in 12 states last year and a planned expansion to all 50 states this year. Eliminating Direct File, as regular readers know, would be a massive giveaway to big tax prep corporations such as Intuit and H&R Block, whose leaders would really like tax season to continue to be an expensive, complicated nightmare.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
New York Attorney General Tisch James secured a $2.5 million settlement with New York City tour bus companies for colluding to limit competition.
New Jersey Gov. Phil Murphy called for an investigation into whether the state’s electric grid operator is responsible for “exorbitant” rate increases.
Washington State is the first state to enact the Uniform Antitrust Pre-Merger Notification Act, an effort to have states adopt laws similar to the federal government’s pre-merger rules.
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— Pat Garofalo