CVS and Cigna-owned Express Scripts filed lawsuits Thursday to block an Arkansas law that tries to curb the power of pharmacy benefit managers (PBMs) in the state.
PBMs, also known as drug middlemen, are third-party administrators of prescription drug plans for health insurers. They negotiate with pharmaceutical companies over how much a health plan will pay for a drug and set the out-of-pocket costs for patients.
Arkansas Gov. Sarah Huckabee Sanders signed a law last month that banned PBMs from owning and operating pharmacies in the state, saying at the time that they “have taken advantage of lax regulations to abuse customers.”
The legislation came following two reports from the Federal Trade Commission and the House Committee on Oversight and Accountability last year that accused PBMs of reaping massive profits by pushing patients to pay for more expensive drugs, including life-saving cancer medicine.
Supporters of the Arkansas law, which goes into effect in January, claimed it would also greatly help independent pharmacies, which can’t compete with PBM-owned chains like CVS.
In its lawsuit Thursday, CVS said the legislation will force it to close 23 pharmacies in the state, eliminating hundreds of jobs, and claimed the ban would “drive-up costs for Arkansans.”
CVS, which declined to further comment, said in their press release that the law violates the Dormant Commerce Clause, a part of the Constitution that restricts states from discriminating against or unfairly burdening out-of-state businesses. It also said the law violates the company’s Equal Protection rights.
Susan Peppers, vice president of pharmacy practice for Evernorth Health Services, which runs Express Scripts and is owned by Cigna, said in a press release that “if this law takes effect in January, hundreds of thousands of Arkansans will be left scrambling to navigate the forced closure of pharmacies and finding new ways to get their medicines and critical clinical support.”
While advocates say the law will help rural Arkansans whose local pharmacies can’t stay afloat, Express Scripts is claiming the opposite. The law “could be especially challenging for the more than 40% of Arkansans that live in a rural area and may not have easy access to a retail pharmacy,” it said.
In a statement to Quartz, Arkansas Attorney General Tim Griffin defended the legislation. “Pharmacy benefit managers wield outsized power to reap massive profits at the expense of consumers,” he said. “Through Act 624, Arkansas is standing up to PBMs on behalf of consumers, and I will vigorously defend our law.”