With CVS’s Vertical Empire Under Threat in Tennessee, the Company Threatens to Leave

A bipartisan Tennessee bill targets the company’s control over insurers, pharmacies and drug pricing — prompting a full-scale pressure campaign built on closure threats and fear of lost access.

Most people think of CVS as a drug store, but it’s a lot more than that. Not only does it operate more than 9,000 retail stores – 134 in my home state of Tennessee – it also owns Aetna health plans. But as big as those divisions of this megaconglomerate are, it actually gets more revenue from a subsidiary that is far less well known: Caremark.

CVS Caremark is a pharmacy benefit manager, one of the three biggest in the country, along with Cigna’s Express Scripts and UnitedHealth’s Optum Rx. Together these giant middlemen control 80% of the middle part of the pharmacy supply chain. For most Americans, those PBMs determine which medications we’ll have access to and how much we’ll have to pay out of our own pockets to take those medications home.

For CVS, being a giant conglomerate that includes health insurance, retail pharmacies and a huge PBM is very profitable, and it has enabled the company to leap up the Fortune 500 list of U.S. corporations in recent years. It has also enabled the company to push independent pharmacies out of business. Tennessee alone has seen 815 pharmacy closures over the past decade, including 163 in the last three years and 62 in 2024 alone. Notably, this wave of closures has occurred under the current framework that allows vertically integrated companies like CVS to own both pharmacies and an enormous PBM.

In both Washington and many state capitals, including Nashville, lawmakers have introduced bills that would break those companies up. One such bill is Tennessee Senate Bill 2040, sponsored by Sen. Bobby Harshbarger, a Republican from my hometown of Kingsport, and Rep. Rick Scarbrough of Oak Ridge. Their bill would prohibit any entity from simultaneously owning both a pharmacy and a pharmacy benefit manager. The core idea is to break up “vertical integration” — where it owns a health insurer, a PBM and retail pharmacy chains all under one roof. PBM-affiliated pharmacies would be required to divest or restructure by January 1, 2028.

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As you can imagine, CVS has mounted an aggressive opposition campaign in Tennessee. A CVS district leader warned the bill “would essentially result in us closing all of our CVS locations” — all 134 of them in Tennessee. CVS has been running ads in all six of the state’s major media markets claiming the bill would close those 134 pharmacies and put 2,000 people out of work, and has sent text messages to customers urging them to oppose it.

The bill’s sponsors aren’t buying it. Harshbarger has called CVS’s claims “fearmongering” and “misinformation,” arguing that the bill doesn’t force closures — it forces divestment, and “divestment does not equal closure.” Rep. Scarbrough framed it simply: “We’re not trying to say you can’t be a PBM or you can’t be a pharmacy. You just can’t have both.”

The legislation has a strong factual foundation behind it. A 2024 audit by the Tennessee Department of Commerce and Insurance found that CVS Caremark used “spread pricing” — charging certain health plans more for a medication than what pharmacies are actually paid to dispense it. Independent pharmacists have been vocal supporters, with some describing being forced to sell drugs below cost because of the reimbursement rates PBMs set. CVS, Cigna, and UnitedHealth together managed nearly 79% of prescription drug claims in 2023, and in 2024 the FTC sued all three for allegedly inflating insulin prices.

Tennessee isn’t alone in trying this approach — and the legal obstacles are already visible. Arkansas passed a similar PBM pharmacy co-ownership ban in 2025, CVS and other PBMs sued, and a federal judge temporarily blocked the Arkansas law in July 2025, finding it likely violated the Commerce Clause by discriminating against out-of-state companies. That lawsuit is still ongoing. Tennessee lawmakers expect the same legal battle if their bill passes.

This is a classic industry pressure campaign — threaten mass closures, run ads, mobilize patients — to kill a reform that would dismantle a profitable conflict of interest. The “fearmongering” framing from the bill’s sponsors is apt: CVS made the same closure threat in Arkansas, the law passed, CVS sued and got it blocked, and CVS stores in Arkansas are still operating while the litigation plays out. The Tennessee bill has bipartisan legislative leadership support and is part of a broader package of health insurance industry reforms moving through the statehouse.

Harshbarger’s and Scarbrough’s bill is moving steadily forward despite the pressure campaign. It passed the Senate Health and Welfare Committee on February 25 by an 8-1 vote and was placed on the Senate Finance, Ways and Means Committee calendar for tomorrow. The House companion bill was assigned to the Finance, Way and Means Subcommittee last week.

Independent pharmacists who’ve testified in support of the bill say PBM reimbursement practices have been a primary cause of the pharmacy closures in Tennessee. The state’s 2024 confirmed a key driver: CVS Caremark was found to be giving more favorable terms to pharmacies affiliated with it than to independent pharmacies.

Meanwhile, a union health plan is now suing CVS Caremark over allegation that it received bribes and kickbacks from drugh manufacturers in exchange for good slots on health plan formularies (drug lists). As reported last week by BenefitsPro, the plaintiff, Roofers’ Union Welfare Trust Funds, claim Caremark and other big PBMs have been ”using their massive leverage to extract kickbacks for themselves instead of negotiating for rebates to lower their customers’ drug costs.”