Judge keeps CVS in Arkansas, at least for now

By STEVE BRAWNER

A federal judge on Monday issued a preliminary injunction against a new Arkansas law that would have closed the state’s 23 CVS Pharmacy locations.

A preliminary injunction is a judge’s order not to enforce a law until the case is heard. U.S. District Judge Brian Miller issued the injunction because he believes CVS and its fellow plaintiffs likely will prevail in their case against the state. 

First, the back story.

Act 624 by Rep. Jeremiah Moore, R-Clarendon, and Sen. Kim Hammer, R-Benton, would prohibit pharmacy benefit managers (PBMs) from operating retail pharmacies in Arkansas. 

PBMs are big companies that manage prescription drug benefits for insurers and reimburse pharmacies for dispensing medications. When a patient with health insurance buys medicine, the PBM pays most of the cost. 

The four largest control 70% of the market. CVS is the biggest. It reimburses both its own pharmacies and its national and local competitors.

Pharmacists have said for years that PBMs’ payments have been too low and too slow, to the point that some pharmacies have closed. The Insurance Department received about 3,000 complaints last year from pharmacists. PBMs argue instead that their practices have reduced consumer costs of prescription drugs.

As Miller noted, lawmakers have passed several measures regulating PBMs. One law requires PBMs to reimburse pharmacies at rates at or above the pharmacies’ drug acquisition costs. Another forbids PBMs from paying in-state pharmacies less than what they pay their own affiliates. Another prohibits PBMs from discriminating against pharmacies that are willing to abide by a health plan’s terms.

The new law prohibiting PBMs from operating retail pharmacies in the state, Act 624, had widespread support among lawmakers. It passed 89-4 in the House and 26-9 in the Senate. Gov. Sarah Huckabee Sanders supported the bill and signed it into law. Attorney General Tim Griffin supported it, too. The law was set to take effect Jan. 1, 2026. All CVS pharmacies and all other PBM-owned retail operations in Arkansas would have been required to close by then.

Naturally, CVS, other PBMs and the Pharmaceutical Care Management Association sued, which brings us to the case at hand.

Judge Miller wrote in his decision that a preliminary injunction is an “extraordinary remedy” granted only when the plaintiff can prove it likely will win the case. 

Miller wrote that Act 624 likely violates the U.S. Constitution’s Commerce Clause, which empowers Congress to regulate interstate commerce to ensure free trade among the states. The flip side is the Dormant Commerce Clause, which prevents states from discriminating against interstate commerce. In other words, the Constitution prevents Arkansas from tariffing Texas-made Blue Bell ice cream to protect Yarnell’s, and Texas retaliating by jacking up the price of Arkansas-grown rice.

Miller said Act 624 explicitly does that. Section 1 of the law accuses PBMs of “business tactics that have driven locally-operated pharmacies out of business” but doesn’t mention out-of-state pharmacies such as Walgreen’s. He said legislators’ comments as they considered the bill were “brimming with protectionist rhetoric.”

“There are too many examples of this rhetoric to list in this order, and it would be a disservice to the strength of plaintiffs’ claim to list only a few,” Miller wrote.

Bills often start with a section explaining the “legislative findings and intent” and making an argument for the bill’s passage. That’s the section Miller wrote about. It includes other justifications for the bill, such as minimizing the conflict of interest caused by PBMs “acting as a ‘fox guarding the henhouse’ by being both a price setter and price taker.”

Miller said Act 624 also likely violates the Constitution’s supremacy clause as it pertains to the TRICARE military health insurance program. The Constitution and laws passed by Congress supersede laws passed at lower governmental levels. Miller wrote that TRICARE has contracts with some of the plaintiffs. The federal government wants them to provide the service, so state governments can’t stop them from doing so, he wrote.

Miller acknowledged that the practice of PBMs reimbursing both their own affiliates and their competitors creates “an inherent conflict of interest.” But he said the Legislature has other remedies to regulate PBMs that don’t go as far as Act 624, as evidenced by the laws it has already passed.

Again, this is a preliminary injunction. The case remains to be heard, and the attorney general’s office will have its own arguments to counter the judge’s.

For now, the law is on hold. CVS is still in business in Arkansas, and still reimbursing both itself and its competitors.

Steve Brawner’s column is syndicated to 21 outlets in Arkansas. Email him at brawnersteve@mac.com.