Tennessee’s PBM Law Signals a Broader Challenge to Healthcare Vertical Integration

For years, vertical integration was treated as the natural direction of the U.S. healthcare market.

Insurers acquired pharmacy benefit managers. PBMs acquired or affiliated with specialty, mail-order, and retail pharmacies. Health systems expanded into physician practices, outpatient facilities, pharmacies, technology platforms, and other services.

The business case was familiar: common ownership could reduce fragmentation, improve coordination, create efficiencies, and lower costs. That argument is now receiving much greater scrutiny.

Tennessee’s recently enacted Freedom, Access, and Integrity in Registered Pharmacy Act, commonly called the FAIR Rx Act, is one of the clearest examples. Rather than limiting itself to PBM transparency, reimbursement practices, or patient-steering rules, Tennessee is challenging whether pharmacy benefit managers and health insurers should be permitted to own or control pharmacies at all.

The larger message for healthcare companies is not that vertical integration is that integrated ownership structures can no longer be seen as inherently efficient or politically secure.

When a business model depends on directing prescriptions, referrals, reimbursement, data, or revenue toward affiliated entities, ownership itself can become a regulatory risk.

What Tennessee Changed

Governor Bill Lee signed the FAIR Rx Act on May 22, 2026. The law restricts certain common ownership and control relationships involving pharmacies, PBMs, and health insurance issuers. Subject to limited exceptions and transition provisions, affected organizations must separate prohibited ownership interests by July 1, 2028.

The law reaches pharmacies licensed in Tennessee as well as nonresident pharmacies dispensing or shipping prescriptions to Tennessee residents. This can include mail-order, specialty, central-fill, telepharmacy, and automated dispensing operations.

It also requires disclosures involving direct and indirect ownership, affiliates, contractors, and other arrangements that may provide a PBM with influence over pharmacy operations.

That makes Tennessee’s approach different from many traditional PBM laws.

Most PBM legislation regulates conduct. It may prohibit patient steering, require rebate disclosure, establish reimbursement standards, or impose reporting and fiduciary obligations.

Tennessee is taking a different approach. The law reflects a judgment that certain conflicts may be too embedded in the ownership model to be corrected through disclosure or contract regulation alone.

CVS Health and Cigna’s Express Scripts have challenged the law in federal court. They argue that the restrictions could interfere with pharmacy access and improperly target integrated companies. Tennessee lawmakers have defended the measure as a response to concerns about competition, drug costs, and the ability of PBMs to direct prescriptions toward affiliated pharmacies.

The litigation will determine how far Tennessee can go. The strategic significance of the law, however, is already clear.

State policymakers are becoming more willing to examine whether the structure of a healthcare company creates incentives that cannot be adequately controlled through ordinary compliance requirements.

Why Vertical Integration Is Under Pressure

Tennessee’s law did not just happen overnight. 

The three largest PBMs manage most prescription drug claims in the United States. Each operates within a larger healthcare organization that owns or affiliates with other parts of the healthcare financing, pharmacy, provider, or distribution system.

That concentration has caused regulators and lawmakers to focus less on size by itself and more on how integrated companies use contracting authority, reimbursement decisions, network design, patient data, and ownership relationships.

Federal Trade Commission staff have reported that large PBMs sometimes reimbursed affiliated pharmacies more than unaffiliated pharmacies for certain specialty generic drugs. The FTC also raised concerns that PBM-affiliated pharmacies may benefit from prescription steering and other advantages unavailable to independent competitors.

Congress has pursued PBM transparency and compensation reforms involving rebates, reporting, and the relationship between PBM compensation and drug prices. Federal proposals have also considered restrictions on common ownership involving PBMs, insurers, and pharmacies.

States too are developing their own approaches to this problem. Arkansas enacted a law directed at PBM ownership of pharmacies, while California has pursued restrictions involving steering, formulary practices, and affiliated pharmacies. Several of these measures are now being litigated.

These developments do not establish that all vertical integration is unlawful or undesirable. They simply show that the burden of persuasion is changing.

With times changing they way they are, an integrated company may no longer be able to defend its structure simply by citing efficiency. Policymakers, regulators, customers, and courts are examining whether the company directs business toward its own affiliates, treats affiliated and independent organizations differently, restricts customer choice, or retains value in ways that are difficult for plan sponsors and patients to evaluate.

It's less about whether entities share common ownership and more about how that ownership affects commercial behavior.

How Independent Companies Can Use the Shift

Regulatory pressure on vertical integration creates opportunities for independent healthcare companies.

Independent pharmacies, specialty pharmacies, physician groups, technology vendors, and healthcare service organizations can position their lack of ownership conflicts as a commercial advantage.

Their strongest message is that an independent organization can offer clearer economics, broader choice, greater flexibility, and fewer incentives to favor an affiliated channel.

An independent pharmacy may be able to show that its dispensing and clinical decisions are not influenced by a parent PBM. A technology company may emphasize that its platform supports multiple payers, pharmacies, and providers without favoring a related business. A physician group may use its independence to negotiate across several networks instead of relying on one vertically integrated partner.

As customers become more sensitive to steering and self-preferencing, independence can become part of the company’s value proposition.

That advantage should be supported by contracts, operating practices, and evidence. 

What Buyers and Investors Should Reevaluate

Healthcare buyers and investors should reconsider how they evaluate vertically integrated growth strategies.

A transaction involving a pharmacy, provider group, health platform, or distribution business may appear attractive because of projected referrals, cross-selling opportunities, preferred network access, or administrative synergies.

Those assumptions may be vulnerable if the expected value depends on steering, reimbursement advantages, exclusive contracting, or preferential treatment among affiliates.

Due diligence should examine whether the target’s revenue depends heavily on an affiliated payer, PBM, provider, pharmacy, distributor, or management company. Buyers should also determine whether key contracts would remain economically viable if anti-steering rules, ownership restrictions, equal-treatment requirements, or stronger disclosure obligations were imposed.

Ownership and management agreements should accurately reflect who exercises operational control. Affiliate arrangements should be evaluated for fair-market terms, conflict-management procedures, and regulatory exposure.

The most important question for investors is whether the economics of the transaction remain defensible under the regulatory environment that may exist several years from now.

A business model that depends on regulatory tolerance for affiliate preference may warrant a lower valuation, stronger contractual protections, or a different transaction structure.

What Integrated Companies Should Do Now

Existing integrated companies should not assume that divestiture is inevitable.

They should assume that greater justification will be required.

Executive teams need a clear explanation of how the integrated structure benefits patients, customers, employers, and the healthcare system. That explanation should be supported by data and operating evidence rather than corporate messaging alone.

Companies should review whether affiliated and unaffiliated organizations receive comparable access and treatment. They should examine whether customers have meaningful choices, how reimbursement methodologies are established, and whether contracts could be viewed as coercive or exclusionary.

Boards should understand where earnings are generated across related entities. A business line that appears modest on a standalone basis may direct substantial volume or margin to another affiliate. Regulators may focus on that relationship even when each individual agreement appears commercially reasonable.

Governance practices should reflect this risk. Contracts and transactions among affiliates may require stronger documentation, independent review, conflict-management procedures, and clearer evidence of commercial reasonableness.

Companies that can establish a defensible record now will be in a stronger position when facing legislative scrutiny, contract renegotiation, litigation, or regulatory review.

The Executive Decision

The Tennessee FAIR Rx Act reflects a broader shift in how policymakers evaluate healthcare consolidation.

Attention is moving from the existence of common ownership to the ways integrated companies control patient flow, reimbursement, distribution, information, and market access.

Executive teams should map their ownership, referral, reimbursement, data, and contracting relationships. They should identify where one affiliate has the ability to influence business flowing to another and determine whether that relationship could be characterized as steering, self-preferencing, discriminatory treatment, or hidden compensation.

They should also be able to show measurable value for patients or customers and demonstrate that the business model would remain viable if affiliates and independent companies were required to compete on more equal terms.

Organizations that cannot support those conclusions may have a structural vulnerability.

Organizations that can may have a meaningful competitive advantage.

The Larger Business Lesson

Tennessee’s law may survive, be narrowed, or be struck down. Its importance does not depend entirely on the result of the current litigation.

The law reflects a broader change in the political and regulatory treatment of healthcare consolidation. Vertical integration is no longer automatically viewed as an efficient response to a fragmented system. It is increasingly evaluated through the conflicts, incentives, and commercial power that ownership may create.

That shift will affect acquisitions, joint ventures, management arrangements, preferred networks, affiliate contracts, and market-entry strategies across healthcare.

The companies that respond most effectively will examine their structures now, determine where regulation could change the economics of the business, and use that analysis to make better decisions about transactions, contracts, governance, and growth.

Lanton, Lanton & Sosa Law advises healthcare and regulated organizations on transactions, contracting structures, regulatory change, compliance, governance, and commercial strategy. In a market where ownership structures are becoming policy questions, legal analysis must extend beyond what is permitted today to how a business model may be evaluated tomorrow.

PBM Reform After Rutledge: Why ERISA Still Matters

In 2020, the U.S. Supreme Court gave states a major victory in the fight over PBM regulation.

In Rutledge v. Pharmaceutical Care Management Association, the Court upheld an Arkansas law that regulated pharmacy reimbursement. For pharmacies, state policymakers, and patient-access advocates, that decision mattered. It confirmed that state PBM laws are not automatically preempted by ERISA simply because they affect prescription drug benefits.

That was a big moment but apparently it was not the end of the ERISA fight.

After Rutledge, many people understandably viewed the Supreme Court’s decision as a turning point for state PBM reform. States had been trying to respond to reimbursement pressure and pharmacy deserts by regulating PBMs, but many states were hesitant on how far they could go with PBMs threatening to sue under ERISA. Rutledge gave states more confidence to keep going.

However; the PBM industry did not stop litigating and their arguments in favor of ERISA evolved.

Before Rutledge, the broader argument was that many state PBM laws were preempted because they touched employer-sponsored health plans. After Rutledge, that argument became harder to make in its broadest form. The Supreme Court had already said that states could regulate certain PBM reimbursement practices without automatically interfering with ERISA plan administration. So the next phase for PBMs became more targeted.

In PCMA v. Mulready, the Tenth Circuit reviewed Oklahoma’s Patient’s Right to Pharmacy Choice Act. The court held that several parts of the law were preempted by ERISA. Oklahoma later asked the U.S. Supreme Court to review the case, but the Court declined to take it. This is important because Mulready is not a U.S. Supreme Court decision. It did not overrule Rutledge and it did not say states are powerless to regulate PBMs. What it did do was give PCMA a post-Rutledge roadmap.

The lesson from Oklahoma is that courts may treat reimbursement regulation differently from laws that reach deeper into network design or plan administration. A state law focused on what pharmacies are paid may be viewed differently from a law that affects which pharmacies must be included in a network, how preferred pharmacy arrangements are structured, or how an ERISA plan administers its pharmacy benefit.

That distinction is becoming central to the next phase of PBM litigation. This also comes at a very different moment politically.

Congress passed PBM reform this year. That was a watershed moment. For years, PBM reform was largely a state-level issue. State legislatures were often the ones responding to community pharmacy concerns, patient-access issues, and questions about transparency. Now Congress has entered the conversation in a meaningful way.

The 2026 federal PBM reforms may not solve every issue in the market, and they do not replace the need for state action. They still matter because they show that PBM oversight has moved from a statehouse issue into the national healthcare-policy conversation.That changes the environment around these lawsuits.

PBM reform is no longer a fringe debate. It has become a bipartisan healthcare issue. Once Congress acts, it becomes harder to argue that PBM oversight is unusual or unnecessary. This may be one reason ERISA litigation becomes even more important to the PBM industry.

If the political momentum is moving toward more PBM oversight, then the legal fight becomes about where the boundaries are drawn. PCMA does not need to defeat every PBM law to change the practical effect of reform. It can try to narrow the parts of state laws that reach network access, preferred pharmacy structures, anti-steering rules, or plan administration.

That is why the recent lawsuits challenging state PBM laws in Illinois and Tennessee are worth watching.

According to PLANSPONSOR, PCMA has again turned to ERISA preemption arguments in challenging those state laws. The details of those laws are not the focus of this article. The larger point is that PCMA is continuing to use ERISA preemption as a central litigation tool even after Rutledge. This is the post-Rutledge strategy in action.

The argument is not that states cannot regulate PBMs. The argument is that some state laws cross the line from regulating PBM conduct into regulating the design and administration of ERISA plans.

For pharmacies, pharmacy associations, and policymakers, the takeaway is practical. Passing a PBM reform law is only the first step. The next fight is often in federal court. That means the drafting matters.

A state PBM law should be clear about what it is regulating and why. If the goal is reimbursement fairness, patient access, transparency, anti-steering protection, or pharmacy network accountability, the statute should be written with the expected ERISA challenge in mind.

This does not mean states should stop acting. It simply means states need to be precise.

The same is true for pharmacy advocates. PBM reform cannot be built only for the legislative hearing room. It also has to be built for the courtroom that may come next.

Taken together, these developments show where the PBM fight is moving. Rutledge gave states room to regulate. Mulready showed that ERISA preemption still has limits to test. Congress has now moved PBM reform into the national healthcare-policy conversation.

For pharmacies, healthcare organizations, and policymakers, this is not an academic issue. The policy momentum around PBM reform is real, but so is the legal risk. Passing a law is only the first step. The next question is whether that law can survive the federal preemption challenge that may follow.

Ron Lanton Discusses 340B Compliance and Patient Access with Drug Topics

Lanton, Lanton & Sosa Law is pleased to share that Ron Lanton III, Esq., Senior Partner of the firm, was recently featured in Drug Topics in a discussion on the 340B Drug Pricing Program and its importance to pharmacists, safety-net providers, and the patients they serve.

The 340B Program remains one of the most important and complex areas in healthcare policy. For pharmacies, hospitals, covered entities, and other stakeholders, the program sits at the intersection of patient access, regulatory compliance, reimbursement pressure, and federal oversight.

In the Drug Topics discussion, Ron addressed how the 340B Program can serve as a critical infrastructure tool for safety-net providers, helping them stretch limited resources, support clinical services, and reach vulnerable patient populations. He also emphasized the importance of compliance readiness, program oversight, and understanding how evolving policy expectations may affect pharmacies and healthcare organizations.

At Lanton, Lanton & Sosa Law, our healthcare regulatory work focuses on helping clients understand complex policy environments before they become operational, compliance, or business risks. The 340B Program is a clear example of how legal, regulatory, and market issues often move together.

You can read the full Drug Topics FAQ here.

Lanton Law Speaks with Drug Topics on Its Over the Counter Podcast on MFN

Ron Lanton of Lanton Law speaks with Drug Topics on their podcast episode of Over the Counter. Ron discusses developing policy expected to enact significant change in the pharmacy industry and beyond titled “Most Favored Nation: Global Benchmarking to Reimagine US Drug Distribution.” Click here to access the podcast.

Lanton Law Quoted in Pharmacy Times Interview on Drug Pricing Reforms Amid the Repeal of Executive Order 14087

Lanton Law was quoted in the Pharmacy Times Article titled "Reversal of Executive Order (EO) 14087 Raises Questions About Future Drug Pricing Reforms.” We discuss the EO and how pharmacists are impacted. The article can be viewed here.

Effects of the Federal Trade Commission's Repeal of Non-Compete Agreements on the Pharma Industry

In an interview with Associate Editor Donald Tracy, MA, Ron Lanton III, Esq., Partner, Lanton Law offers his thoughts on the recent Federal Trade Commission (FTC) repeal of non-compete agreements, and how it could effect the #pharma industry.

The interview can be viewedhere.

California Passes First-in-Nation Law to Reduce Medication Errors, Address Pharmacy Staffing Concerns

Lanton Law speaks with Pharmacy Times on California's new Stop Dangerous Pharmacies Act (AB 1286). This new law aims to address understaffed chain pharmacies and reduce medication errors. Key aspects of the law included giving pharmacists more autonomy over staffing decisions, requiring reporting of unsafe conditions, and establishing a confidential medication error reporting system. Listen here for the interview.

Pharmaceutical Commerce Speaks with Lanton Law about New Drug Pricing Models

Pharmaceutical Commerce interviews Ron Lanton; Partner at Lanton Law on newly emerging pricing models such as the cost plus drug model. Ron gives his insight on what impacts these emerging models will have on the pharmaceutical industry. The interview can be seen here.

Lanton Law Speaks With Pharmacy Times About Provider Status

Below is the description from Pharmacy Times about our discussion with them on pharmacy provider status. You can listen to the interview here.

In this episode of Pharmacy Focus: Policy Edition, we delve into the intricacies of provider status for pharmacists, including challenges that have hindered pharmacists from attaining this recognition, the recent legislative strides, and the far-reaching implications for the field. Our guest, Ron Lanton III, Esq from Lanton Law, lends his expertise to shed light on the financial impacts and effective advocacy strategies.

Key Topics

• Unpacking the concept of provider status for pharmacists and its significance

• Recent legislative advancements that have propelled the provider status movement forward

• Implications of achieving provider status: expanded clinical roles, reimbursement opportunities, and patient care improvements

• Financial considerations for pharmacists and the broader healthcare landscape

• Strategies for effective advocacy to accelerate provider status adoption

New York Proposes New PBM Regulations

The New York State Department of Financial Services has proposed new rules surrounding pharmacy benefit managers (PBMs) that deal with establishing definitions; licensing; contracting with pharmacies; acquisition of PBMs; consumer protections and audit regulations regarding PBMs.

This rulemaking is one to monitor especially with the recent events from the 10th Circuit. We have written a recent blog post on this developments surrounding this decision. 

Lanton Law is a national boutique law and lobbying firm that focuses on healthcare/life sciences and technology. Our pharmacy practice has been helping pharmacies nationwide with operational issues, mergers and acquisitions, regulatory inquiries, audits, licensure, employment issues and contracting. Our lobbying efforts help pharmacies nationwide achieve improved business climates through carefully crafted legislation as well as counseling clients on responding to relevant proposed rules.  

If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today.

Pharmacy Congressional Bills to Watch

Two pro-pharmacy bills continue to make their way through Congress.

S.1038 titled Drug Price Transparency in Medicaid Act of 2023 sponsored by Senator Welch (D-VT) requires pass-through pricing models, and prohibits spread-pricing, for payment arrangements with pharmacy benefit managers under Medicaid. The bill also extends funding for retail pharmacy surveys and requires additional information with respect to price concessions and survey participation to be made publicly available.

S2052 titled Protect Patient Access to Pharmacies Act proposes to enforce any willing pharmacy requirements and establish safeguards to ensure patient access to pharmacies in Medicare Part D.

Lanton Law is a national boutique law and lobbying firm that focuses on healthcare/life sciences and technology. Our pharmacy practice has been helping pharmacies nationwide with operational issues, mergers and acquisitions, regulatory inquiries, audits, licensure, employment issues and contracting. Our lobbying efforts help pharmacies nationwide achieve improved business climates through carefully crafted legislation as well as counseling clients on responding to relevant proposed rules.  

If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today.

Tenth Circuit Deals Pharmacy a Set Back Regarding Oklahoma PBM Law

In 2020 the pharmacy industry witnessed much needed relief with the U.S. Supreme Court ruling on behalf of pharmacy in the unanimous Rutledge v. PCMA case. That decision held that a federal law, the Employee Retirement Income Security Act of 1974 (ERISA), does not prevent states from enacting laws regulating the abusive payment practices of PBMs. 

However; this week The U.S. Court of Appeals for the Tenth Circuit issued a decision agreeing with the Pharmaceutical Care Management Association (PCMA) that Oklahoma's Patient's Right to Pharmacy Choice Act (the Act) is preempted by ERISA because it interferes with central matters of plan administration by restricting ERISA plans from structuring their pharmacy networks in a particular manner. The court also held that ERISA preempted the Act's provision that would bar pharmacy benefit managers (PBMs) from denying, limiting, or terminating a pharmacy's contract because one of its pharmacists is on probation with the state pharmacy board.

This is definitely an inconsistent decision from Rutledge and should be overturned due to recent U.S. Supreme Court precedent. 

Lanton Law is a national boutique law and government affairs firm that closely monitors legislative, regulatory and legal developments in the healthcare and life science spaces. Contact us to learn about how either our legal or lobbying services can help you attain your goals.

Lanton Law Lobbies on Beacon Hill in Boston, Massachusetts for Pharmacy Issues

Lanton Law was on Beacon Hill this week advocating for pharmacy issues. We are happy to be working with several pharmacy allies within the legislature on meaningful issues around health promotion screening and pharmacy benefit manager transparency.

FDA REMS Change for Abortion Pill Creates Opportunities, Questions for Pharmacists

Although the FDA has now allowed retail pharmacies to dispense mifepristone, a drug used for medicated abortions, questions still remain about the requirements for pharmacies and the availability of the drug. Lanton Law talks to Pharmacy Times in an interview about a post Dobbs world with mifepristone. Click here for the interview.

Lanton Law Talks Provider Status With Don Downing; Clinical Professor at the UW School of Pharmacy

We have a new podcast with Professor Downing of the University of Washington School of Pharmacy. We discuss pharmacy provider status and the opportunities within pharmacy. Listen here.

Lanton Law Talks with Savages Drug About The Business of Pharmacy

We speak with Deb Rockwell; Business Manager at Savages’ Drug in Fairfield, Maine about the importance of understanding pharmacy accounts receivable. Listen the the interview here.

Pharmacy Times Speaks with Lanton Law About "Vanity Drugs"

In an interview by Aislinn Antrim of Pharmacy Times called “Calling Them ‘Vanity Drugs,’ Some Insurers Refuse to Cover New Anti-Obesity Drugs,” Ron Lanton III, Esq., Partner at Lanton Law, discussed why insurers are refusing to cover new, highly effective anti-obesity drugs and how some prescribers are getting around the issue. Lanton said that this is a common issue across many different disease spaces and drug types, but some policy changes may be able to help.

The interview can be seen here.

We have taken the text that appears on Pharmacy Times.com from the interview and placed it below in case you have trouble accessing the video.

Aislinn Antrim: Hi, I'm Aislinn Antrim with Pharmacy Times, and I'm here with Ron Lanton, principal at Lanton Law, to discuss how and why some insurers are considering new weight loss and anti-diabetes drugs to be “vanity drugs.” So, there are several new drugs on the market, and they've shown significant weight loss in clinical trials. But some insurers are calling these “vanity drugs” and are not covering them. Do you have a sense of what this term, vanity drugs, means?

Ron Lanton III, Esq.: No, I don't. I think whenever somebody askd me, like, “What does that mean?” I’m always like, okay, let's go to the legal definition. And I don't think there really is a legal definition of vanity drugs, which is something that we say. But to me, whenever I hear something like that characterized as vanity drugs, it's just another excuse. We're not going to pay for it. Right? So, I got a couple of ideas about what I think is going on behind that terminology, but I just wanted to talk a little bit about what this drug is and kind of the history about why it got here and where we are.

So, the brand name drug is Wegovy, because it's just too complex for me to say the generic form of the name of it, but it was approved last year in June by the FDA. And apparently, this is a new generation of highly effective hormone-based obesity medications. And specifically, what it does is that it targets a hormone, GLP-1, which is secreted in the gut, and then targets receptors throughout the body. And it makes it so that there is some kind of positive response, where you do lose the weight. And for this drug, it was prescribed for patients that are obese, who have a BMI or body mass index of greater than 30, or a BMI greater than 27 accompanied by weight-related medical problems, such as high blood pressure and type 2 diabetes and cholesterol, things like that. It’s definitely something that I believe would be beneficial to the patient because if you do take it, if it works as it says, we're not going to jump to those other more expensive disease states that cost a lot of money to treat.

But, going back to like the whole vanity drug classification of it, yes, this isn't a proven curative drug, I think they were saying like up to 13% of individuals don't lose any weight that take this drug. But, you know, insurance companies have for a while used thing called step therapy, where they're like, try drug A first before you go to drug B, and a lot of time is wasted. And a lot of dollars can be wasted too, because that's that kind of one-size-fits-all approach to everything. Whereas, you know, if we're doing more curative, something that just kind of goes right to your specific biological makeup, that could have a lot better of an outcome for a patient and at a lower cost. So, I think they're coming at it from a step therapy mindset.

And, too, there is a policy that's been weakened a little bit ago by the court, but the copay accumulator, where they're stopping you from having the rebates from a manufacturer go to the deductible and the patient's maximum allowable cost. So, it's like you have those mindsets of let's try not to pay it. But I think, you know, with our medicine and science getting a lot better, we're going to have to think past that old traditional reimbursement system.

Aislinn Antrim: Yeah, absolutely. This seems to be kind of a widespread issue—you talked about Wegovy, and it's been applied to a couple of these other similar new drugs. What are pharmaceutical lobbyists really doing to kind of get insurers to pay for these?

Ron Lanton III, Esq: That's an interesting question. So, I can't speak for pharma, I don't know what they're doing. I talked to pharma interests, I did look at their website, and one of their policy issues is called “Build a better patient-centered agenda.” And I like where they're going with that, because essentially, what it's saying is we want insurance to work like insurance is supposed to work. Which is, if we have something that's wrong with us, we go see the doctor, the doctor prescribes. And the doctor says, “This is what we think is good for that patient to have a good outcome.” And the insurance is supposed to just pay for it. Now, you know, there's all kinds of things, and I know why there's rules about it and there's all kinds of special circumstances. But you know, more times than not, we're fighting the insurance company to pay for things that seem to be common sense. So, I think there is a bill, which I'll talk about in a little bit, on the obesity issue that we're talking about here. But instead of it being what I call a hard lobbying issue, which is I'm going to go directly to my congressman, or my senator and we'll go lobby about how we need this particular drug. It seems to be more of a soft lobbying issue to me, where the pharmaceutical industry would have to reach out to the payers to have that conversation about why the manufacturers think this is a good thing with the patients today. They have to talk to the patient themselves and educate the patient. So, if the patient feels comfortable enough, what you're dealing with is years of stigma and everything about this. Again, this is getting out of traditional health care and going to the root of the problem. And instead of just treating a symptom, you know, we're really trying to figure out what's going on here. So that's the other thing. And then really, the last thing that I see as kind of the soft lobbying by pharma is educating the doctors about this drug and why this is here, and why they should start to utilize this in their weapons system of fighting whatever it is that they're dealing with patients. So that's what I call more of a soft lobbying issue.

Aislinn Antrim: Interesting. Are there policy changes that could address this issue?

Ron Lanton III, Esq: The court system is weakening the copay accumulators, which I mentioned earlier, and there have been several state and state efforts. And, definitely, there's a federal bill right now on step therapy, where they're trying to get rid of that, because again, it's like, why are we doing all these things that may not work, and it's wasting time and it's causing a lot of money. And we could just get right to the heart of the problem, especially when the doctors are saying, you really shouldn't get in between my relationship with my patient, because I know the patient. And, you know, I'm the closest that's here. So, this is what I think.

There is an interesting bill that I want to bring up about policy changes that you had asked about. So, there is a bill, HR 1577, and there's also a senate version of this—SB 596 is a companion bill. So it’s basically the same bill that's in the house is also in the Senate, same language, and everything. It’s called the Treat and Reduce Obesity Act and let me tell you just really quick what this is. The bill would allow for coverage for therapy that is provided by a physician who's not a primary care physician, or other health care providers and approved counseling programs, if you have a referral from your PCP. Currently, the therapy is covered only if provided by a PCP. The bill would also allow coverage under Medicare's prescription drug benefit, so under Part D, for the treatment of obesity, or weight loss management for individuals who are overweight. So, this really targets what we're talking about right now. And if we actually have this bill go through, I think this conversation will be a lot easier, because we already have the regulatory scheme for it, instead of having to build it from scratch and just kind of convince people that this is a good thing for patients to take. Again, when we're coming at it from the traditional mindset of “Let's try not to pay for things and if we do, let's try the cheaper stuff first, before we get to something that might actually help,” I think that's just backwards.

Aislinn Antrim: Yeah, absolutely. Do you see similar issues in other drug classes or treatment areas?

Ron Lanton III, Esq: A long while ago—well, it's about 2013, so seems like a long while ago, with everything that's happened between then—[we had] Sovaldi with hepatitis C, you know, at $4,000. For the treatment, I think it was 12 course treatment, and people were like, “Oh, my God.” I know there's still an issue but, you know, if 9 out of 10 times a patient takes this, they get better, those are pretty decent odds. So why not try it for a little bit? So, that would be my kind of form of step therapy, which is let's just try, and if it's not working, then okay, we can get off of it. But this kind of seems to be what I call a best-in-breed prescription out there. So, like, if this is the best thing, let's take it and see what happens. And I think, again, with drugs that are curative and more expensive, because the upfront cost has to be there, because you're not going to have the repeat customer because they're getting cured. But at the same time, I think somebody has to do a cost analysis at the payer by saying, if we put patient on drug A and it costs this, but if we put them on drug B, it's going to cost all this other stuff and the patient's going to get sicker. It's just that's just not really what we should be doing. I do know that there's this balance of, you know, we have to have something that's affordable for patients to take. So it's $84,000. And I hate to bring up old wounds, but it's at $4,000, something that is reasonable or not. And I think that's, you know, something that the pharma and the insurance just still haven't quite worked out yet, especially since we keep seeing this thing about drug price from congress, and why is this stuff so high? But I think now there's a lot more scrutiny starting to come into the picture with the Federal Trade Commission, and how they're now saying, okay, well, high drug prices and what are these PBMs doing and let's find out a little bit more about this. So, that's something we should continue to watch. But those are the policies. You know, if we get bills like this, we have an FTC that is really scrutinizing both pharma and the PBM industry, I think we'll start to slowly but surely get to an answer that's tolerable for everybody.

Aislinn Antrim: Well, that's good to hear. Some companies have found kind of an interesting workaround by marketing these drugs as diabetes treatments, rather than weight loss drugs. And in some cases that seems to have worked. Does this seem like an effective solution? Or what are your thoughts on this?

Ron Lanton III, Esq: I think it obviously depends on what the doctor is seeing from the patient. I mean, if you're pre-diabetic, then you know, if you don't do anything, you're going to get over into type 2 diabetes, potentially. So, I can understand the rationale behind it. But I don't think it's really that different than off labeling. I mean, you know, if you have a drug and it's supposed to be used for cancer A but also works for cancer B, it’s not approved for cancer B, but, you know, there may be times as a patient where your condition doesn't have something that is FDA approved, but the doctor is looking at these studies and trying to see what can help you. Again, that's that patient-doctor relationship that you just have to trust. And that's what the patient is looking for. So, I think it's really no different than off labeling and if that really goes to the result that we're getting to, I'm all for it.

Aislinn Antrim: Absolutely. Why do list prices vary for the same drug with different indications? So, with diabetes versus for obesity?

Ron Lanton III, Esq: Yeah, that's the million-dollar question. Literally, if you live with these high-priced drugs, right? I don't know if I can give you an answer. I think the best people to ask this question to would be the pharmacy benefit managers, because the more and more they've gotten involved, the more and more prices have gone up. And that is because the manufacturer has to hire the higher price because they have to compensate for the rebate that they're giving to the pharmacy benefit manager. So why is that? And I think that, you know, like I was telling you earlier, the scrutiny with the Federal Trade Commission going in and just seeing exactly what PBMs are doing with these drug prices, and then, you know, either getting some federal standards around it, and what they can and can't do or be giving the PBM a federal regulator. They don't have one, you know, and it's just this piecemeal stuff that they're doing by state. I think those days are numbered, as far as just having a PDMP and unregulated entity. But I think the more layers that start to get peeled back, the more attention that's coming. Again, this stuff doesn't happen overnight. None of this happened overnight at all. I mean, PBMs really didn't grow until the ‘90s. So, we're talking from the ‘90s until now, there's been some changes, gradual changes, but there's been a shift. And I think we're starting to start to shift that backwards to where we can get an answer. We'll find out these things.

Aislinn Antrim: Wonderful. Is there anything else you wanted to add on this topic?

Ron Lanton III, Esq: No. I think this is definitely not the last thing that we're going to see. I just think it's, I hate to say it, I know it's a different disease state, but it's just Sovaldi in a different form. I mean, we have these drugs that are promising to do things, and if 13%—and I know that's one study, but I mean, if somebody tells me “Okay, 13% of people this may not do anything for them.” I'm at least willing to give it a shot, because it's better than what we have now. And it's definitely better than some of the step therapy protocols that patients are going to have to go through.

Aislinn Antrim: Definitely, thank you for talking to me about this.

Ron Lanton III, Esq: Definitely. Thank you for asking.

Pharmacy Transactions- The Buying and Selling of a Pharmacy

There are many things to consider when you are deciding to either purchase or sell a pharmacy. Hence the need for an experienced firm to address these matters. 

Lanton Law has helped various stakeholders ranging from private equity to retail pharmacies who are looking to either acquire or divest either a retail, specialty or chain pharmacy.   

Issues within this type of transaction typically include: 

• Drafting corporate formation and relevant governance documents

• Lease negotiation

• Regulatory filings

• Preparing shareholder and if necessary employment agreements

• Drafting relevant contracts

• Strategic planning 

• Ensuring the pharmacy has the appropriate operating policies and procedures

• Assisting with appropriate accreditations 

There is also the issue of whether to do a stock purchase or an asset purchase. Each has their respective pros and cons. Additionally, each board of pharmacy has different standards and procedures regarding change of ownership. 

Lanton Law is a national boutique law and lobbying firm that focuses on healthcare/life sciences and technology. Our pharmacy practice has been helping pharmacies nationwide with operational issues, mergers and acquisitions, regulatory inquiries, audits, licensure, employment issues and contracting. Our lobbying efforts help pharmacies nationwide achieve improved business climates through carefully crafted legislation as well as counseling clients on responding to relevant proposed rules.  

If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today.

FTC Takes Aggressive Policy Stance Against Drug Manufacturers and Pharmacy Benefit Managers (PBMs)

The Federal Trade Commission (FTC) has come out aggressively against both pharmaceutical manufacturers and pharmacy benefit managers (PBMs). The agency has released its policy statement seen here, announcing that the agency “will ramp up enforcement against any illegal bribes and rebate schemes that block patients’ access to competing lower-cost drugs.”  

Here is what the FTC is specifically targeting in its policy statement: 

• Exclusionary rebates that foreclose competition from lower-cost medicines may constitute unreasonable agreements in restraint of trade under Section 1 of the Sherman Act; unlawful monopolization under Section 2 of the Sherman Act; or exclusive dealing under Section 3 of the Clayton Act.

• Inducing prescription drug middlemen to place higher-priced drugs on formularies instead of lower-cost alternatives in a manner that shifts costs to payers and patients may violate the prohibition against unfair methods of competition or unfair acts or practices under Section 5 of the FTC Act. 

• Paying or accepting rebates or fees in exchange for excluding lower cost drugs may constitute commercial bribery under Section 2(c) of the Robinson-Patman Act, which prohibits compensating an intermediary to act against the interests of the party it represents in the transaction.

This follows the recently revealed PBM study by the FTC will officially examine the impact of vertically integrated PBMs on the access and affordability of prescription drugs. As part of this inquiry, the FTC will send compulsory orders to CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc. 

Lanton Law is a national boutique regulatory law and lobbying firm that focuses on healthcare/life science and technology. If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today.

Vermont Enacts New PBM Law

Vermont Gov. Phil Scott (R) signed H. 353, a bill that several issues including patient steering, reimbursement transparency, spread pricing, and other PBM practices.

Lanton Law is a national boutique law and lobbying firm that focuses on healthcare/life sciences and technology. Our pharmacy practice has been helping pharmacies nationwide with operational issues, mergers and acquisitions, regulatory inquiries, audits, licensure, employment issues and contracting. Our lobbying efforts help pharmacies nationwide achieve improved business climates through carefully crafted legislation.  

If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today.