Pharmacies, Drugmakers on Edge for Rollout of US Drug Price Cuts

Major drugmakers and pharmacy groups are weighing how they will implement the first Medicare negotiated drug prices amid concerns about reimbursement practices and the impact of pharmacy benefit managers on how prices reach eligible individuals.

The Biden administration this month reached a milestone in its Medicare Drug Price Negotiation Program when it published the negotiated prices of 10 prescription drugs after months of talks between manufacturers and the Medicare agency. The negotiations stemmed from the administration’s efforts to lower drug costs under President Joe Biden‘s signature Inflation Reduction Act.

The negotiated prices, which the statute refers to as maximum fair prices, won’t go into effect until Jan. 1, 2026, which gives the Centers for Medicare & Medicaid Services, nine drugmakers, and thousands of pharmacies less than a year and a half to smooth out how the prices will be implemented.

The CMS is on track to finalize guidance in the fall, but drugmakers and pharmacies are already scrutinizing implementation approaches that could make the pharmaceutical supply chain more complex with new payment models and reimbursement practices.

“Multiple stakeholders—pharma, pharmacies, the government—they’re all working together on this,” said Joey Mattingly, associate professor and vice chair of research at the University of Utah College of Pharmacy.

“It feels like people are trying to proactively get this right,” said Mattingly, who served as a special adviser to the CMS on implementing the negotiation program.

The CMS in a statement to Bloomberg Law said it held three listening sessions in May for manufacturers, pharmacies, dispensing facilities, wholesalers, and other Medicare Part D-related organizations to receive input on implementation of the negotiated price.

Making the Price Available

The Inflation Reduction Act requires companies to ensure the negotiated price is made available to eligible individuals, and to the pharmacies, mail-order services, and other entities that dispense the drugs.

But the law requires different pharmacy drug procurement and reimbursement practices from those typically used today.

The traditional process for prescription drug flow in the supply chain starts with the manufacturer producing the drug and setting the price for it. The drug is then sold to a wholesaler at a certain price, which is discounted on factors such as the size of purchase. The wholesaler then distributes and sells the drug to pharmacies and other dispensing entities at a marked-up price, passing along some of the discount.

Pharmacy benefit managers, functioning as middlemen between drugmakers, insurers, and pharmacies, come into play as they negotiate drug prices with manufacturers and determine which medicines are covered by a patient’s insurance plan. PBMs ideally use their purchasing power to negotiate prices and rebates that can be passed down to the patient.

Pharmacies, after buying drugs from the wholesaler, are the final step in the supply chain before a drug reaches the patient. They contract with PBMs for inclusion in their pharmacy network and dispense the drug to a patient under a health plan. Pharmacies make revenue from patient out-of-pocket cost sharing and PBM reimbursements.

The IRA “fundamentally changes this equation,” Mattingly said. “Because the way it was written, it’s saying pharmacies need to have the maximum fair price available at the pharmacy level. Well, that’s not how we buy drugs.”

Under the law, manufacturers will need to provide the negotiated price either via an upfront discount or as a refund to the pharmacy. The CMS has proposed using a Medicare Transaction Facilitator to confirm the transactions.

Therefore, beginning in 2026, pharmacies may continue to purchase the drugs from wholesalers, but dispense the drug at no more than the negotiated price to eligible individuals. A PBM, on behalf of a Part D plan, would then reimburse the pharmacy.

Because the pharmacy purchased the drug from a wholesaler—likely in a large quantity package size to serve all patients, including those with Part D—the manufacturer will be required to reimburse the pharmacy the difference between how much it paid for the drugs from a wholesaler and the negotiated price within 14 days to make the pharmacy whole, according to the CMS draft guidance.

Manufacturers must follow various requirements to provide the negotiated price, such as following a 14-day prompt MFP payment window, recording and documenting claims, and avoiding duplicate discounts that may occur between the negotiated price and the federal 340B Drug Pricing Program.

Drugmakers may be liable for civil monetary penalties if the price is not available to a dispensing entity or if the report with payment-related data is not provided to the facilitator within the time window.

Unintended Consequences

While the program is slated to lower costs for Part D patients and government spending, its implementation could lead to unintended consequences for dispensing entities, some pharmacy industry experts say.

“Manufacturers are now going to have to pay pharmacies through this process,” Mattingly said. But “if the maximum fair price is well below the wholesale cost—the price that the pharmacy bought the drug at—there will be a period of time where pharmacies are essentially paying more to buy the drug and receiving less from the insurance.”

“The purpose of the law was to lower the drug prices for our seniors and for Medicare,” he said. “The law was never intended to harm any of the supply chain entities, like pharmacies, so we’ve got to do our best to make sure that we don’t accidentally harm pharmacies through the implementation.”

Implementation plans are already spurring concerns for the National Community Pharmacists Association, a trade group representing over 19,000 independent pharmacies.

“We can’t float this program, nor do we believe it was anyone’s intent that pharmacies are going to have to prefund the Medicare drug negotiation program,” said Ronna Hauser, senior vice president of policy and pharmacy affairs for the NCPA. “We need some solutions to be put into place very quickly to make this work.”

Pharmacies could also be waiting over 30 days for the manufacturer refund, which could affect how they pay for drugs and dispense them, Hauser said.

Role of PBMs

Pharmacies have also shared concerns over the role of PBMs and its impact on negotiated prices.

The middlemen continue to be criticized over lack of transparency and inflated costs to health plans, but they maintain that their mission is to deliver discounts to patients. PBMs say manufacturer list prices and patent practices limiting competition fuel high drug prices.

“It’s our understanding we’re going to purchase the drug at the same price we do today from our wholesalers, but we have no guarantee that we’re going to get paid MFP, plus a dispensing fee from the PBM,” Hauser said. “CMS has been silent to date on how the PBMs are supposed to reimburse pharmacies for MFP drugs.”

The American Pharmacists Association, a group consisting of more than 62,000 practicing pharmacists, said the CMS “needs to issue guidance that ensures Part D plans and PBMs cannot pay pharmacies at less than that MFP.”

Manufacturers also point to PBMs, arguing the middlemen will make it unclear if the negotiated prices will benefit patients.

“Pharmacy benefit managers remain unchecked by the process and can continue to drive up patients’ out-of-pocket costs,” AstraZeneca PLC said in a statement. “AstraZeneca urges CMS to protect patient out-of-pocket costs as part of this process.”

Bristol Myers Squibb Co. asks insurance plans and their pharmacy benefit managers “to continue to make ELIQUIS available to patients without increasing out-of-pocket costs or imposing other barriers to accessing this medicine.”

“PBMs are an entity where we call for transparency, and execution of the requirements with the negotiated price list for 2026 exemplifies that call,” said Earl Ettienne, assistant dean of graduate programs and industrial partnerships at Howard University.

“But if we don’t have transparency, we will struggle,” said Ettienne, also an associate professor of clinical and administrative pharmacy science. “Pharmacies are at the forefront of the distribution channel, and the ongoing legislative discussions surrounding PBM reform could not be timelier.”