Pharmacies Weigh PBM Practices in US Drug Price Negotiation Plan

Independent pharmacies are increasingly concerned about potential unfair reimbursements under Medicare’s drug price negotiation plan, voicing doubts about the Biden administration’s final guidance outlining how it will monitor pharmacy benefit manager practices.

The PBMs functioning as middlemen between drugmakers, insurers, and pharmacies could pressure pharmacies to close their doors by not reimbursing the full negotiated price for drugs selected under the negotiation program, some pharmacy groups say.

When the Centers for Medicare & Medicaid Services finalized guidance on how it plans to implement the program, it raised questions about the impact on pharmacy revenue once the negotiated prices, referred to as maximum fair prices (MFP) in the Inflation Reduction Act, take effect in 2026 and 2027.

The CMS said it will work to ensure plans and PBMs engage in sustainable and fair reimbursement practices while monitoring whether further adjustments are needed, but some pharmacies were expecting the guidance to include guardrails to confirm the middlemen don’t reimburse them lower than the negotiated price.

Commenters when the guidance was proposed asked that CMS ensure Medicare Part D plan sponsors and PBMs reimburse at the negotiated prices, plus a dispensing fee, and without pharmacy price concessions. Without that clarity in the final guidance, some pharmacies are worried about the financial burden.

“The new CMS guidance fails to ensure fair reimbursement for pharmacies that dispense the drugs,” said Douglas Hoey, CEO of the National Community Pharmacists Association, in a statement. “Pharmacists who want to keep their patients are often forced to dispense prescriptions for less than their cost to acquire the medicine.”

PBMs are increasingly facing scrutiny over transparency and inflated costs to health plans. The middlemen are also criticized for squeezing out independent pharmacies by applying low reimbursement rates and favoring their own affiliated businesses.

“We’re at a time where independent pharmacies are under increasing pressure,” Ted Okon, executive director of Community Oncology Alliance, said at a drug industry media briefing on the Inflation Reduction Act. “We’re going to put them under more pressure because it hasn’t been worked out yet by CMS.”

PBMs maintain their mission is to deliver discounts to patients and that they already actively negotiate steep discounts for some drugs selected under the program.

Getting Reimbursed

The IRA requires companies to ensure the negotiated price is available to eligible individuals, and to the pharmacies, mail-order services, and other entities that dispense the drugs. The final guidance reiterated that drugmakers may provide access to the negotiated price prospectively or retrospectively; or via an upfront discount or as a refund to the pharmacy.

Recognizing there may be advantages and disadvantages to both approaches, the CMS encouraged manufacturers and dispensing entities to reach agreements on how it will effectuate the negotiated prices.

Industry watchers say manufacturers are likely to use the retrospective option because that is how drugs are usually purchased today. Pharmacies typically purchase drugs from a wholesaler—likely in a large quantity package size to serve all patients, including those with Part D.

Starting in 2026, pharmacies will continue to purchase drugs the same way, but manufacturers will 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. A PBM, on behalf of a Part D plan, reimburses the pharmacy for dispensing the drug.

But the CMS hasn’t done enough to ensure fair reimbursements, the NCPA now says. The association on Oct. 15 released a national survey that found more than 90% of independent pharmacists may not sell the select Part D drugs.

“The PBMs offer take-it-or-leave contracts,” Hoey said. “They don’t negotiate because of their dominant market share, which is one reason why the FTC is investigating their business practices.”

Despite industry concerns, the CMS said it will track complaints and disputes over time, including emerging compliance issues. The agency will engage with a Medicare Transaction Facilitator to confirm prices reach eligible individuals.

The guidance also emphasized that the IRA requires that the negotiated price be made available to dispensing entities.

“It’s in the law,” said Joey Mattingly, associate professor and vice chair of research at the University of Utah College of Pharmacy. “If a PBM does try to take additional discounts off, I think there could be a legal battle.”

“The intent of the law is that pharmacies are neutral—pharmacies should not profit off of this and pharmacies should not lose off of this,” he added.

‘A Slippery Slope’

Some advocacy groups are also weighing the retrospective framework for when manufacturers provide the negotiated price.

“With a retrospective framework, you are floating as the hospital, the health system, or the pharmacy,” said Jillanne Schulte Wall, senior director of health and regulatory policy for the American Society of Health-System Pharmacists. “You are paying for the drugs and floating that cost until you’re reimbursed.”

The Pharmaceutical Care Management Association, representing the PBM industry, said it was concerned that the final guidance prioritizes retrospective reimbursement by drug companies, rather than a “solution that puts pharmacies’ financial underpinnings first.”

“This means pharmacies will have to operate on thinner financing until they are reimbursed, and the ball is in the drug company’s court to approve the necessary payments,” a PCMA spokesperson said in a statement.

Manufacturers will be required to submit to the CMS its implementation plans, which must include a process for mitigating material cash flow concerns for dispensing entities. Drugmakers must also indicate how it will pay back pharmacies and any alternative arrangements in place with dispensing entities.

But Wall worries that manufacturers may favor the retrospective framework and specifically use it to target drugs that are eligible under the 340B Drug Pricing Program, or even outside of the IRA.

“The argument is going to be much easier for manufacturers to say, ‘I already have to do this for IRA, so why shouldn’t I just do it for all of my drugs, including 340B,” Wall said. “The concern is that it then becomes a slippery slope.”