Inflation Reduction Act’s Impact on Independent Pharmacies | AAP 2025

The Inflation Reduction Act (IRA) has brought significant changes to the healthcare landscape, with important implications for independent pharmacies across the United States. While the legislation aims to lower prescription drug costs for patients, it also introduces reimbursement shifts, administrative requirements and new pricing regulations. As the provisions of the IRA continue to roll out, understanding them will be critical for independent pharmacies.

Inflation Reduction Act’s Impact on Independent Pharmacies | AAP 2025 / Tada Images - stock.adobe.com

In a presentation given at the American Associated Pharmacies (AAP) Annual Conference, held April 10 to 12 in Austin, Texas, Melanie Maxwell, president of AlignRx, discussed the intent and benefits of the IRA, the Medicare Prescription Payment Plan (M3P), the Medicare Drug Price Negotiation Program, impacts on cash flow and reconciliation, and how pharmacies can effectively advocate for themselves and their patients.

“What is the intent of the IRA,” Maxwell said. “The intent is good, right? Everybody wants more affordable health care, especially for seniors.”

Maxwell started the session discussing 4 things that are positive about the IRA, including out-of-pocket costs for insulin being capped at $35 per month among Medicare Part D enrollees, zero out of pocket costs for recommended adult vaccines for both Medicare and Medicaid, expansion of the low income subsidy program to include up to 150% of the federal poverty level, and a 6% cap on premium increases year over year for Medicare Part B programs.

Maxwell then went on to discuss other areas of the IRA and how they will impact the patient experience, such as benefits and out of pocket costs. In 2024, Medicare’s Part D benefit followed a complex 4-phase structure, tracking both total drug and out of pocket costs. However, under the IRA in 2025, the structure is simplified: the coverage gap is eliminated, and only out of pocket costs are considered, with a $2000 annual cap for beneficiaries.

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The IRA also promotes biosimilar use by increasing reimbursement, encouraging a shift from costly biologics. A new "penalty rebate" holds manufacturers accountable—if drug prices exceed inflation, they must repay the excess—though this may reduce pharmacy margins tied to the average wholesale price (AWP).

“It's a guard penalty to keep prices in check,” Maxwell said. “Now, on our side of the fence, that's going to hurt us because as AWP prices rise, that gives us more margin for that spread between cost and reimbursement. That's why we're going to see a little bit of that, on the more expensive side, get pinched. We're not going to have that driving prices.”

Next, Maxwell talked about the M3P. The M3P allows beneficiaries to spread their annual out of pocket drug costs over 12 months. This installment-style option helps ease the financial burden early in the year. While pharmacies aren't responsible for managing this payment plan, they must identify participating patients, which Maxwell said is tricky since it’s only noted in soft messages within claim transactions. Missed messages can lead to compliance issues. Though well-intentioned, the plan adds complexity for pharmacy staff. However, Maxwell noted that pharmacies still receive full reimbursement from plans, with no copay collection needed from patients at the point of sale.

Maxwell finished the session by discussing the Medicare Drug Price Negotiation Program. She said that one of the “frustrations is that pharmacy really was not at the table in a meaningful way when this law was being put together. So, it’s got some unintended consequences.”

The IRA enables the federal government to negotiate drug prices directly with manufacturers by setting a Maximum Fair Price (MFP). Starting in 2026, the first 10 drugs will be impacted, followed by 15 more in 2027, then 15 in 2028, and 20 in 2029, totaling 60 drugs. Initial lists are based on Medicare Part D spending and future ones will include both Part D and B. Pharmacies will now receive partial payments from PBMs, with manufacturers covering the rest through rebates. A new Medicare Transaction Facilitator (MTF) handles data and payment reconciliation, requiring pharmacies to tighten claim tracking and reconciliation processes moving forward.

A major issue with the Medicare Drug Price Negotiation Program is that the Centers for Medicare & Medicaid Services (CMS) did not regulate reimbursement for drugs under the MFP, leaving pharmacies vulnerable. PBMs aren’t required to reimburse fairly, and payment delays of potentially 30 to 45 days will strain cash flow, Maxwell said. Because of this, many pharmacies may stop stocking these drugs due to financial burden, defeating the goal of affordability. Without reform, this could critically impact independent pharmacies' financial stability and patient access to medications.

“I still have hope, because if we can successfully make sure that the manufacturers are going to price their rebate off of [the wholesale acquisition cost] and I can set appropriate reimbursement on the reimbursement side, this will not be as big of an issue financially as what we're worried about,” Maxwell said. “But those are two big ifs, and we don't control one of them, and we only partially control the other. So, just be prepared.”

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