Medicare Drug Price Negotiations Expose Community Pharmacies to Financial Risk
A survey conducted by 3 Axis Advisors revealed potential impacts of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program.
In the form of payment delays, cash flow shortfalls, and overall revenue losses, the 10 drugs whose price negotiations are set to take effect January 1, 2026, present a detrimental financial risk to community pharmacies in the US. Highlighted by a recent analysis of the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program (MDPNP), experts believe it could lead to pharmacy closures, reduced prescription access, and further financial pitfalls for independent pharmacies.
“Everyone wants to reduce drug costs for seniors and taxpayers,” said National Community Pharmacists Association (NCPA) CEO B. Douglas Hoey, MBA, in a news release.1 “But, as our research shows, the program is structured in a way that will force many independent pharmacies out of the Medicare Part D program. Drug costs may come down, but there will be a shortage of pharmacies to dispense medicine.”
While many experts and industry leaders see the MDPNP as a win for patients’ out-of-pocket drug costs, it has significant impacts on the overall business of prescription drug dispensing. Amidst a complex pharmaceutical supply chain and health care benefits system, independent pharmacists and the groups that advocate for them believe price negotiations will lead to even more failing pharmacy businesses.
Independent pharmacists and the groups that advocate for them believe price negotiations will lead to even more failing pharmacy businesses. | image credit: Vitalii Vodolazskyi / stock.adobe.com
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However, when the IRA was initially crafted in 2022 to introduce drug cost savings, it focused on patients rather than the providers that dispense their medications. The IRA specifically gave power to the Centers for Medicare & Medicaid Services (CMS) to negotiate with drug manufacturers the price of medications most commonly used among senior populations with Medicare insurance coverage.2
“CMS is proud to have negotiated drug prices for people with Medicare for the first time. These negotiations will not only lower the prices of critically important medications for cancer, diabetes, heart failure, and more, but will also save billions of dollars,” said CMS Administrator Chiquita Brooks-LaSure in a news release.3
But according to pharmacy industry experts, the Medicare price negotiations will only lead to other complications. While costs may decrease for patients, other parties within the supply chain will be forced to absorb lost costs, specifically pharmacies.
First, according to NCPA’s news release, a result of the price negotiations would be payment delays for at least 7 days on any of the 10 selected drugs. Delays can also result in pharmacies missing their “prompt pay requirements” for Part D drugs. Furthermore, these delays are projected to result in the loss of $11,000 in weekly cash flow.1
Finally, based on the 3 Axis Advisors analysis, the MDPNP is set to result in $43,000 lost in annual pharmacy revenue. NCPA noted that this loss is roughly equal to a pharmacy technician’s annual salary, making the employment of a tech roughly equal to the impact of drug price negotiations.
“These financial impacts could lead to significant consequences, such as pharmacy closures, reduced medication availability, and staffing cuts, ultimately causing disruptions for seniors at the pharmacy counter,” continued authors of the release.1 “The financial disruptions come at a time when community pharmacies are closing at an unprecedented rate. Over 7,000 pharmacies have closed in less than 10 years.”
Indeed, several pharmacists and advocacy groups agree that the pharmacy profession is currently facing a dire situation regarding financial stability and prescription reimbursement. Amid pharmacy benefit manager (PBM) control and vertically integrated health care corporations taking away from smaller pharmacy businesses, the state of independent pharmacy needs persistent federal attention.
As NCPA continues to gain further evidence on how the MDPNP will impact independent pharmacy, the group has called on the newly seated Trump administration to freeze the implementation of price negotiations. With almost an entire year before the first set of negotiations are effective, independent pharmacy leaders hope to be prepared and find some relief before they experience an impact to their business.
“Like many government programs, the intent is good, but the unintended consequences undermine the goal,” concluded Hoey.1 “That’s exactly the case here.”
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