Pharmacies, PBMs at odds over proposed change to Part D contracting rule

Independent pharmacies and pharmacy benefit managers (PBMs) are at odds over a proposed rule change from the Centers for Medicare and Medicaid Services (CMS) over the Medicare Part D program.

Current rules prevent pharmacies from terminating Part D contracts without cause and without giving a long notice period of sometimes more than a year. Such contracts have provisions including which drugs a PBM will cover and how much the PBM will reimburse the pharmacy for dispensing those drugs.

But pharmacies argue this rule leaves them with no choice but to accept unfavorable contract terms, such as drug reimbursement rates that are less than drug acquisition costs, according to Ronna Hauser, SVP of policy and pharmacy affairs at the National Community Pharmacists Association (NCPA), a trade group that represents the roughly 19,000 independent pharmacies in the US.

That’s because PBMs often fax pharmacies contracts, and the mere receipt of the document means a pharmacy automatically agrees to its terms unless it responds within a certain time period (usually a week or two) saying otherwise, according to Hauser. And since the contracts are sent via fax, they can get lost in the shuffle, and pharmacy owners may not realize they’ve received a contract, she added.

“These contract rates oftentimes are egregious, and they’re paying pharmacies under [drug] acquisition costs,” Hauser said. “Our members can’t accept those terms.”

On the flip side. Unlike pharmacies, PBMs are currently allowed to terminate contracts without cause. The Pharmaceutical Care Management Association (PCMA), a trade group that represents PBMs, argues this is necessary to protect Part D beneficiaries from “bad actors,” i.e., pharmacies that have committed Medicare fraud or other unethical practices.

In the proposed rules for the 2026 Medicare contract year, CMS made an update that would allow pharmacies to terminate contracts without cause with a 60-day notice period, but only if the PBM agrees to the termination as well. The NCPA doesn’t think the update as written would benefit pharmacies much.

“While we’re appreciative that CMS has put something forward, it’s just not strong enough,” Hauser said. “We feel that it would be worthless as drafted.”

So, the NCPA has asked CMS to change the rule and allow pharmacies to terminate contracts without cause and without needing to get the PBM’s permission to do so, while the PCMA is opposing any changes to the current rule.

CMS is expected to finalize the rule in March or April, according to Hauser.

CMS did not immediately respond to Healthcare Brew’s request for comment on the NCPA’s request.

The PBM’s side. Allowing pharmacies to terminate contracts without cause would create a lot of uncertainty for PBMs, according to Lauren Moldawer, a healthcare attorney specializing in PBM contracts at the law firm Mintz.

PBMs are required to meet CMS’s access requirements, which state they must contract with a certain number of pharmacies in a given area to ensure all Part D patients living there have access to a pharmacy. So, if pharmacies were able to terminate contracts without cause, that could jeopardize a PBM’s ability to meet those requirements, Moldawer said.

PBMs also must take a number of administrative steps when a pharmacy terminates a contract, and additional administrative burden could raise costs for beneficiaries, according to Moldawer.

“In negotiations between the [Part D] plan and PBM, the more administrative tasks the PBM has, [the more] they charge the plan,” she said. “They could use it to leverage more money from the plans on their administrative fees, and then that could increase costs.”

The PCMA wrote a letter to CMS opposing the NCPA’s request, saying pharmacies could threaten to terminate contracts as a negotiating tactic.

“Allowing pharmacies to terminate contracts and enter and exit networks at will would lead to considerably more, rather than less, beneficiary disruption and confusion,” the PCMA argued.