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Pharmacies fear New Year’s financial squeeze from Biden administration rule

The Biden administration seemed to be giving pharmacies a win when they forced pharmacy benefit managers to be more up-front about the behind-the-scenes fees they charge.

But now pharmacies are afraid the transition to the new system on Jan. 1 will lead to a cash flow crunch.

In the past, PBMs could charge pharmacies performance-based fees long after the fact, and the total amount of the fees has grown in recent years. But now, PBMs will have to charge the fees up front. The administration expects that some patients could see lower costs at the pharmacy counter following the change, while PBMs counter that Medicare premiums could increase.

But that means there will be a period for pharmacies when fees are still being billed from 2023, and 2024 bills are piling up, too. That could be particularly problematic for small, independently owned pharmacies.

Carly Ennis, who runs a family-owned, two-pharmacy business in Oklahoma, said she expects their business will still be paying between $40,000 to $70,000 in fees from 2023 in the first half of 2024, in addition to the new fees that have to be paid up front.

Ennis got into the pharmacy business through her husband’s grandfather, who started in the industry in the 1970s. She and her husband took over the business in 2016. That’s when she realized how much the performance fees were taking a bite out of the stores’ bottom lines.

“I didn’t know I had to, like become a politician to run the store,” Ennis said.

Pharmacy owners like Ennis have pleaded with the Biden administration to make PBMs develop payment plans to give pharmacies extra time to pay, and to establish a direct line for pharmacy complaints.

But the federal government says it can’t force PBMs to create payment plans between PBMs and pharmacies, so it “strongly encourages” the arrangements instead, according to a November memo.

The government already delayed implementation of the rule for a year, and has sent some letters to PBMs about the cash crunch, including one on Dec. 13.

Ronna Hauser, the senior vice president of policy and pharmacy affairs at the National Community Pharmacists Association, said she wasn’t aware of any plans or PBMs that are offering payment plans, though some collective bargaining organizations for pharmacies have worked with them on payment plans.

Independent pharmacies say the posture from the Biden administration isn’t enough. Ennis said she has heard of pharmacies that have gotten a loan to prepare for the crunch, or prepared to get one on short notice, but it’s not an attractive option because of high interest rates and uncertainty about whether pharmacies will be able to pay them back.

“It’s like a ticking time bomb,” she said.

The issue has caught the attention of Sen. Chuck Grassley (R-Iowa), who has spoken with Centers for Medicare and Medicaid Services Administrator Chiquita Brooks-LaSure about the issue and criticized the administration for months.

“CMS cannot sit on the sidelines and let rural pharmacies go out of business. I ask for prompt oversight action and a response on how CMS will protect seniors’ access to rural pharmacies,” Grassley wrote in October.

Reporter: Rachel Cohrs, STAT Washington Correspondent

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