Independent pharmacies have struggled in recent years to stay open—and new financial constraints may mean a record number of pharmacy closures in 2024.
Nearly a third of independent pharmacies are at risk of going out of business due in part to a new rule from the Centers for Medicare and Medicaid Services (CMS) that results in lower prescription reimbursements, according to the National Community Pharmacists Association (NCPA), a trade group that represents more than 19,400 US pharmacies.
“This is an emergency,” NCPA CEO B. Douglas Hoey said in a statement. “If Congress fails to act again, thousands of local pharmacies could be closed within months and millions of patients could be stranded without a pharmacy.”
The CMS rule, which went into effect on January 1, requires payers and pharmacy benefit managers (PBMs) to apply what’s called direct and indirect remuneration (DIR) fees at the time a patient picks up a prescription.
CMS created DIR fees to account for the cost of a Medicare Part D drug after it’s dispensed to a patient and all rebates are taken into account. Historically, a pharmacy could be charged a DIR fee months after dispensing a drug. But under the new rule, payers and PBMs must apply all DIR fees at the time a drug is dispensed.
The rule is intended to increase drug price transparency for pharmacies and patients alike, according to the NCPA. CMS officials said in December 2023 that the rule “is expected to lower total beneficiary out-of-pocket costs [and] provide meaningful price transparency.”
NCPA execs said in a statement that the organization supports the rule, though it has warned CMS that the transition to applying DIR fees up front could make things difficult for independent pharmacies because it results in lower up-front reimbursements rates.
“With lower prescription reimbursements in one corner and higher back-end fees in the other, many community pharmacists are thinking about throwing in the towel,” NCPA execs wrote in a statement.
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The NCPA surveyed 10,000 independent pharmacy owners and managers about the CMS rule in February, and of the 815 respondents, 32% said they’re considering closing down this year due to the financial constraints. Additionally, 93% said they’d consider dropping out of Medicare Part D next year, and 99% said their prescription reimbursements have decreased since the rule went into effect.
“If a third of all community pharmacies close, and if more than 90% stop accepting Medicare Part D, it will be a catastrophe for seniors, a hardship for most other patients, and a devastating blow to the overall healthcare system,” Hoey said in a statement.
Independent pharmacies have made CMS aware of the reimbursement issue, and the agency sent a letter to payers and PBMs in December 2023, urging them to “work with providers and pharmacies to alleviate these issues and safeguard access to care.”
“Pharmacies serve a critical role in delivering healthcare and providing access to medications across the country,” the letter read. “CMS is concerned about the sustainability of these businesses, especially small and independent pharmacies, and their potential closures that may leave pharmacy services out of reach for many people, especially those in rural and underserved areas.”
The NCPA sent a letter to CMS in February saying that the agency’s guidance “has not resulted in any meaningful change in PBM practices or reimbursements,” and urged the agency to “thoroughly investigate PBM reimbursement practices.”
“More decisive and direct action is required from CMS, which is responsible for enforcing program rules. This should involve clear directives that close the gaps that allow PBMs and plans to impose unreasonable terms and conditions,” Hoey wrote in the letter. “This focused approach is essential to maintain equitable healthcare, especially in determining reimbursements. Unless CMS acts quickly, NCPA fears beneficiary access to pharmacy services will be increasingly threatened, with independent pharmacies being forced to close.”