PBM Network Terminations Bring Risks Beyond Lost Contracts | NCPA 2026

For independent pharmacies, losing a pharmacy benefit manager (PBM) contract is often only the beginning, as a network termination can trigger audits, financial clawbacks, and regulatory action that follow a pharmacy long after the contract ends.

“A network termination can significantly impact the pharmacy's viability or its bottom line,” Harini Bupathi, Esq, partner practicing in Frier Levitt’s Life Sciences litigation practice group, told Drug Topics®. “That's certainly why there's so much attention that's given to maintaining a relationship when you're addressing, for example, a network termination or any other network adverse action. But there's certainly other consequences to consider.”

To gain deeper insights from her experience at NCPA 2026, we caught up with Bupathi after this year’s convention to discuss PBM-pharmacy relationships, contracting, and more. Listen as she provides key insights regarding the impact that network terminations have on community pharmacies and what they can do if they are susceptible to one.

READ MORE: PBM Underpayment Persists as Cost-Plus Brings New Strain | NCPA 2026

Unpacking the Cascading Financial Impact of PBM Terminations

Bupathi notes that network terminations often stem directly from audits, leaving pharmacies vulnerable to retroactive clawbacks and payment withholdings. These financial recoupment demands can escalate into serious contractual disputes that threaten operational cash flow.^1,2

PBMs regularly examine dispensing patterns and inventory reconciliation, transforming routine clerical discrepancies into allegations of fraud or waste. When a PBM places a pharmacy on payment withholding, the financial strain begins long before a formal termination notice takes effect.^1-3

Beyond direct financial liabilities, a single termination can trigger cascading cross-ownership and affiliation-based removals. Under aggressive enforcement strategies, PBMs extend termination decisions across entire network groups linked by shared ownership or management.^4,5

Even compliant pharmacies with flawless audit track records face removal simply due to indirect associations or minority ownership ties. PBMs frequently cite historical relationships or family connections to justify sweeping cross-terminations.⁴

The regulatory fallout of a PBM action extends into state board oversight and mandatory cross-PBM reporting. Most provider agreements mandate that pharmacies report disciplinary actions or state board inquiries to all active payor networks. Receiving PBMs routinely use these disclosures to launch parallel audits or justify secondary network exclusions. Furthermore, PBMs frequently refer audit findings to state boards of pharmacy or federal oversight agencies, potentially sparking double investigations.^1,3

Multi-Network Impact and Mandatory Reporting Obligations

When a termination occurs, PBMs actively redirect patients to competing network pharmacies, disrupting established relationships. This loss of patient access combines with long-term credentialing hurdles that affect a pharmacy's standing for years.^1,2

Ahead of year-end review cycles, PBMs intensify audit scrutiny around drug invoice reconciliations, copayment collections, and dispensing documentation. Failure to thoroughly reconcile National Drug Code inventory records or prove actual delivery creates immediate audit vulnerabilities that PBMs leverage.²

To minimize exposure, pharmacies must adopt proactive compliance strategies before an audit notice arrives. Conducting quarterly self-audits allows operators to reconcile inventory variances and identify documentation gaps early.^3,5

Complete transparency on credentialing applications remains essential because PBMs aggressively scrutinize prior disclosures to justify contract revocations. Maintaining meticulous, contemporaneous documentation for controlled substances and patient counseling shields operations against unmerited fraud accusations.

Strategic Defense Mechanisms and Legal Options

When facing a notice of termination, pharmacies must evaluate their contractual rights and adhere strictly to designated appeal deadlines.^3,5

Bupathi emphasizes that performing a rigorous cost-benefit analysis helps pharmacy owners determine whether legal intervention is warranted to restore network access.

Legal remedies include pursuing internal appeals, entering binding arbitration, or filing for preliminary injunctions in court to halt network removal. Early engagement with legal counsel allows pharmacies to evaluate business impacts, assert statutory audit protections, and preserve operational viability.^1,3

Pharmacies should also educate patients about their freedom of choice, as patients can request plan adjustments or transition to compatible plans during open enrollment.

By combining rigorous self-auditing with decisive legal action, independent pharmacy owners can successfully defend their contracts and protect their vital role in community health care.^3,5

READ MORE: NCPA Annual Convention & Expo Resource Center

REFERENCES

1. Yastrovskaya D. Collateral consequences of PBM audits: what pharmacies need to know. Health Law Alliance. November 4, 2025. Accessed October 16, 2026. https://www.healthlawalliance.com/blog/collateral-consequences-of-pbm-audits-what-pharmacies-need-to-know

2. Lee DY, Carlo Jr. J. PBM audits and network terminations: preparing pharmacies for heightened year-end scrutiny. Buchanan Ingersoll & Rooney PC. October 12, 2026. Accessed October 16, 2026. https://www.bipc.com/pbm-audits-and-network-terminations-preparing-pharmacies-for-heightened-year-end-scrutiny

3. Preparing for 2026: navigating PBM terminations and board of pharmacy risks. Frier Levitt. December 22, 2025. Accessed October 16, 2026. https://www.frierlevitt.com/articles/pbm-terminations-board-of-pharmacy-risks-2026/

4. Yastrovskaya D. The hidden PBM threat putting pharmacies at risk: affiliation-based network terminations. Health Law Alliance. January 9, 2026. Accessed October 16, 2026. https://www.healthlawalliance.com/blog/the-hidden-pbm-threat-putting-pharmacies-at-risk-affiliation-based-network-terminations

5. Challenging PBM pharmacy network terminations. Frier Levitt. October 8, 2025. Accessed October 16, 2026. https://www.frierlevitt.com/articles/challenging-pbm-pharmacy-network-terminations/