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

Underwater reimbursement and opaque maximum allowable cost (MAC) pricing remain the biggest financial threats to independent pharmacies heading into 2027. A newer challenge in pharmacy benefit manager (PBM) cost-plus contracting, however, is quickly becoming an industry-wide issue.

“A pharmacy cannot sustain its business if it is receiving reimbursement that does not cover the cost to acquire the drug,” AJ Barbarito, Esq, senior associate in Frier Levitt’s Life Sciences Litigation practice group, relayed to Drug Topics® in a quip all too familiar across pharmacy.

Exploring some of the most-discussed legal insights from NCPA 2026, Barbarito recently joined us to tackle some of the ongoing reimbursement issues facing community pharmacy heading into the new year. According to him, the current reimbursement dilemma in pharmacy practice lies in 2 familiar challenges as well as the emerging new pressures within cost-plus pricing.

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Persistent Reimbursement Pressures and State Legal Backlash

These longstanding financial hazards continue to erode pharmacy balance sheets, namely direct underwater reimbursement and opaque MAC lists. Many long-term PBM agreements feature rates that have steadily deteriorated over time, ultimately forcing community pharmacies to fill prescriptions well below acquisition costs.

At the same time, MAC pricing methodologies remain largely lacking in transparency and rarely update in tandem with fluctuating drug market prices.

Although pharmacies can theoretically appeal underpaid claims, PBMs routinely deny these requests. Furthermore, filing an individual appeal requires substantial labor resources that often exceed the monetary value of the disputed claim itself, creating a significant administrative barrier.

These severe rate reductions have sparked major antitrust litigation from state enforcement officials. In a prominent legal action, Florida Attorney General James Uthmeier filed suit against Prime Therapeutics and Express Scripts alleging an illegal price-fixing arrangement. The complaint details how Prime adopted lower reimbursement rates from Express Scripts, causing payments to drop across 80% of brand name drugs and 70% of generics.¹

In one documented instance outside Orlando, a pharmacy experienced a 45% reimbursement cut on a single prescription, converting a modest profit into a loss of $15.45 per fill.

Uncovering the Hidden Strains of Cost-Plus Models

In response to widespread industry criticism, major regulatory settlements have sought to reshape commercial contracting. Landmark enforcement actions by the Federal Trade Commission (FTC) against Express Scripts and CVS Caremark require PBMs to offer new cost-plus reimbursement options to community pharmacies.^2,3

Under a true cost-plus framework, reimbursement is calculated using actual acquisition costs plus a set dispensing fee. Despite this model promising greater transparency, Barbarito warns that emerging contracts contain severe operational pitfalls for independent operators.

A primary concern involves PBM demands for confidential wholesaler invoices to verify dead-net acquisition costs. Sharing proprietary purchasing data poses substantial risks for independent pharmacies, particularly when PBMs own competing retail chain entities.

Moreover, reimbursing strictly at dead-net acquisition cost strips away off-invoice discounts and purchasing rebates, effectively punishing pharmacies for negotiating favorable inventory terms. Experts also emphasize that FTC consent orders do not establish mandatory floors or minimum dollar amounts for dispensing fees.²

PBMs frequently offer nominal dispensing fees that are not pegged to objective cost surveys, transforming intended cost-plus models into margin-eliminating, cost-neutral arrangements, according to Barbarito.

Regulatory Horizons and Federal Contract Standards

The ongoing shift toward cost-plus pricing arrives as federal regulators prepare broader structural reforms under the Consolidated Appropriations Act of 2026. The Centers for Medicare and Medicaid Services recently published a Request for Information seeking public input on establishing mandatory reasonable and relevant contracting standards within Medicare Part D.⁴

By federal statute, the Secretary of Health and Human Services must finalize these enforceable standards by April 2028 for implementation in the 2029 plan year. The agency is examining whether current reimbursement structures and dispensing fees adequately cover actual ingredient and operational expenses across diverse pharmacy settings. Until enforceable federal standards take effect, community pharmacists must carefully evaluate incoming contracts to protect their financial viability.²

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REFERENCES

1. Morse S. Florida AG sues Prime Therapeutics, Express Scripts alleging price fixing. Healthcare Finance. August 31, 2026. Accessed October 14, 2026. https://www.healthcarefinancenews.com/news/florida-ag-sues-prime-therapeutics-express-scripts-alleging-price-fixing

2. Barbarito AJ, Bennet SL. FTC’s Caremark settlement: what it means for pharmacies, PSAOs, and wholesalers. Frier Levitt. August 13, 2026. Accessed October 14, 2026. https://www.frierlevitt.com/articles/ftc-caremark-settlement-pharmacies-psaos-wholesalers/

3. FTC secures landmark settlement with Express Scripts to lower drug costs for American patients. FTC. News Release. February 4, 2026. Accessed October 14, 2026. https://www.ftc.gov/news-events/news/press-releases/2026/02/ftc-secures-landmark-settlement-express-scripts-lower-drug-costs-american-patients

4. Request for information; Medicare Part D reasonable and relevant pharmacy. Federal Register. September 24, 2026. Accessed October 14, 2026. https://public-inspection.federalregister.gov/2026-19535.pdf