Long-term care (LTC) pharmacies face pressure from two sides: persistent drug shortages impact patient care, and Medicare payment reforms are reshaping cash flow. LTC facilities depend on accurate cycle fill, emergency kits and 24/7 coverage. They feel the pressure in negative margins, backorders and difficult conversations when patients can’t get their medications.
In this post, we’ll explain how Medicare changes will raise drug prices, why drug shortages remain high and how these factors combine to hit LTC pharmacies especially hard. Then, we’ll show you how streamlined pharmacy procurement enhances savings and increases efficiency in the face of these challenges.
Medicare Pricing Overview
The most significant change to Medicare pricing, resulting in substantial losses for most pharmacies, is due to the Inflation Reduction Act.
The IRA limits Medicare patients’ out-of-pocket costs and the amounts drug makers can charge. For 2025, Part D beneficiaries face a $2,000 annual cap on out-of-pocket drug costs, and industry actors must now implement the new benefit structure.
To compensate for lower patient costs:
- Manufacturers will launch new drugs with higher prices
- Insurers will adjust coverage based on lower margins
- Pharmacy benefit managers (PBMs) will update formularies
These changes impact prescription drug costs and pharmacy reimbursements, leading to LTC facilities incurring higher expenses for prescription drug products. They also encounter payment delays on refunds from drugmakers. Some pharmacies may now only receive reimbursement based on wholesale acquisition cost (WAC).
In January 2024, the U.S. Department of Health and Human Services eliminated retroactive Medicare Part D direct and indirect remuneration (DIR) clawbacks. DHH also eliminated the application of required pharmacy price concessions at the point of sale. These changes improve transparency but front-load the discount, triggering a cash crunch for many pharmacies.
Medicare’s drug price negotiation program is still rolling out. Negotiated “maximum fair prices” for the first cycle are scheduled to take effect in 2026. Additional rounds and timelines will extend through 2028. Medicare’s negotiations with drug manufacturers will continue to raise drug prices as downstream impacts change coverage, networks and pharmacy reimbursement.
Drug Shortages Analysis
Drug shortages have always been a constant. Yet now, their rate remains consistently high. We saw the highest rate of drug shortages in nearly a decade during the first quarter of 2024. Active shortages remain stubbornly high, with more than 200 active shortages as of late 2025. Many of these shortages are for the same drugs, stretching over years. Data from the FDA, GAO and USP indicate that the average shortage now lasts more than four years.
Shortages persist for several reasons:
- Raw material deficits, often compounded by overseas volatility
- Supply chain issues with specific products or materials
- Insufficient production to meet increased demand
- Regulatory challenges (e.g., delayed inspections and plant closures)
- Fragile manufacturing and quality lapses creating sudden supply shocks
- Manufacturers adjusting their production portfolios around low-margin categories
- Companies stockpiling inventory, creating the impression of an actual shortage
Shortage lists include higher rates for injectables, antibiotics and cardiovascular agents, which are all crucial to patient care at LTC facilities. These shortages lead to frequent therapeutic substitutions and fragmented sourcing, which complicates patient care and often raises costs while compromising pharmacy compliance.
Impact on LTC Pharmacy Purchasing
Put simply, drug prices combined with drug shortages add up to a huge strain on LTC pharmacies. The primary concern is clinical risks. Patients simply can’t receive their prescribed medications. Extended drug shortages also increase switchbacks, prior authorization restarts and reconciliation errors across cycle fills. These impacts, in turn, affect adherence and quality metrics tied to facility contracts.
But staff also feel the pressure when making pharmacy purchasing decisions. Pharmacists and buyers spend more time scrambling to find the right products, comparing alternatives and analyzing pricing and compliance. Teams are losing hours just chasing NDCs, validating NTEs and coordinating STAT deliveries to avoid missed doses or facility citations. Evidence from the GAO and FDA shows that shortages consume a significant amount of operational bandwidth.
Of course, LTC pharmacies also face cash flow volatility and reimbursement pressures. Higher drug prices are obviously a major force here. The POS application also means pharmacies face gross margin compression and heightened working capital needs, especially when acquisition costs rise during a shortage. Part D redesign and manufacturer negotiations alter plan behaviors on formularies and networks. Pharmacies need a clearer line of sight from acquisition cost to expected reimbursement; otherwise, margins take a significant hit.
Solutions to Mitigate Impact
LTC pharmacies can use enhanced pharmacy procurement strategies and pharmacy procurement software to regain control. In fact, solutions like SureCost are designed specifically for this intersection of pricing pressure and supply instability.
A single source of truth: A unified pharmacy procurement solution integrates all procurement data, including vendor catalogs (primary, secondary, direct-from-manufacturer, etc.), pharmacy contracts and pharmacy purchasing workflows (from uploading a purchase order through receiving to dispensing or returning). Buyers can quickly and easily determine the best option based on pricing, availability, compliance and other variables.
Optimized compliance: By integrating all vendor agreements, a solution like SureCost reveals the potential impact of a purchase on compliance before you make a decision. It also shows qualified alternatives within wholesaler and GPO agreements, reducing negative reimbursements on high-volume line items. Purchasers can compare alternatives during shortages without risking non-compliance. The pharmacy compliance software also flags overcharged items at receiving and models potential reimbursement before you upload a PO.
Insights into drug shortages: The best solutions analyze data to assess risk levels and the likelihood of shortages, allowing pharmacies to stay proactive. With all catalogs and contracts under one interface, teams can quickly and easily find cost-effective options. For example, SureCost synthesizes the latest FDA data and information from a nationwide vendor network to generate early alerts and surface competitive options from the “big three” wholesalers and hundreds of secondary wholesalers and manufacturers.
Business intelligence: When selecting a pharmacy procurement software, look for flexible, robust and easily configurable reporting. For example, backorder and fill-rate visibility metrics provide insights into vendor performance and lead times. Margin intelligence pairs acquisition options with expected reimbursement logic, allowing you to prioritize items that protect spread under POS pharmacy concessions and evolving Part D structure.
Summary
Medicare’s redesign and negotiation timeline will keep changing the financial ground under your feet, and drug shortages are unlikely to vanish soon. LTC pharmacies that centralize purchasing decisions, enforce contract discipline and embed shortage playbooks in their buying workflow will be best positioned to protect patients and margins.
The right pharmacy procurement software is key. The result is continuity of patient care, fewer last-minute vendor scrambles, efficient inventory and increased savings. This technology is no longer a luxury; it has become a vital purchasing tool. Pharmacy procurement software empowers you and your team to safeguard patient care and protect your facility’s bottom line.
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