The Inflation Reduction Act (IRA) has a simple and admirable goal: lower prescription drug costs and improve the sustainability of Medicare. While the actual effects of the IRA may help some patients, they could also be catastrophic for pharmacies, and some patients may lose access to vital medications. This blog post will discuss the impact of the IRA on pharmacies and what they should prepare for, along with strategies to mitigate these effects.
How the IRA Impacts Pharmacies Financially
In summary, the IRA enables Medicare to negotiate with drug manufacturers on prices for prescriptions common among Medicare Part D patients. Medicare can cap patients’ out-of-pocket costs for these drugs and limit the prices drug manufacturers can charge. If a drug company raises prices faster than the inflation rate, it must pay a rebate to Medicare (that helps sustain the program).
While this may lower patient costs, the IRA means significant financial losses for pharmacies that will affect patient service and business solvency. Why? Drugmakers will compensate for reduced prices by launching new drugs with higher prices. They may also adjust production strategies to maximize profitability, leading to market compression and shortages.
Insurers will adjust their coverage to gain similar advantages, and pharmacy benefit managers (PBMs) will change formularies to compensate for lower margins. This will impact reimbursement dynamics and pharmacies' payments. PBMs already manage most US prescriptions and impose substantial fees on pharmacies. Independent pharmacies also receive lower reimbursements compared to PBM-managed pharmacies.
In addition to lower reimbursement rates, independent pharmacies serving Medicare D patients must lay out thousands of dollars upfront to purchase these popular drugs. They must then wait to receive refunds from the drug manufacturers. These payment delays will result in huge financial losses for pharmacies. To mitigate potentially business-closing losses, independent pharmacists have already decided not to stock drugs, meaning patients can’t get the drugs they need.
In addition to losses due to reimbursement wait times, pharmacies must also provide documentation and purchasing data to receive reimbursement. These requirements mean that pharmacies incur additional costs to install the necessary infrastructure (or risk losing out on rebates). This is on top of similar expenses to ensure “track and trace” under the latest DSCSA regulations.
Why LTC Pharmacies Face Even Greater Risks
Despite the IRA’s goal of easing patient costs, the financial burden placed on pharmacies could potentially put many of them out of business while reducing patient access to the most common prescription drugs. Long-term care pharmacies face additional challenges under the IRA.
Unlike retail pharmacies, LTC pharmacies can’t simply choose not to purchase these products. They’re often contractually obligated to stock these drugs for patients in the facilities they serve. They’re essentially forced to “take the loss.” At the same time, LTC pharmacies typically receive reimbursement for the drugs on this list based on wholesale acquisition cost (WAC) plus a percentage. Under the new regulations, effective January 2026, they will only get paid based on WAC. This will create another significant financial burden on LTC pharmacies.
This isn’t just an issue with the payment model to LTC pharmacies. The IRA will create issues for LTC residents. These pharmacies are forced to adjust how much they order, leading to potential facility shortages and patients losing access to essential medicines. Many LTC pharmacies are already exploring new care models (for example, behavioral health) as part of their effort to maintain financial viability, and patients may see changes or cuts to the services they need. LTC pharmacy consolidations are increasing, and it’s unclear how these new arrangements will impact patients.
Strategies Pharmacies Can Use to Reduce Losses
Pharmacies can’t change drug prices, but they can become more nimble in the face of them. Access to as many purchasing options as possible is key. Instead of relying on the same wholesalers or shopping the top 200 generics, an expanded vendor portfolio provides alternative sources, better pricing options, and more savings opportunities while providing backup options when shortages hit. SureCost’s Smarter Purchasing Report found that purchasing outside the Top 200 reduced pharmacies’ cost of goods sold (COGS) by an average of approximately 11%.
Enhanced pricing tools are essential as IRA-related reimbursement complexity increases. Amidst other financial burdens, pharmacies must validate every purchase to ensure they get the right product at the quantity they ordered for their negotiated price. For example, SureCost’s Smarter Purchasing Report found that, on average annually, about 15% of GPO-qualified purchases were priced incorrectly. This meant pharmacies were paying an average annual overcharge of nearly $103K, with some losing almost 55% of their GPO spend to incorrect pricing.
A unified purchasing management solution provides all of these functions by integrating vendor catalogs and data into a single interface, analyzing all purchasing options and calculating the best choice for your pharmacy. Operational efficiency remains critical for cost containment. Accomplishing these goals quickly and efficiently will also reduce costs while easing the burden on already overworked staff.
What Pharmacies Must Do Now to Prepare
As the IRA covers more drugs, these challenges will only compound. Financial losses and impacts on product supply could be disastrous for pharmacies and their patients. Pharmacies must do everything possible to reduce costs, find new savings opportunities, and ensure access to vital prescription drug products. Pharmacies that act now—by expanding vendor options, tightening cost controls, and adopting smarter purchasing tools—will be best positioned to navigate IRA-driven disruptions and continue delivering critical care to patients.
