In 2022, the Inflation Reduction Act (IRA) was signed into law, marking one of the most significant shifts in Medicare drug pricing policy in decades. While much of the discussion has centered on prescription drug price negotiation and beneficiary savings, the IRA fundamentally alters the economic structure underpinning pharmacy reimbursement—particularly in long-term care (LTC) settings. The IRA is already reshaping LTC pharmacy, increasing pricing transparency while shifting financial and operational complexity behind the scenes—directly impacting how reliably medications reach your residents.
Through the introduction of Maximum Fair Prices (MFPs), Medicare Prescription Payment Plans (M3Ps), insulin cost caps, and the phased expansion of negotiated pricing, the IRA accelerates transparency and compresses pricing variability across Medicare. These changes are designed to improve affordability while reshaping the financial dynamics of the healthcare system.
As traditional pharmacy pricing models break down, continuity of care increasingly depends on partners with the scale and infrastructure to absorb regulatory change without disrupting operations. Smaller, JV, and in-house pharmacy models face growing pressure under new reimbursement rules, raising real risks to service levels, compliance, and medication access over time.
In this environment, choosing the right pharmacy partner is no longer a tactical decision; it’s a strategic safeguard for resident care and organizational stability.
What the IRA Means for Patients in Different Care Settings
While the IRA aims to help Medicare beneficiaries lower their out-of-pocket costs for prescription drugs, some of its changes may have unintended consequences for pharmacies. Access to medications in skilled nursing facilities (SNFs) and assisted living facilities (ALFs) can be complex due to reliance on facility-based pharmacy services, with potential disruptions in pricing, reimbursement, and Medicare policies disproportionately affecting timely access, particularly for residents with multiple chronic conditions.
In addition to negotiated pricing, the IRA has introduced structural changes to Medicare Part D that further reshape the drug cost landscape. Beginning in 2026, beneficiary out-of-pocket spending will be capped at $2,100 annually, alongside the implementation of M3Ps, which allow patients to spread prescription costs over monthly payments. While these provisions are designed to improve affordability and adherence, they also introduce new administrative and billing complexities for pharmacies.
Historically, pharmacy reimbursement models relied on opaque pricing spreads to absorb variability in acquisition costs, administration, and working capital requirements. The expansion of MFP removes much of that flexibility. As negotiated pricing extends across high-volume, high-cost therapies, traditional spread-based pricing models are increasingly misaligned with regulatory intent, financial sustainability, and provider expectations—particularly in the LTC environment.
Early impacts are already emerging, as some manufacturers have begun lowering list prices on select high-cost therapies to reduce the likelihood of future MFP selection, with downstream effects across both Medicare and commercial markets. At the same time, these pricing shifts may begin to influence which therapies are most utilized within LTC settings, particularly for chronic conditions.
The full effect of the IRA provisions will continue to increase over time, specifically over the next three years, as more drugs are introduced to the program. The law phases in Medicare drug price negotiations which began in 2026 and will expand annually to additional groups of high-cost drugs each year through 2028, creating a cumulative expansion of negotiated pricing and beneficiary savings. CMS has already identified the first 10 high-expenditure Part D drugs subject to MFP in 2026, including widely used therapies such as Eliquis, Jardiance, Xarelto, Januvia, and Enbrel.
Click here to access the CMS timeline for the IRA.
Emerging Challenges for LTC Pharmacies
As the IRA brings sweeping changes to drug pricing and reimbursement in Medicare, LTC pharmacies face a range of financial and operational hurdles. These pricing and reimbursement shifts could have far-reaching implications for how LTC pharmacies manage costs, comply with new rules, and serve their patient populations.
Impact on Cash Flow
Pharmacies may experience financial burdens as the IRA requires Medicare to negotiate MFPs with manufacturers for certain high-cost drugs, ensuring that beneficiaries are charged no more than the MFP for these medications. CMS has reaffirmed that for MFP-eligible claims, total reimbursement cannot exceed the negotiated MFP plus a dispensing fee, which compresses gross reimbursement on high-cost brand drugs. In practice, this means pharmacies must purchase the medications upfront at full cost and then wait to be reimbursed by manufacturers or Medicare at the negotiated rate.
This delay in reimbursement forces pharmacies to “float” or carry the financial burden of these drug costs in the interim, which can strain their cash flow. The resulting cash flow compression disproportionately impacts pharmacies with limited scale, restricted access to capital, or reliance on narrow operating margins—conditions common among smaller and independent providers.
Under legacy pricing structures, pharmacies effectively act as short-term financiers—fronting the full acquisition cost of medications while awaiting capped reimbursement and manufacturer reconciliation. As MFP applies to some of the most commonly dispensed LTC drugs, that financial exposure grows materially. These pressures are expected to intensify as high-cost drugs, including widely prescribed anticoagulants and diabetes therapies, become subject to MFP, compressing margins on some of the most commonly dispensed medications in LTC settings.
Administrative Complexities
LTC pharmacies are facing growing challenges due to recent and upcoming IRA reforms. These requirements expose a critical reality: the operational and regulatory services pharmacies provide carry real costs that can no longer be reliably recovered through drug pricing spreads. CMS has acknowledged this risk and provided mechanisms for pharmacies to identify material cash flow concerns, but liquidity impacts may remain especially challenging for smaller or independent pharmacies with limited operating margins. Industry surveys suggest the magnitude of this strain is significant, with a majority of LTC pharmacies indicating they may need to reduce services, limit geographic coverage, or reassess operating models as these changes take effect.
Starting in 2026, approximately 20% of Medicare Part D revenue for LTC pharmacies will be from drugs that have an MFP, and starting in 2028, these impacts will also expand to Part B drugs. This follows the implementation of a $35 monthly cap on insulin cost sharing for Medicare beneficiaries and recent reimbursement changes.
Compounding the strain, pharmacies will need to recoup the difference between their acquisition cost and the MFP for MFP drugs from manufacturers, often on a delayed timeline, further tightening cash flow and administrative resources. At the same time, while some high-cost drugs may see reduced prices under MFP, overall pharmacy spend may not decline proportionally, as other therapies, including specialty biologics and newer branded medications, become more prominent cost drivers.
Pharmacies must also report drug use under MFP, adding complexity, especially since pharmacies typically don’t link sales to payer types. Additionally, M3Ps require investment in infrastructure as pharmacies must notify certain Medicare Part D enrollees at the point of sale if they are likely to benefit from participating in the program, and payors must submit to BIN/PCNs for opt-in members.
As compliance, reporting, and patient-level financial interactions increase, separating the cost of the drug from the cost of dispensing and pharmacy services becomes essential for transparency, sustainability, and operational resilience.
Looking Ahead
As Medicare drug pricing moves toward greater transparency, long-term care pharmacy is reaching a structural inflection point. Pricing models built on cross-subsidization and opaque spreads are increasingly incompatible with MFP reimbursement, evolving utilization patterns, and heightened regulatory scrutiny. A cost-plus pricing framework—where drug acquisition cost is transparently passed through, and pharmacy services are supported by a clearly defined dispensing fee—creates alignment, predictability, and trust across pharmacies, providers, and payers.
While negotiated pricing may lower costs for certain high-profile drugs, it is also expected to shift overall spending patterns, with other therapies that include specialty biologics, oncology treatments, and newer branded medications, representing a growing share of total pharmacy spend. These evolving dynamics may create new financial pressures for LTC providers, even as savings are realized in select areas.
These dynamics place greater strain on in-house and joint venture pharmacy models, which must absorb regulatory, financial, and compliance risk internally.
In this environment, scale, sophistication, and financial resilience are no longer competitive differentiators—they are prerequisites. Partnering with a large, experienced LTC pharmacy provider capable of managing working capital demands, manufacturer reimbursement complexity, and transparent pricing execution becomes an indispensable advantage. These partnerships provide the utmost clinical expertise, a payer negotiation infrastructure, regulatory compliance support, scalability and resource optimization, and white-glove customer service that LTC providers need.
As a trusted partner to LTC facilities, Omnicare provides comprehensive solutions to enhance patient care and streamline operations. With specialized expertise in LTC pharmacy services, we offer medication management, clinical pharmacy consulting, and innovative technology to support SNFs, ALFs, and other care providers. Omnicare has the scalability and trusted relationships to maintain medication access and cost control, continuing its dependability as an LTC pharmacy partner.
As the legislative landscape evolves, Omnicare will continue to prioritize efficiency and patient safety to help facilities deliver high-quality, reliable care. Omnicare’s scale, infrastructure, and pricing discipline uniquely position the company to lead this transition—supporting transparent drug pricing, sustainable pharmacy economics, and enhanced clinical capabilities while ensuring uninterrupted access to care.
