A New World Order of Drastically Lower Pharmacy Reimbursement Series – Part 3: Reviewing and Challenging PBM and Plan Sponsor Contract Amendments

In part one of this article series, Frier Levitt dissected the May 9, 2022, Centers for Medicare and Medicaid Services (CMS) Final Rule (Final Rule) entitled, “Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs.” 

In part two, we explored Medicare Part D economics and provided pharmacies with a framework to project the impact on pharmacy reimbursement and evaluate against pharmacy acquisition and operation costs.

Here, in the third and final part of this article series, we explore the legal protections that benefit pharmacies in challenging unreasonable reimbursement. Overall, the law creates obligations on PBMs and plan sponsors to not only offer standard terms and conditions that allow participation in Medicare Part D networks, but also require those terms and conditions to be both reasonable and relevant as to Part D drug reimbursement. 

Do Providers Have Any Legal Protection?

Providers are protected by multiple state and federal laws that give rise to claims against PBMs and plan sponsors that do not provide reasonable and relevant terms and conditions, including reimbursement rates on Part D drugs. 42 U.S.C. §1395w-104(b)(1)(A); 42 C.F.R. §423.505(b)(18); Medicare Prescription Drug Benefit Manual, Chapter 5. For example, CMS has explicitly directed that “Part D sponsors must offer reasonable and relevant reimbursement terms for all Part D drugs as required by 42 CFR 423.505(b)(18) [the AWPL].”

Can Providers Challenge Unreasonably Low Reimbursement?

Providers absolutely should review their individual pharmacy economics to evaluate the impact of PBM/plan sponsor pricing, as discussed in part two of this article series. Using this information, providers can either challenge PBM/plan sponsor reimbursement directly or advocate that their PSAO negotiate more favorable reimbursement terms.  If a PBM or plan sponsor refuses to offer reimbursement terms that are reasonable and relevant, providers should explore whether their contract with the PBM/plan sponsor create contractual requirements to adhere to the AWPL.  Providers should also know that many state laws require reasonable reimbursement. In the past few years, multiple states have enacted legislation that give providers additional tools to seek reasonable reimbursement for both brand and generic medications. 


PSAOs are in a particularly important position in the New World Order as these organizations enter into contracts on behalf of their networks composed of thousands of independent pharmacies.  PSAOs should evaluate pricing offered by PBMs and plan sponsors and expect pharmacy push-back if PSAOs agree to terms that put independent pharmacies out of business.  As a result, PSAOs will need to make tough decisions regarding whether to enter into these networks. 

The Tide is Turning Against PBMs

Historically, there has been a narrative that opposing PBM contract amendments is a futile endeavor.  However, this tide is turning.  States have enacted laws that regulate PBMs, place limits on PBMs’ ability to control the pharmacy marketplace and expose previously hidden portions of the drug coverage market.  Just one example is the recently created Pharmacy Benefits Bureau.  The Bureau, which is established under New York’s Department of Financial Services, will have several responsibilities as a PBM “watchdog” including establishing standards to protect consumers and independent small businesses.

Federal oversight has also expanded. On Monday, June 6, 2022, the Federal Trade Commission (FTC) voted unanimously to approve a “6(b)” study into the anti-competitive and abusive practices of PBMs, a move that has the potential to lead to relief for independent pharmacies and other providers that dispense drugs to patients.

With this backdrop, providers have a strengthened position to pushback and challenge unreasonable and predatory reimbursement offered by PBMs.

How Frier Levitt can Help

Frier Levitt’s attorneys are experienced in disputes between independent pharmacies and PBMs and have fought for 22 years to assist pharmacies in arbitration/litigation predatory pricing and auditing by PBMs.  In the last eight months, Frier Levitt has been able to recover over $45 million dollars in damages from PBMs to benefit pharmacies.  Additionally, Frier Levitt drafts state and federal legislation, industry white papers and agency comments provided to regulators.  Call Frier Levitt to learn more.