Understanding State Reimbursement Legislation for Pharmacies

The Evolving Landscape of Pharmacy Reimbursement

As a pharmacy owner or operator, you’re no stranger to the complex world of prescription reimbursements. The financial health of your pharmacy depends not just on filling prescriptions, but on being adequately compensated for the medications dispensed and services provided. Yet, for years, pharmacies across the nation have grappled with reimbursement rates that often fail to cover acquisition costs, let alone operational expenses. This persistent challenge threatens the sustainability of pharmacy practice and, ultimately, patient access to vital medication services.

The good news? State legislatures are increasingly recognizing this critical issue. In 2025 alone, we’ve seen unprecedented legislative activity aimed at ensuring fair pharmacy reimbursement practices. During the first quarter, 49 states opened their general sessions, with over 50 bills specifically addressing dispensing fees and more than 40 targeting spread pricing practices. This legislative momentum represents a significant shift in how policymakers view the importance of maintaining viable community pharmacies.

But what does this flurry of legislative activity mean for your pharmacy? Let’s explore how these changes could impact your bottom line, operational decisions, and ability to serve your community effectively. Understanding these developments is crucial for positioning your pharmacy to thrive in this evolving reimbursement landscape.

The Current State of Pharmacy Reimbursement Challenges

Before exploring the solutions being proposed, it’s important to understand the key problems these laws aim to address. Pharmacy owners nationwide have been vocal about several persistent issues that threaten their financial viability and ability to serve patients effectively.

Below-cost reimbursements: PBMs often set reimbursement rates below the actual cost of medications, forcing pharmacies to dispense at a loss, especially with generic medications. This practice is particularly problematic because generics constitute the majority of prescriptions filled at most pharmacies. When reimbursements consistently fall below acquisition costs, pharmacies face an unsustainable business model that threatens their very existence.
Unpredictable DIR fees: These retroactively applied fees can wipe out profit margins from prescriptions filled months earlier, making financial planning extremely difficult. The unpredictable nature of these fees creates significant cash flow challenges, as pharmacies cannot accurately forecast their actual reimbursement for prescriptions already dispensed. This uncertainty makes business planning, inventory management, and staffing decisions exceptionally challenging.
Spread pricing practices: When PBMs charge plan sponsors more than they reimburse pharmacies and pocket the difference, sometimes reaching double-digit percentages of prescription costs. This lack of transparency in the prescription drug supply chain diverts funds that could otherwise benefit both patients and pharmacies. The hidden nature of spread pricing makes it particularly difficult for pharmacies to negotiate fair reimbursement rates.
Inadequate dispensing fees: While the average cost of dispensing ranges from $10-$15 per prescription, reimbursements often include dispensing fees under $2. These inadequate fees fail to recognize the professional services, expertise, and resources required to safely dispense medications. The significant gap between actual dispensing costs and reimbursed fees places additional financial pressure on pharmacies of all sizes.
Steering to PBM-affiliated pharmacies: Some PBMs direct patients to their own affiliated pharmacies, limiting patient choice and harming independent pharmacies. These practices not only disrupt established patient-pharmacist relationships but also create concerning conflicts of interest in the prescription drug supply chain. Patients often find themselves unable to use their preferred local pharmacy due to these steering practices.
MAC list manipulation: PBMs set Maximum Allowable Cost prices without transparency and often fail to update them when drug costs increase, leaving pharmacies to absorb the difference. The proprietary nature of these MAC lists makes it nearly impossible for pharmacies to verify appropriate reimbursement or effectively challenge inaccurate pricing. The lag time between drug cost increases and MAC list updates further exacerbates financial pressures.

These challenges create an unsustainable business environment where pharmacies struggle to maintain profitability while continuing to provide essential healthcare services. Many community pharmacies have been forced to reduce staff, limit services, or even close their doors permanently as a result of these reimbursement pressures.

Key Legislative Trends in 2025

The first quarter of 2025 has demonstrated remarkable legislative activity addressing pharmacy reimbursement challenges. Lawmakers appear increasingly receptive to concerns raised by pharmacy advocates regarding the sustainability of current reimbursement models.

Dispensing Fee Regulations

Over 50 bills nationwide address dispensing fees, with states like Texas considering legislation (HB 2978) that would mandate dispensing fees between $7-$10. These measures recognize that dispensing involves more than counting pills; it includes patient counseling, drug utilization review, and managing insurance requirements. The push for higher dispensing fees acknowledges the professional services pharmacists provide and the resources required to operate a pharmacy safely and effectively.

By establishing minimum dispensing fees, these bills aim to ensure that pharmacies receive fair compensation for the clinical and operational aspects of prescription fulfillment. This approach represents a significant shift from viewing pharmacy services as purely product-focused to recognizing the valuable healthcare services pharmacists provide.

Maximum Allowable Cost (MAC) Transparency

Many states are pushing for greater transparency in MAC lists. Bills in states like Colorado (HB 1094) include provisions requiring timely updates to MAC lists when drug acquisition costs increase, preventing pharmacies from dispensing medications at a loss. These transparency measures are designed to create more accountability in how PBMs establish and maintain reimbursement rates.

These measures often include appeal processes for pharmacies to challenge inappropriate MAC prices and requirements for PBMs to disclose their sources for determining rates. By bringing these previously opaque processes into the light, legislators hope to create a more level playing field for pharmacies negotiating with PBMs and ensure that reimbursement rates more accurately reflect actual medication costs.

Spread Pricing Prohibitions

With over 40 bills addressing spread pricing, states are targeting one of the most controversial PBM practices. Montana’s HB 740 includes provisions to eliminate spread pricing by requiring PBMs to pass through the exact amount paid to pharmacies to the health plan. This approach aims to remove hidden markups that benefit PBMs at the expense of both pharmacies and plan sponsors.

These bills typically mandate a “pass-through” pricing model, aligning the interests of PBMs more closely with those of plan sponsors and pharmacies. By requiring transparent administrative fees rather than hidden markups, these provisions could significantly impact pharmacy reimbursement structures and create more predictable revenue streams.

Affiliate Pharmacy Restrictions

More than 50 bills address affiliate relationships and steering practices. States like Oregon are considering legislation (OR 2252) that would prohibit PBMs from being affiliated with health insurers, while others like Texas (HB 5457) aim to prevent PBMs from owning pharmacies altogether. These measures target the inherent conflicts of interest that arise when PBMs direct patients to their own affiliated pharmacies.

These “anti-steering” provisions aim to level the playing field by ensuring patients can choose their pharmacy based on service quality rather than being directed to PBM-owned outlets. By limiting vertical integration in the prescription drug supply chain, these bills seek to preserve patient choice and promote fair competition among pharmacies.

NADAC-Based Reimbursement

Several states are exploring National Average Drug Acquisition Cost (NADAC) as a benchmark for reimbursement, following the Supreme Court’s 2020 ruling that states can regulate ERISA plans for specific PBM rate regulations. NADAC represents a significant shift toward more transparent, acquisition-based reimbursement models.

NADAC offers a more transparent alternative to proprietary MAC lists, as these rates are publicly available and based on actual pharmacy acquisition cost surveys. Bills incorporating NADAC typically include provisions for a reasonable markup percentage plus a fair dispensing fee, creating a more sustainable reimbursement structure for pharmacies.

Copay Accumulator Prohibitions

Over 40 bills target copay accumulator programs, which prevent manufacturer copay assistance from counting toward a patient’s deductible or out-of-pocket maximum. These programs often lead to prescription abandonment when patients face unexpected costs after their copay assistance is exhausted.

For pharmacies, high abandonment rates mean wasted resources on prescriptions that are processed but never picked up. By prohibiting these accumulator programs, states aim to improve medication adherence while also addressing a significant operational challenge for pharmacies.

High-Impact Legislation to Watch

Among the numerous bills addressing pharmacy reimbursement, several stand out for their comprehensive approach and potential significant impact.

Alabama SB 252

This bill has passed both chambers and awaits the Governor’s decision. It contains provisions that could substantially improve pharmacy reimbursement structures, including more transparent MAC processes and limitations on retroactive claim adjustments. The bill represents a comprehensive approach to addressing multiple reimbursement challenges simultaneously.

Colorado HB 1094

Having passed the House and now in Senate committee, this bill prioritizes pharmacy reimbursement provisions that could set new standards for fair compensation, including requirements for cost-based reimbursement. Its progress through the legislative process has been closely watched by pharmacy advocates nationwide, as its provisions could serve as a template for other states.

Oklahoma SB 789

After Senate passage, this bill moves to the House with provisions addressing several key reimbursement issues affecting community pharmacies, including requirements for transparent reimbursement methodologies. The strong support in the Senate suggests growing bipartisan recognition of the need for PBM reform to protect both local pharmacies and the patients they serve.

Illinois HB 3705

Recently amended to include several key issues and backed by the Governor’s office, this pending legislation could reshape pharmacy reimbursement in Illinois by addressing both pricing transparency and network adequacy. With executive branch support, this bill has a strong chance of implementation and could create a more sustainable reimbursement environment for Illinois pharmacies.

ERISA Preemption: A Pivotal Legal Battle

The ongoing PCMA v. Mulready case before the Supreme Court could determine whether states have broad authority to regulate ERISA plans regarding PBM activities and pharmacy reimbursement. This case represents a critical juncture in states’ ability to address pharmacy reimbursement challenges comprehensively.

The 2020 Rutledge v. PCMA decision established that states could regulate certain aspects of pharmacy reimbursement without running afoul of ERISA preemption. However, the current case may further clarify or potentially limit this authority. The outcome will have far-reaching implications for the effectiveness of state legislation addressing pharmacy reimbursement issues.

The Impact on Different Pharmacy Settings

The wave of state legislation will affect various pharmacy practice settings differently, based on their unique business models and challenges.

Independent Community Pharmacies

For independent pharmacies, these legislative changes could mean the difference between struggling to stay afloat and returning to sustainable profitability. Provisions addressing below-cost reimbursements and inadequate dispensing fees directly target the financial pressures that have forced many independent pharmacies to close. By ensuring fair compensation for both products dispensed and professional services provided, this legislation could help preserve access to pharmacy care in underserved communities where independent pharmacies often play a critical role.

Chain Pharmacies

While chain pharmacies may have more negotiating leverage and greater economies of scale, they still face many of the same reimbursement challenges. Legislation addressing retroactive DIR fees and spread pricing will benefit chains by creating more predictable revenue streams. For publicly traded pharmacy chains, more stable and transparent reimbursement models could lead to more consistent financial performance, benefiting both shareholders and the patients they serve.

Specialty Pharmacies

Specialty pharmacies dispensing high-cost medications may see particular benefits from legislation addressing timely reimbursement updates and prohibitions on self-dealing by PBMs. The high acquisition costs of specialty medications make below-cost reimbursement particularly damaging. Legislation ensuring prompt updates to reimbursement rates when acquisition costs increase is especially important in the specialty space, where new medications and price changes occur frequently.

Practical Steps for Pharmacy Owners

While these legislative developments are promising, pharmacy owners shouldn’t simply wait for new laws to take effect. Proactive management remains essential for navigating the current reimbursement landscape while preparing for potential improvements.

Track your reimbursements: Monitor rates across all payers to identify problematic contracts and trends. Implementing systems to track reimbursement at the prescription level can provide valuable insights into which contracts are performing adequately and which may require renegotiation or termination.
Document below-cost reimbursements: Maintain records of instances where reimbursements fall below acquisition cost. This documentation can support appeals to PBMs and, if necessary, complaints to state regulatory authorities. Detailed records also provide powerful evidence when advocating for legislative changes.
Engage with your state pharmacy association: These organizations are often at the forefront of legislative advocacy. Your firsthand experiences with reimbursement challenges can provide powerful testimony in legislative hearings and help shape effective policy solutions.
Diversify revenue streams: Explore additional services like medication therapy management and immunizations. Expanding clinical service offerings can reduce dependence on prescription reimbursement while better utilizing pharmacists’ clinical expertise to improve patient care.
Optimize purchasing: Maximize preferred product opportunities and leverage buying group relationships. Even small improvements in purchasing efficiency can help offset reimbursement challenges and improve overall profitability.
Analyze contract performance: Regularly review each PBM contract against expectations. This analysis can inform renegotiation strategies and help prioritize which contracts to focus on improving.
Educate your patients: Help patients understand how PBM practices affect their access to pharmacy care. Informed patients can become powerful advocates for fair pharmacy reimbursement practices and support their local pharmacies.

The Future of Pharmacy Reimbursement

The unprecedented level of legislative activity in 2025 signals a potential turning point for pharmacy reimbursement. As PBM practices face increasing scrutiny, we may be witnessing the beginning of a more transparent, fair reimbursement system that better recognizes the value pharmacies provide.

Looking ahead, we can expect:

Greater transparency throughout the prescription drug supply chain, with clearer connections between what patients pay, what plan sponsors pay, and what pharmacies receive.
More value-based reimbursement models that reward pharmacies for improving patient outcomes rather than simply filling prescriptions. These models align with broader healthcare trends toward quality-based payment.
Continued evolution of pharmacy practice beyond traditional dispensing, with expanded clinical services supported by appropriate reimbursement structures that recognize pharmacists’ expertise and training.
Technological innovations that streamline reimbursement processes, reduce administrative burdens, and provide real-time visibility into contract performance and prescription profitability.

Leveraging Data to Navigate the Changing Landscape

Data-driven decision-making becomes more critical in this evolving regulatory environment. Pharmacies that can quantify the impact of reimbursement challenges and identify optimization opportunities will be best positioned to thrive amid changing reimbursement structures.

Advanced analytics can help identify:

Prescriptions consistently reimbursed below cost, allowing for targeted interventions such as product substitution, contract renegotiation, or strategic inventory management to minimize financial losses.
Patients at risk of medication non-adherence due to reimbursement issues, enabling proactive outreach to preserve both patient health and pharmacy revenue through improved adherence rates.
Optimal product mix strategies that maximize reimbursement while meeting patient needs, particularly in therapeutic categories with multiple treatment options where reimbursement varies significantly.
Performance trends across different payers and plans, highlighting which relationships deliver the most value and which may require renegotiation to ensure sustainable reimbursement rates.

How We Can Help

At Stratos Insights, we understand the challenges you face with reimbursement legislation. Our business intelligence dashboard integrates real-time data to help you track reimbursement patterns, identify below-cost dispensing, and optimize purchasing decisions to maximize profitability in this challenging environment.

Our wholesaler performance monitoring tools and contract analysis capabilities ensure you’re maximizing every opportunity for improved reimbursement. With custom reporting features, you can quickly identify trends and make data-driven decisions that protect your bottom line while continuing to provide exceptional patient care.

The landscape is changing rapidly, but with the right data and expertise, your pharmacy can navigate these changes successfully and emerge stronger than ever. Our team remains committed to helping pharmacies thrive amid evolving reimbursement models and legislative requirements.

Note: Always consult with a healthcare provider before beginning any new therapy or treatment program.