The IRA and Your Pharmacy: A Complete Guide to Medicare Drug Pricing Reform and How to Protect Your Margins
- RxConnexion
- Aug 3
- 4 min read
The Inflation Reduction Act (IRA) is more than a piece of federal legislation—it’s a shift in how prescription drugs are priced, reimbursed, and ultimately, how your pharmacy does business. The Medicare Drug Price Negotiation Program, which rolls out in stages starting in 2026, will have direct implications for revenue, inventory, patient behavior, and cash flow—especially for independent pharmacies serving Medicare populations.
In this guide, we break down the key components of the IRA and how pharmacy owners can proactively manage these changes to protect profitability and create sustainable revenue models.
What Is the IRA and What Does It Mean for Pharmacies?
The Inflation Reduction Act, signed into law in August 2022, gives Medicare the power to negotiate prices on select high-cost, single-source brand-name drugs. This initiative, aimed at reducing drug spending and out-of-pocket costs for seniors, marks a significant departure from decades of pricing precedent.
Key Highlights:
Medicare can now negotiate prices with manufacturers for certain drugs.
Maximum Fair Price (MFP) will be established for negotiated drugs.
Implementation begins in 2026 with 10 drugs, expanding to 60+ drugs by 2029.
Applies to drugs under Medicare Part D (2026) and Part B (2028).
Implications for Pharmacy Owners:
Reimbursements tied to these drugs will decline over time.
Margin compression will occur on top-selling, high-cost medications.
Volume may increase as patient copays decrease—but margins may shrink.
Pharmacies must prepare for the disconnect between volume and profitability.
Questions You Should Be Asking:
How exposed is my pharmacy to Medicare Part D business?
What percentage of my revenue comes from brand-name drugs at risk for MFP?
Do I have a plan to replace lost margin?
At RxConnexion, we help pharmacies assess risk exposure by providing data analytics and real-time performance tracking tools to guide operational decisions.
Breaking Down the Drugs and Dollars in the MFP Program
In September 2023, CMS published the first 10 drugs selected for price negotiation, representing a large share of total Medicare Part D spend. These drugs are:
Eliquis (apixaban)
Jardiance (empagliflozin)
Xarelto (rivaroxaban)
Januvia (sitagliptin)
Farxiga (dapagliflozin)
Entresto (sacubitril/valsartan)
Enbrel (etanercept)
Imbruvica (ibrutinib)
Stelara (ustekinumab)
Fiasp/Novolog (insulin aspart)
Financial Impact:
These 10 drugs alone represent over $50 billion in annual Medicare spending.
Pharmacies dispensing these drugs will see new MFP-based reimbursements starting in 2026.
Margins on these medications are expected to tighten significantly, especially for pharmacies with a high Medicare patient base.
Why This Matters:
Most independent pharmacies dispense several of these drugs daily. Although reduced patient cost-sharing may increase fill rates, your reimbursement per script will likely decline. Without a strategy, this could create a false sense of growth—more prescriptions, but less profit.
What to Do Now:
Review your top 100 dispensed medications and flag overlap with the MFP list.
Monitor your dispensing volume by payer, especially Medicare Part D.
Analyze your average gross profit per prescription and adjust accordingly.
RxConnexion provides tools that automatically analyze your dispensing trends, flag revenue risks, and help you plan for the ripple effects of Medicare pricing reform.
Managing Inventory, Reimbursement, and Cash Flow in the MFP Era
Once MFP pricing takes effect, pharmacies must make operational changes to maintain cash flow and profitability. Reduced reimbursement on high-cost drugs means you'll need a leaner, smarter inventory and more diversified income streams.
Inventory Management Tactics:
Shrink inventory levels for MFP-listed drugs with low turnover.
Negotiate better purchase terms with your wholesaler or GPO.
Consider Just-In-Time ordering for expensive low-margin medications.
Monitor inventory carrying costs closely to prevent cash flow gaps.
Cash Flow Strategies:
Build a cash reserve to manage reimbursement lags.
Adjust your Days on Hand metric to reflect post-MFP turnover rates.
Evaluate payment terms with vendors to improve working capital cycles.
Use analytics to project revenue dips and plan ahead.
Revenue Diversification:
This is the time to develop services outside the PBM model:
Telemedicine services through XPedicareRx-24
Custom compounding for both human and veterinary medications
Niche treatments such as GLP-1, ED, hormone support, dermatology, etc.
Cash-based programs such as weight loss or men’s health
Travel vaccines, point-of-care testing, and clinical consults
Engaging Patients:
MFP changes will lower out-of-pocket costs for some of your Medicare patients. Use this as an opportunity to:
Educate them on how they benefit.
Guide them toward adherence.
Cross-promote your clinical services and delivery/prescription packaging options.
The RxConnexion Edge: Proactive Support for the Independent Pharmacy
At RxConnexion, we understand the real impact of reimbursement reform. That’s why our platform combines:
Data analytics to monitor dispensing trends, margins, and prescriber behavior
Central Fill compounding to offer high-margin, low-risk products
Telemedicine integration to drive cash-based prescriptions and new patient access
Targeted marketing tools to engage prescribers and patients directly
You don't need to navigate these changes alone. We're here to help you pivot, profit, and grow in a system that increasingly favors scale and compliance.
Take Action Now
Medicare price negotiations under the IRA aren’t just a policy update—they’re a turning point. The pharmacies that adapt early will survive and thrive. The ones that delay will fall behind.
Want to see how exposed your pharmacy is to MFP pricing? Need help developing cash-based programs to offset declining margins?
Schedule a free strategy call with RxConnexion today at www.RxConnexion.com and let’s map out your response together.
