This bill adds a short-term mechanism to support long-term care pharmacies that dispense Part D drugs to residents of institutional settings by directing prescription drug plan sponsors and MA–PD organizations to pay a per-prescription supply fee to those pharmacies. The statute requires the fee be paid in addition to any negotiated ingredient or dispensing payments and creates enforcement language for failures to pay.
To offset plan cash flow and limit insurer exposure, the Department of Health and Human Services must return the aggregate amount of those supply fees to the plans through a subsidy mechanism. The bill also orders an independent study to analyze payment levels, pharmacy costs, and market trends to inform longer-term policy options for maintaining access in long-term care markets.
At a Glance
What It Does
The bill requires Part D plan sponsors and MA–PD organizations to remit a per-prescription supply payment to long-term care pharmacies for certain prescriptions dispensed under Part D, and it specifies that this payment is separate from and cannot reduce other negotiated pharmacy reimbursements. CMS is directed to provide a subsidy to plans equal to the aggregate supply fees they pay out to pharmacies, and the statute creates a civil enforcement tool for nonpayment.
Who It Affects
Directly affects PDP sponsors and MA organizations offering MA–PD plans, long-term care pharmacies that serve institutional residents, and Medicare beneficiaries in long-term care settings who receive drugs under Part D. Indirectly affects PBMs, plan pharmacy networks, and CMS compliance and payment operations.
Why It Matters
The measure is a targeted liquidity intervention intended to prevent pharmacy network exits and preserve beneficiary access, particularly in concentrated or rural markets. It shifts short-term cash flow responsibilities to plans but backstops those outlays through a federal subsidy, creating immediate fiscal and administrative implications for plan contracting and CMS operations.
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What This Bill Actually Does
The bill inserts a new subparagraph into the Part D statute that defines a distinct supply fee for prescriptions dispensed by pharmacies operating in long‑term care settings. The statutory language ties the fee to prescriptions furnished at a capped price category under existing Part D rules and identifies the pharmacies by provider taxonomy so that only pharmacies serving institutional settings qualify.
Importantly for pharmacy–plan relationships, the statute says the supply fee must be paid on top of any ingredient costs, dispensing fees, or other negotiated reimbursements and explicitly prevents plans from offsetting other payments to absorb the new fee. The enforcement provision creates a civil remedy against a plan or MA organization that fails to remit the fee and imports the procedural framework of an existing sanction statute for adjudicating such penalties.To prevent the supply fee from becoming a permanent cost to plan sponsors, the bill adds a repayment mechanism to the Part D payment rules: CMS must flow back to plans the aggregate fees they paid to long‑term care pharmacies by providing a subsidy.
The statute also includes a timetable for CMS’s payment of those subsidies, which will be administratively material for plan accounting and cash‑management.Finally, the bill tasks the Government Accountability Office with a focused study on the economic viability of long‑term care pharmacies in the Part D market. The audit mandate requires the GAO to collect and analyze granular data on pharmacy payments, dispensing fees, compliance costs tied to network performance standards, and recent trends in Part D payments; the GAO must then issue recommendations to help Congress and HHS design a sustainable payment approach that preserves beneficiary access, especially in underserved markets.
The Five Things You Need to Know
The statute sets a per‑prescription supply fee for the first covered plan year at $30 and ties the following year’s fee to the statutory Part D annual percentage increase.
The supply fee applies only to covered Part D drugs dispensed by a qualifying long‑term care pharmacy to beneficiaries who meet the statute’s definitions tied to maximum fair price rules.
The bill directs the Secretary to reimburse plans by providing subsidies equal to the aggregate supply fees those plans paid to long‑term care pharmacies.
CMS must provide the subsidy within a statutorily specified period after the end of the applicable plan year (the statute establishes an 18‑month limit for such payment).
A civil money penalty of not less than $10,000 is available against a PDP sponsor or MA organization for each failure to pay the supply fee, with the statute applying the procedural provisions of the existing sanction framework for adjudication.
Section-by-Section Breakdown
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Creates a distinct long‑term care pharmacy supply fee
This provision adds a new subparagraph that legally requires plan sponsors and MA–PD organizations to pay a per‑prescription supply fee to qualifying long‑term care pharmacies for certain Part D fills. The drafting separates the fee from existing reimbursements, so contract language that previously allowed plans to net or recoup payments should be revisited; plans will need to adjust adjudication systems to recognize and pay the new fee on eligible claims.
Civil monetary penalty for plan nonpayment and procedural path
The amendment creates a statutory penalty for failure to pay the fee and expressly makes the penalty subject to the adjudicative procedures in the government’s existing sanction statute (excluding two subsections). Practically, this imports a known administrative appeal and collection process; plans should expect CMS enforcement actions to follow established rules for notice, hearing, and recovery, and should factor potential exposure into risk assessments.
Defines qualifying pharmacies and covered fills
The statute defines a ‘long‑term care pharmacy’ by a national provider taxonomy code and ties a ‘specified prescription’ to Part D fills paid at certain capped prices for eligible institutional residents. That definitional approach narrows the fee’s scope to institutional dispensing and creates a clear line for claims processing, but it also requires accurate provider taxonomy coding and operational checks to avoid misapplication.
Subsidy backstop to flow fees back to plans
This addition instructs the Secretary to provide plans with subsidies equal to the total supply fees they paid. From an administrative perspective CMS must build a reconciliation and payment process to accept plan reports or otherwise calculate the aggregate fees and then remit funds; the statute also fixes a deadline for CMS to complete that reimbursement, making timing and data integrity central implementation challenges.
Mandates an independent study on long‑term care pharmacy sustainability
Congress directs the Comptroller General to analyze payment levels (ingredient costs and dispensing fees, with a brand/generic breakdown), the compliance costs tied to network performance standards, and recent payment trends, and to recommend legislative and administrative steps to create a sustainable payment system. The GAO’s access to plan and pharmacy data will determine the utility of its recommendations; the study’s market‑level findings will likely seed options for longer‑term statutory or regulatory fixes.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Long‑term care pharmacies — receive an immediate per‑prescription payment that improves near‑term revenue per claim and may prevent market exits where margins were previously unsustainable.
- Residents of nursing homes and other institutional settings — benefit indirectly if the fee prevents pharmacy network shrinkage and preserves continuous access to medications and pharmacist services.
- Rural and concentrated markets — those with thin networks are likeliest to see access benefits because the interventions target settings where pharmacy closure risk is highest.
Who Bears the Cost
- PDP sponsors and MA organizations offering MA–PD plans — must remit the supply fee at point of sale and bear short‑term cash‑flow and administrative costs while awaiting CMS reimbursement.
- CMS and the federal budget — takes on cash‑management and reconciliation work and assumes the fiscal responsibility of flowing subsidies back to plans, increasing near‑term Medicare Part D outlays and administrative burden.
- PBMs and contract administrators — face operational changes to claim processing systems and contract negotiations as the statute forbids offsetting the fee against other reimbursements, which may require renegotiation of network agreements and auditing changes.
Key Issues
The Core Tension
The central dilemma is whether to preserve immediate beneficiary access by forcing short‑term payments from plans (with federal reimbursement) or to refrain from temporary fixes that may distort market incentives and delay structural payment reform; the bill chooses expedient access protection at the cost of added administrative complexity, potential budgetary exposure, and the risk of creating temporary supports that become politically difficult to remove.
The bill is a narrowly tailored, time‑limited intervention that prioritizes preserving access over longer‑term rate reform. That design reduces legislative complexity but raises implementation friction: plans must update claims systems to pay an additional line‑item fee, track aggregate outlays, and reconcile with CMS when the agency issues subsidies.
The statute’s prohibition on netting the fee off other reimbursements protects pharmacy gross receipts but can trigger downstream contractual disputes between pharmacies, plans, and PBMs accustomed to complex rebate and offset arrangements.
There are also fiscal and behavioral risks. Backstopping plan payments with federal subsidies shields plans from ultimate economic exposure but creates interim liquidity demands that smaller sponsors or downstream administrators may struggle to meet.
The temporary subsidy risks creating expectations of continued supplemental payments if underlying price and margin pressures remain unaddressed; absent a long‑term mechanism, the measure risks only delaying consolidation or exit rather than solving root causes. Finally, practical enforcement will hinge on accurate taxonomy coding and beneficiary status data; misclassification could generate both overpayments and unnecessary penalties, and the administrative burden of audits and appeals may fall disproportionately on smaller entities.
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