Background

The Inflation Reduction Act mandates that the Centers for Medicare & Medicaid Services (CMS) negotiate a Maximum Fair Price (MFP) for a set number of drugs each year. To date, 10 Part D drugs have been negotiated for the Initial Price Applicability Year (IPAY) 2026, with an additional 15 Part D drugs selected for IPAY 2027.

After CMS negotiates MFPs, manufacturers must provide access to the MFP to Medicare beneficiaries and to pharmacies and providers dispensing negotiated drugs. In October 2024, CMS provided guidance on how manufacturers could effectuate MFP prospectively or retrospectively, but the agency did not set a standard method. In a prospective model, pharmacies would acquire an inventory of drugs at a price based on MFP, and then likely would need to hold the MFP inventory separately from drugs to be sold at other prices. In a retrospective model, pharmacies could maintain a single drug inventory acquired at a price (e.g., the wholesale acquisition cost [WAC]), and receive a reconciliation payment from manufacturers. CMS has defined the standard reconciliation payment amount (known as the standard default refund amount, or SDRA) as the difference between WAC and MFP, but manufacturers and dispensers maintain the ability to utilize alternative refund amounts.

Stakeholders are increasingly concerned that the MFP effectuation options proposed by CMS could create administrative and financial burdens for pharmacies. There is growing attention on whether small and independent pharmacies may face challenges in dispensing IPAY 2026 and 2027 drugs, potentially affecting beneficiary access to these medications.

To contribute to the discussion on MFP effectuation, Avalere conducted an analysis to determine the percentage of prescriptions for IPAY 2026 and IPAY 2027 drugs dispensed through independent and franchise pharmacies, as well as the proportion of beneficiaries who obtain their medications through these channels. For this analysis, franchise pharmacies are defined as independently owned pharmacies that operate under a franchisor’s branding and business model within a specific region.

Findings

At the national level, 34% of scripts for IPAY 2026 or IPAY 2027 drugs are filled at an independent or franchise pharmacy. Similarly, at the national level, 30% of beneficiaries accessed at least one of the IPAY 2026 or IPAY 2027 drug at an independent or franchise pharmacy. That equates to 12 million beneficiaries and 74 million scripts filled.

Avalere also analyzed results at the state level to understand potential regional variability (Figure 1). The share of beneficiaries that access IPAY2026 or 2027 drugs at an independent or franchise pharmacy is at or above the national average in 22 states.

Figure 1: Percent of Total IPAY 2026 or IPAY 2027 Beneficiaries that Filled a Script at an Independent or Franchise Pharmacy

The five states with the highest share of beneficiaries using independent or franchise pharmacies across both years are North Dakota, Arkansas, Mississippi, Nebraska, and Illinois (Table 1).

Table 1: States with the Highest Share of Beneficiaries Using Independent or Franchise Pharmacies to Access IPAY 2026 or IPAY 2027 Drugs

The five states with the lowest share are Arizona, Delaware, Nevada, New Hampshire, and Ohio (Table 2).

Table 2: States with the Lowest Share of Beneficiaries Using Independent or Franchise Pharmacies

Conclusion

As CMS continues to refine the MFP effectuation process, it is important to consider the potential impact on various dispensing entities and the beneficiaries they serve.  Similarly, as manufacturers prepare to submit their MFP effectuation plans to CMS by September 2025, it is important to consider these findings to anticipate any potential access challenges and channel considerations.

Methodology

Avalere analyzed 2023 Medicare Prescription Drug Event (PDE) data through an agreement with CMS, accessed through CMS’s Chronic Condition Warehouse Virtual Research Data Center. Avalere identified all prescriptions for IPAY 2026 and IPAY 2027 drugs from the 2023 PDE data using brand names. Avalere then identified the volume of IPAY 2026 and IPAY 2027 selected drugs going through independent and franchise pharmacies using dispenser class code. (Dispenser class code 01 is defined as “independent pharmacy” and 05 is defined as “franchise pharmacy.”) Then, Avalere summarized the number of scripts, percent of total scripts, number of beneficiaries filling at least one script for a selected drug, and percent of beneficiaries at the national and state level for IPAY 2026 and IPAY 2027 drugs flowing through independent or franchise pharmacies. Avalere used the location of the pharmacy that dispensed the drug to provide state level metrics.