December means two things for pharmacy owners: year-end close-out tasks and preparing for the regulatory changes taking effect in January. This month we are focused on Medicare and Medicaid - the programs that keep many pharmacies running but also create some of the most complex compliance obligations in healthcare. Here is what is changing and what you need to do about it.
Regulatory Update: Medicare Part D Changes Taking Effect in 2026
The Inflation Reduction Act continues to reshape Medicare Part D, and pharmacies need to prepare for the next wave of changes. The $2,000 annual out-of-pocket cap for Part D beneficiaries, which took effect in 2025, has altered patient utilization patterns in ways that affect pharmacy workflow and cash flow.
Plan sponsors are adjusting their formularies and network contracts in response to these changes, and some pharmacies are seeing shifts in their payer mix as a result. If you have not reviewed your Part D contract terms recently, do it before the new plan year starts. Pay particular attention to DIR fee structures, preferred pharmacy status, and any changes to dispensing fee schedules.
Additionally, CMS is expanding the Medicare Drug Price Negotiation Program, with a new set of drugs subject to negotiated maximum fair prices taking effect in 2026. While the direct impact on pharmacy-level reimbursement will vary by drug and plan, these negotiated prices will filter through the supply chain and may affect your acquisition costs and margins on affected products. Stay informed about which drugs are included and how your wholesaler is pricing them.
Medicaid Reimbursement: What Pharmacy Owners Need to Watch
Medicaid reimbursement continues to be a moving target, and 2025 has brought significant changes at the state level. Several states have transitioned to or modified their Actual Acquisition Cost (AAC) based reimbursement models, moving away from Average Wholesale Price (AWP) benchmarks. If your state made this transition and you have not adjusted your pricing expectations, you may be leaving money on the table - or accepting reimbursement below cost without realizing it.
The professional dispensing fee is where many pharmacies recover the margin lost in the ingredient cost reimbursement change. Know your state's current dispensing fee and compare it to your actual cost of dispensing. If there is a gap, engage with your state pharmacy association on advocacy for fair dispensing fees.
Also watch for changes in Medicaid managed care contracts. As states shift more of their Medicaid population into managed care organizations (MCOs), your reimbursement terms may be set by the MCO rather than the state fee schedule. Review your MCO contracts carefully and compare their rates to the state Medicaid fee schedule. In some cases, MCO rates are lower, and you may need to negotiate or consider whether participation makes financial sense.
Keep documentation of your cost of dispensing analysis. If you ever need to appeal a reimbursement decision or participate in a state rate-setting process, having current data on your actual costs is essential.
HIPAA and Government Program Compliance: Where They Intersect
Participating in Medicare and Medicaid creates compliance obligations beyond standard HIPAA requirements. The False Claims Act, Anti-Kickback Statute, and Stark Law all come into play when you bill federal healthcare programs, and violations of these laws can have consequences that dwarf a typical HIPAA penalty.
One area where we see pharmacies stumble is patient inducements. Routinely waiving copayments for Medicare or Medicaid patients can constitute a violation of the Anti-Kickback Statute and may also implicate the False Claims Act. There are limited exceptions - financial hardship waivers for patients who genuinely cannot afford their copayment - but these must be documented on a case-by-case basis. A blanket policy of waiving copays is not permitted.
Another common issue is improper billing practices. Billing for a quantity not dispensed, billing for a brand when a generic was dispensed, or billing for a higher-cost product than what was actually provided can all constitute false claims. These often result from data entry errors rather than intentional fraud, but the government does not always make that distinction. Regular self-audits of your billing data are your best defense.
Year-End Checklist for Government Program Compliance
Before you close the books on 2025, run through this checklist to ensure your Medicare and Medicaid compliance is solid heading into the new year.
Revalidation status: Confirm your Medicare enrollment is active and your next revalidation date is on your calendar. Check PECOS for any pending actions or requests.
NPI accuracy: Verify that your NPI information is current in NPPES. This includes your business address, authorized officials, and taxonomy codes. Incorrect NPI data can cause claim denials and compliance issues.
Medicaid enrollment: Confirm your enrollment is active in every state where you dispense to Medicaid patients. If you added a new pharmacy location this year, make sure it is properly enrolled.
Contract review: Pull your Part D and Medicaid MCO contracts. Note any rate changes, DIR fee modifications, or new requirements taking effect January 1.
Compliance program review: CMS requires pharmacies participating in Part D to have a compliance program. Review your program against the seven elements of an effective compliance program: written standards, compliance officer, training, communication lines, internal monitoring, enforcement, and corrective action.
Document your year-end review. A written summary showing that you reviewed each of these areas demonstrates the kind of proactive compliance that CMS looks for during audits.
Quick Hits
- Check your Medicare enrollment status and revalidation date in PECOS
- Verify NPI information is current and accurate in NPPES
- Review Part D and Medicaid MCO contracts for January 1 changes
- Audit copayment waiver practices for Anti-Kickback Statute compliance
- Run a self-audit on billing accuracy for the past quarter
- Document your year-end compliance program review
Stay compliant. Stay ahead. - The Rxperts Team