Pharmacy Benefit Managers (PBMs) have always had a central role in determining which pharmacies can participate in insurance networks and receive reimbursement for patient care. In recent years, however, PBMs have expanded their enforcement reach in a way that many pharmacy owners never anticipated. A rapidly escalating tactic known as affiliation-based termination is exposing independent pharmacies, multi-location operators, and pharmacy owners to PBM network removal based not on their own conduct, but on alleged associations with others.

This aggressive expansion of PBM enforcement has created a new and dangerous compliance landscape—one where ownership ties, historical relationships, or indirect affiliations can place an otherwise compliant pharmacy at immediate risk of termination.

How PBMs Are Expanding Terminations Beyond the Audited Pharmacy

Historically, PBM audits and enforcement actions were limited to the pharmacy under review. Today, that line has shifted. PBMs increasingly assert that a single audit finding, or even an alleged compliance concern, at one location justifies terminating every pharmacy connected through shared ownership, management, or affiliation.

Under this theory, PBMs claim that compliance issues at one entity reflect a broader “systemic risk,” allowing them to apply sweeping termination clauses across an entire ownership group. This occurs even when affiliated pharmacies have clean audit histories, independent operations, and no documented violations of their own.

Why Affiliation-Based Terminations Are Especially Dangerous for Pharmacy Owners

What makes affiliation-based enforcement particularly troubling is how broadly PBMs define “affiliation.” In practice, PBMs have cited minority ownership interests, prior employment relationships, or even familial connections as justification for cross-terminations.

Pharmacy buyers and expanding operators are especially vulnerable. A pharmacy seeking enrollment after an acquisition may discover that a prior owner’s history, or an unrelated third party’s termination, has quietly poisoned its PBM standing. These determinations are often made without transparency, meaningful explanation, or clear contractual grounding.

The Business and Legal Fallout of PBM Cross-Termination Practices

Affiliation-based terminations reflect a broader shift in how PBMs exert control. Modern PBM enforcement goes far beyond claims processing. Through audits, inventory reviews, and compliance examinations, PBMs now wield extraordinary leverage over pharmacy survival.

What begins as a routine audit can escalate rapidly into recoupments, compliance accusations, and full network termination, with ripple effects across affiliated entities. These actions can disrupt cash flow, destabilize operations, and interfere with patient continuity of care, often with little warning.

Legally, these practices raise serious concerns. PBM decisions are not immune from challenge, particularly where terminations exceed contractual authority, rely on vague affiliation theories, or violate the implied covenant of good faith and fair dealing embedded in network agreements.

Protecting Pharmacies Through Strategic PBM Defense

In this evolving enforcement climate, a proactive legal strategy is no longer optional. Independent pharmacies, multi-location groups, and prospective buyers must evaluate affiliation risk early and often, especially during acquisitions, ownership changes, and following a PBM audit.

Experienced healthcare defense counsel can play a critical role in challenging improper affiliation determinations, responding to audit findings, and advocating for reinstatement before network losses become permanent. Early legal involvement often makes the difference between preserving network participation and suffering irreversible financial harm.

How Health Law Alliance Can Help

Pharmacies facing PBM audits, PBM network terminations, or affiliation-based allegations should not assume that a PBM’s determination is final or unchallengeable. With timely and strategic legal advocacy, pharmacies can protect critical revenue streams, preserve network participation, and safeguard patient access to care. Health Law Alliance provides experienced, results-driven representation to help pharmacies respond effectively to PBM scrutiny and avoid unjustified network exclusions. If your pharmacy has come under PBM scrutiny, contact us for a free legal consultation.