Professional dispensing fees: Are pharmacists being paid for care or counting pills?

By Michael Murphy, PharmD, MBA ,and Jennifer Rodis, PharmD, FAPhA, for the PolicyRx newsletter

On July 1, 2026, a new Kansas law turned technical pharmacy payment language into a public debate.

Senate Bill 20 requires pharmacy benefit managers (PBMs) serving state-regulated plans to reimburse pharmacies at no less than the National Average Drug Acquisition Cost (NADAC) plus the greater of $10.50 or the state's Medicaid professional dispensing fee. Opponents characterized the requirement as a "pill tax," while supporters argued that it reflects the cost of safely dispensing a prescription.

Closer to home, Ohio Medicaid has structured professional dispensing fees largely around the number of prescriptions a pharmacy processes annually. Its professional dispensing fee ranges from $15.47 for pharmacies filling fewer than 50,000 prescriptions annually to $8.30 for pharmacies filling at least 100,000.

Together, Kansas and Ohio illustrate why the structure of professional dispensing fees deserves closer examination. Although both policies use the same language, Kansas establishes a statutory reimbursement floor for certain state-regulated plans while Ohio Medicaid varies the fee according to a pharmacy’s annual prescription volume.

These approaches may reflect legitimate differences in markets and operating costs, but they also raise a more fundamental question: What is the fee intended to pay for, and does the method used to calculate it reflect that purpose? Answering that question is essential as policymakers consider whether existing professional dispensing fee structures should be preserved, modified or fundamentally reworked.

In this issue of PolicyRx, we take a closer look at professional dispensing fees, why they matter and what policymakers should consider as they evaluate pharmacy reimbursement reforms.

A brief history of professional dispensing fees

Early pharmacy reimbursement focused heavily on the drug product. Over time, as pharmacy practice increasingly shifted toward patient-centered care, pharmacists started to be relied upon not only to prepare and provide medications, but also to evaluate whether those medications were appropriate, safe and effective for each patient.

A major turning point came with the Omnibus Budget Reconciliation Act of 1990, commonly known as OBRA ’90, which required states to establish drug-use review and patient counseling standards for Medicaid-covered outpatient prescriptions. While the law was focused on Medicaid, many states expanded similar requirements beyond Medicaid patients. This helped reinforce a broader professional expectation that pharmacists should review medication therapy and offer counseling as part of the dispensing process.

Despite practice evolution, this payment structure has functioned the same way for decades, remaining administratively simple and tied to an existing prescription claim despite pharmacists being expected to do far more than place pills in a bottle. Every prescription requires a series of clinical and operational steps:

• Reviewing the medication for safety and appropriateness
• Checking for drug interactions
• Confirming coverage requirements
• Preparing the medication
• Counseling the patient
• Ensuring the patient leaves with the right medication and the right information.

As the pharmacist's role and the medication use process have become more complex, questions arise about the structure and function of these payments in the current healthcare market:

• Does this payment reflect the clinical value of pharmacist expertise, pharmacy operations, direct patient care or a combination of various aspects of work?
• Can these fees support sustainable pharmacy business models?
• How does this traditional reimbursement model, which is tied to prescription benefits and medication dispensing, align with emerging efforts to reimburse pharmacists for patient care services under the medical benefit?

How are professional dispensing fees determined?

The professional dispensing fee is often described as the portion of pharmacy reimbursement that pays for the work of dispensing a prescription, separate from the ingredient cost of the drug. The ingredient cost is intended to reflect the pharmacy’s cost to acquire the drug. The professional dispensing fee is intended to cover costs beyond the drug itself, including pharmacist services and the cost to dispense the medication.

This structure has several advantages:

1. It recognizes that safely dispensing a medication requires professional work. Pharmacists review prescriptions, identify potential medication-related problems, counsel patients and help ensure medications are used appropriately.
2. It creates a payment mechanism that is relatively simple to administer. The fee is attached to the prescription claim, which means payment can occur through the existing pharmacy benefit infrastructure.
3. It helps create a more transparent separation between the cost of the drug and the cost of dispensing it. The ingredient-cost side of this equation, explored in an earlier PolicyRx issue on NADAC, is intended to approximate the pharmacy's cost to acquire the medication. The professional dispensing fee covers costs beyond the drug product itself.

The problem is that the professional dispensing fee is not limited to pharmacist professional services. It also covers many of the costs associated with running a pharmacy, including staff, facilities, technology, inventory management, packaging and other overhead. As a result, the payment for pharmacist clinical work becomes intertwined with the economics of operating a medication distribution business.

Medicaid programs frequently use cost-of-dispensing surveys to estimate the cost of dispensing prescriptions and to support changes in pharmacy reimbursement. Some states use a single professional dispensing fee. Others use tiered fees based on prescription volume, pharmacy type, rural status, specialty drugs or other categories.

This approach adjusts for operating cost differences: lower-volume pharmacies may have higher per-prescription costs because fixed costs are spread across fewer prescriptions and higher-volume pharmacies may have lower per-prescription costs because of economies of scale. This is logical from a cost-accounting perspective, but it also highlights a deeper policy question: Are pharmacies being paid like healthcare providers or as medication distribution sites?

In many parts of healthcare, professional payment is not reduced because a clinician sees more patients in a year. A clinician’s efficiency may affect the economics of the practice, but fee schedules generally do not pay a lower rate for the same service simply because the practice has higher annual volume. Additionally, in other clinical settings, professional services are often billed separately from products, supplies or facility costs. A patient may receive a clinical eye exam from an optometrist and separately purchase glasses or contact lenses. A patient may receive a medical visit, and any drug, device or supply may be paid for through a separate mechanism.

Pharmacy payment models have evolved less cleanly, whereas clinical services, operational costs and product transactions are bundled into a single dispensing event.

Where the model can become misaligned

One reason professional dispensing fees are difficult to reform is that cost surveys connect the fee to average pharmacy expenses, but payment is generally not adjusted for the work required by a particular prescription.

Consider the following:

• Because a professional dispensing fee is paid only when medication is provided to a patient, pharmacists may not receive any reimbursement at all after spending time receiving a prescription, resolving a drug therapy problem, contacting a prescriber, and preventing an unsafe or unnecessary medication from being dispensed.
  • The current payment model rewards medication dispensing without recognition of clinical interventions that may prevent unnecessary and/or unsafe dispensing.
• Because pharmacies tend to receive the same professional dispensing fee regardless of clinical complexity, a refill for a stable maintenance medication and a high-risk medication requiring extensive review may generate the same dispensing fee reimbursement.
  • In many other healthcare payment systems, the level of payment can vary based on complexity, time, risk or medical decision-making.
  • In pharmacy, professional work may vary significantly, but the dispensing fee often does not.
• Contracts sometimes prorate dispensing fees based on days’ supply or tie payment to a percentage of the cost of the medication.
  • For example, a 90-day prescription may involve more pills than a 30-day prescription, but the pharmacist’s clinical review is not necessarily three times more complex.
  • Similarly, a higher-cost medication does not automatically mean the pharmacist’s professional service is more valuable than the service required for a lower-cost medication.
  • When payment is linked too closely to product price, quantity or days’ supply, the professional dispensing fee begins to look less like payment for clinical expertise and more like a product-based administrative fee.

Is a professional dispensing fee a “medication tax?”

The Kansas debate illustrates a broader messaging challenge. Some opponents of professional dispensing fee requirements have described these policies as a “medication tax” or “pharmacy tax,” arguing that requiring plans or PBMs to pay a higher dispensing fee will increase costs for employers, health plans and patients.

That framing is politically powerful, but it can also be misleading. A professional dispensing fee is not a tax collected by the government. It is a payment to the pharmacy for the work and costs associated with safely dispensing medication. The more accurate policy question is not whether a dispensing fee is a tax, but whether the payment is appropriately designed, transparent and aligned with the services and costs it is intended to support.

For patients, the dispensing fee is mostly invisible, but the payment model still affects them. If reimbursement is too low or too unpredictable, pharmacies may reduce hours, decline certain prescriptions, struggle to invest in clinical services or, worse, close locations.

If payment incentives reward volume over complexity, pharmacists may have less protected time for counseling, medication problem-solving and care coordination. When considering patient access and the risks of pharmacy deserts in lower population areas, considerations around professional fee calculations become more complex.

As such, the “medication tax” argument should not be dismissed outright. If policymakers require higher dispensing fees without addressing how those payments flow through PBMs, plans, premiums, patient cost-sharing and pharmacy contracts, patients and purchasers may experience the change simply as higher prescription drug spending that trickles down to impact the cost of and access to medication and pharmacist care.

This reinforces the need for reforms that are transparent about who pays, who receives payment and what the payment is intended to support.

The growing confusion with medical benefit payment

As more states and payers recognize pharmacists as providers of clinical services, pharmacists may be able to bill for services such as medication therapy management, chronic disease management, test-and-treat services, immunization assessment, contraception services, smoking cessation, point-of-care testing or other care authorized under state law.

These services are often separate from dispensing medication. A patient may see a pharmacist for a clinical assessment and not receive a prescription at all. In those cases, billing under the medical benefit makes sense. But in real life, pharmacy care is not always so neatly separated. A patient may come to the pharmacy to pick up a medication, and, during the same encounter, the pharmacist may identify an adherence issue, provide medication education, assess a side effect, recommend a change in therapy or provide another covered clinical service.

That raises a practical question: Where does the dispensing-related clinical service end and the separately billable patient care service begin?

• If counseling on a new medication is included in the professional dispensing fee, can an additional medication management service be billed when the pharmacist spends more time addressing a therapy problem?
• If a pharmacist identifies a drug interaction during dispensing and contacts the prescriber, is that part of the dispensing fee or a separate clinical intervention?
• If a pharmacist provides a test-and-treat service and dispenses medication during the same visit, should the clinical assessment be paid under the medical benefit while dispensing is paid under the pharmacy benefit?

These questions matter because payment policy shapes professional expectations. If pharmacist clinical work is divided into “dispensing-related” and “non-dispensing-related” services, the profession may end up advocating for two separate payment systems for work that patients experience as one episode of care.

Policy considerations

There is no single solution to the challenges created by professional dispensing fees. Each approach has its trade-offs, as outlined below.

1. Preserve the professional dispensing fee, but make it more transparent

One option is to keep the current model but improve transparency. Policymakers could require clearer reporting of ingredient cost reimbursement, professional dispensing fees and any additional pharmacy payments or fees.

Pros

• Builds on an existing payment structure
• Preserves a familiar claims process
• Helps distinguish drug cost from dispensing cost
• Can support more transparent pharmacy reimbursement floors

Cons

• Does not fully separate professional services from pharmacy operating costs
• Continues to tie payment to the act of dispensing
• May not account for clinical complexity
• May not resolve confusion with medical benefit billing

2. Standardize professional dispensing fees and avoid product-based formulas

 Policymakers could prohibit prorated dispensing fees or dispensing fees based on a percentage of the drug’s cost, or they could require a flat professional dispensing fee that reflects the cost of safely dispensing a prescription.

Pros

• Better aligns the fee with pharmacist work rather than product price
• Avoids incentives to favor higher-cost medications
• Reduces the risk that professional payment is treated as a product-based margin
• Creates more predictable reimbursement

Cons

• A single flat fee may underpay complex dispensing events and overpay simple ones
• Does not account for differences in pharmacy cost structures or the potential for impact on patient access
• May still leave unresolved questions about payment for non-dispensing clinical services

3. Create complexity-based add-on payments

Another option is to preserve a base dispensing fee but add complexity-based payments for higher-risk or higher-effort dispensing events.

Examples could include new therapy starts, high-risk medications, complex medication reconciliation, prescriber intervention, significant counseling needs, adherence barriers or documented prevention of medication-related harm.

Pros

• Better recognizes pharmacist clinical judgment
• Creates payment for interventions that improve medication safety
• Moves pharmacy payment closer to other health care payment models that account for complexity
• Could support better documentation of pharmacist impact

Cons

• Adds administrative complexity
• Requires clear documentation standards
• Could create audit risk
• May be difficult to implement consistently across payers
• Could be confusing to delineate what should be billed for service provision in the medical benefit versus as a dispensing add-on payment

4. Decouple pharmacy operating costs from pharmacist professional services

 A more structural reform would separate pharmacy reimbursement into three parts: drug acquisition cost, operational or administrative cost, and pharmacist professional service payment.

Under this model, the pharmacy would be paid for the medication acquisition cost and a separate payment for the operational costs of dispensing. The medical benefit would pay for pharmacist-provided patient care services when those services meet coverage, documentation and medical necessity requirements.

Pros

• Creates a clearer distinction between product, business operations and clinical care
• Allows pharmacist services to be valued more directly
• Could reduce confusion between pharmacy benefit and medical benefit payment
• Provides a foundation for more consistent professional service billing

Cons

• Would require significant changes to pharmacy benefit design
• Could be difficult to administer through existing claims systems
• Would require careful transition planning to avoid destabilizing pharmacy access

Looking ahead

Professional dispensing fees were designed to solve a real problem: Pharmacies need to be paid for more than the ingredient cost of a drug. Dispensing medication safely requires pharmacist expertise, staff support, technology, facilities and time. But the current model asks for one fee to do too much.

As policymakers continue to consider pharmacy reimbursement reforms, the central question should not be whether pharmacies deserve a professional dispensing fee. They do. The more important question is what that fee is intended to pay for. If it is meant to pay for the cost of operating a pharmacy, then it should be treated as an operational payment. If it is meant to pay for pharmacist professional services, then it should reflect the value, complexity and clinical importance of those services. If it is meant to do both, policymakers should recognize the tradeoffs and design payment systems that do not blur the distinction between medication distribution and patient care.

The next generation of pharmacy reimbursement reform should move toward models that fairly pay for medications, sustainably support patient access to pharmacies and pharmacist expertise, and clearly recognize pharmacists for the professional care they provide.