A pharmacy that opens a network termination notice citing a without cause provision often assumes the fight is already over. The contract language appears to hand the PBM an unqualified right to end the relationship on notice alone, no wrongdoing required. That assumption is frequently wrong: a growing number of states require the PBM to state a specific, rational basis for the termination even when the contract calls it without cause, and the notice itself must satisfy timing and delivery rules PBMs do not always follow. For a pharmacy facing loss of network access, and the recoupment exposure that often accompanies it, those procedural requirements are frequently the strongest lever available.
How Without-Cause Termination Clauses Work
Most PBM provider agreements give the PBM a without cause termination right: the ability to end the pharmacy's participation on written notice, without alleging fraud, a documentation failure, or any other specific violation. The clause exists so PBMs can prune their networks without litigating cause in every case. Contractual notice periods commonly run 30 to 90 days. A termination notice often arrives after an audit finding that already carries its own extrapolated recoupment demand, and PBMs sometimes prefer the without cause route over litigating a contested finding on the merits.
The right has historically run one way. Current Medicare Part D rules bar pharmacies from exiting their own Part D network contracts without cause on anything close to the notice period PBMs use, and a 2026 proposal to give pharmacies a matching exit right was not finalized in the Centers for Medicare & Medicaid Services (CMS) contract year 2026 final rule, reportedly over concerns it would run into the Part D statute's noninterference provision.
State Notice and Explanation Requirements
New York requires that no termination of a pharmacy from a network take effect earlier than 60 days after the pharmacy receives written notice, and requires the PBM to provide a specific written explanation for the termination with a rational basis, even when the contract calls the termination without cause. Immediate termination without that 60-day runway is limited to defined circumstances such as insolvency, a cease-and-desist order, or a material breach.
California's Senate Bill 41 took a different approach, barring PBMs from applying disparate termination, audit, or credentialing standards between affiliated and nonaffiliated pharmacies and requiring PBMs to keep paying properly adjudicated claims after termination, absent documented fraud, for contracts issued, amended, or renewed on or after January 1, 2026. Pharmacies outside New York and California can still face a termination that is contractually without cause and functionally unreviewable, which is why the underlying facts, not just the label on the clause, need to be checked before assuming there is no recourse.
Even when a PBM labels a termination without cause, the notice must still meet the state's timing and explanation requirements, and a termination that skips them can be void on procedural grounds alone.
Arguments That Have Reversed Terminations
Pharmacies that have successfully challenged a without cause termination generally do it on one of three grounds. The first is procedural: the PBM's notice missed the contract's or the state's timing, delivery, or explanation requirements, voiding the termination outright, the same category of deadline defense at issue in a CVS Caremark audit appeal. The second is substantive: showing that the PBM's stated or informal reason does not match the pharmacy's actual claims history or PBM audit outcomes undercuts a termination used to route around a contested audit appeal the PBM would rather not litigate on the merits. The third is pattern evidence, particularly under statutes like California's, that the PBM applied a standard unevenly across its network.
Health Law Alliance has reversed OptumRx network terminations for multiple pharmacies in New York and a pharmacy in Michigan, restoring network access in each matter without a recoupment. Past results do not guarantee a similar outcome in any new matter.
Why Early Legal Counsel Is Critical
It is critical that pharmacies promptly retain experienced healthcare defense counsel upon receiving a without cause network termination notice, audit finding, or other PBM communication that puts network access at risk. Early legal intervention can protect the pharmacy's rights, help ensure the response meets every contractual and state-law deadline, avoid inadvertent admissions, and allow counsel to communicate with the PBM on the pharmacy's behalf while the notice period is still running. Delaying legal representation can significantly affect the outcome of a matter, particularly where a procedural defect in the termination notice has to be raised before the effective date passes.
How Health Law Alliance Can Help
Health Law Alliance represents pharmacies nationwide in PBM network termination matters, drawing on the firm's experience with 2,000+ audits overseen on behalf of pharmacy clients. The firm's attorneys review the termination notice against the contract and applicable state law, identify procedural and substantive grounds for reversal, and manage the response while the notice period is running. Pharmacies that have received a without cause network termination notice may contact Health Law Alliance's PBM audit defense team for a free, confidential consultation.
