Can I use my Medicare Part D plan with a network pharmacy that always offers a lower retail price than my plan?

Yes. If a network pharmacy's retail price for a formulary prescription is lower than your Medicare Part D plan's negotiated retail price, and you are using coinsurance (for example you pay 25% of retail drug costs) as your cost-sharing structure, your Medicare Part D plan will use the pharmacy's everyday or "usual and customary" lower retail price to calculate your cost-sharing for your medication purchase.

As noted by the Centers for Medicare and Medicaid Services:

"In cases where a pharmacy offers a lower price to its customers throughout a benefit year, this would not constitute a "lower cash price" situation that is the subject of this guidance.

For example, Walmart and other retailers recently introduced programs offering a reduced price for certain generics to its customers.

The low Walmart price on these specific generic drugs is considered Walmart’s “usual and customary” price, and is not considered a one-time "lower cash" price.

Part D sponsors consider this lower amount to be “usual and customary” and will reimburse Walmart on the basis of this price.

To illustrate, suppose a Plan's usual negotiated price for a specific drug is $10 with a beneficiary copay of 25% for a generic drug.

Suppose Walmart offers the same generic drug throughout the benefit for $4.

The Plan considers the $4 to take the place of the $10 negotiated price.

The $4 is not considered a lower cash price, because it is not a one-time special price.

The Plan will adjudicate Walmart’s claim for $4 and the beneficiary will pay only a $1 copay, rather than a $2.50 copay. This means that both the Plan and the beneficiary are benefiting from the Walmart “usual and customary” price, and the discounted Walmart price of the drug is actually offered within the Plan’s Part D benefit design.

Therefore, the beneficiary can access this discount at any point in the benefit year, the claim will be adjudicated through the Plan's systems, and the beneficiary will not need to send documentation to the plan to have the lower cash price count toward TrOOP."

Source:
Medicare Prescription Drug Benefit Manual, Chapter 14, Coordination of Benefits (Rev. 12, 03/19/2010), Section 50.4.2 – Beneficiary Cash Purchases (Rev. 12, Issued: 03-19-10, Effective Date: 01-01-10; Implementation Date: 01-01-10), Footnote 2] [highlights and formatting added] https://www.cms.gov/ Medicare/ Prescription-Drug-Coverage/ PrescriptionDrugCovContra/ downloads/ PDMChapt14COB.pdf (online 07/14/2016)

Please note - a second version of Chapter 14 is also online (as of 07/14/2016):
https://www.cms.gov/ Medicare/ Prescription-Drug-Coverage/ PrescriptionDrugCovContra/ Downloads/ Chapter14.pdf - This version of Chapter 14 has different language for Section 50.4.2 – Beneficiary Cash Purchases (Rev. 17, Issued: 08-23-13, Effective Date: 06-07-10, Implementation Date: 1-01-11) with Footnote #1 (above) no longer included. Rev. 18, 09-17-18 includes the text: For additional guidance on processing beneficiary-submitted claims for cash purchases, refer to section 30.3, Chapter 18 of this manual.
You can read the text of the updated version of Chapter 14 in our FAQ on this site