PBM Reform Is Moving Forward: What Employers Should Expect Next

On February 3, 2026, the Consolidated Appropriations Act of 2026 (CAA 2026) was signed into law. This expansive federal spending package includes significant reforms impacting Pharmacy Benefit Managers (PBMs). While the full effects of the CAA 2026 won’t be felt until 2029, this new mandate has already shifted pharmacy benefits away from the opaque ‘black box’ model toward one focused on better transparency.

The CAA 2026 is part of a wider federal push to increase PBM transparency and lower drug costs. This includes the Department of Labor (DOL) proposed fee disclosure rules, recent FTC enforcement actions regarding insulin pricing, and the recent debut of TrumpRx.

Background

PBMs are third parties that manage many health plans’ prescription drug benefits.  Health plans often rely on PBMs to process prescription drug claims, design pharmacy networks and negotiate rebates from drug manufacturers. In recent years, the PBM industry has faced growing scrutiny amid questions about lack of pricing transparency and PBM practices, such as retaining a share of manufacturer rebates.  In response, state PBM laws have surged nationwide in the absence of federal regulations.  Applicability of such state laws for ERISA employers has always been questioned.  Now, both Congress and the Executive Branch have provided the launching point of federal regulatory change for the pharmaceutical delivery industry.

Key PBM Changes Under the CAA 2026 Include:

• 100% Rebate Pass-Through: For plan years beginning after August 3, 2028, 100% of rebates, fees and discounts must be remitted to group health plans.

• Medicare Part D ‘Delinking’: Beginning in 2028, Medicare Part D will require PBMs to charge a flat service fee instead of taking a portion of the drug’s price.

• Enhanced Audit Rights: The law strengthens plan sponsor leverage to audit PBM data annually, which will be a critical tool for verifying contractual compliance.

• Mandatory Transparency Reporting: Detailed reports on prescription drug spending data and formulary rationale.

• Heightened Fiduciary Oversight: The law clarifies the disclosure obligations for PBMs as service providers, heightening the employer’s fiduciary obligation to assess the reasonableness of all compensation.

Why This Matters for Employers

The CAA 2026 does not require employers to become pharmacy benefits experts. It does reinforce the expectation that employers work with their brokers and pharmacy partners to ensure transparency and alignment with evolving standards.

Employers should expect that:

• PBM compensation is understood and defensible: Employers should be able to explain how their PBM is paid and what fees are retained. This clear, practical understanding is foundational to fiduciary oversight.

• Pharmacy spend is being actively managed, not just renewed: Employers should be able to demonstrate that pharmacy spend is regularly reviewed and that action is taken to manage any waste and inefficiency, with brokers and pharmacy partners supporting this ongoing oversight.

• Contracts are aligned with market direction: Upcoming renewals are an opportunity to ensure contracts reflect the upcoming phased in expectations around rebate pass-through, fee transparency, and audit rights. 

  • The shift toward fee transparency can be illustrated with a simple example: 

    • Current: A manufacturer paid a $2,000 rebate. The employer would receive $1,700 as the “rebate” while the PBM would retain $300 as a “formulary or administrative fee.”

    • Future: The manufacturer pays a $2,000 rebate. The PBM must pass the full rebate to the plan and will charge bona fide service fees.

What Employers Should Do Now

While some provisions phase in later, the next one or two PBM renewal cycles are where employers can proactively align their program with future requirements. Employers should work with their broker to ensure a few core areas are in place:

• Understand how their PBM is compensated: Employers should work with their broker to confirm, at a high level, how their PBM earns revenue, including what compensation flows back to the plan and what is retained for services. The goal is clarity and defensibility, not complexity.

• Ensure PBM contracts are aligned with CAA transparency standards: As contracts renew, employers should expect their broker to help ensure PBM agreements are aligned with future transparency standards and regulatory requirements.

• Demonstrate ongoing pharmacy oversight: Employers should be able to point to regular reviews and informed decisions around pharmacy spend, with guidance from their broker and pharmacy partners.

• Reassess options as new transparency data becomes available: Enhanced reporting helps employers and brokers validate the competitiveness of the current PBM model and explore alternatives when appropriate.

How Broker-led Pharmacy Consulting Supports These Expectations

• PBM contract and financial diagnostics: 

  • Supporting transparency by validating rebate pass-through, service fees, and contractual compliance.

• PBM RFP and renewal strategy:

  • Helping employers transition from opaque pricing structures to fee-based models that align with emerging regulatory standards.

• Clinical and cost management programs:

  • Guiding strategies such as specialty management and biosimilar adoption to balance clinical outcomes with cost efficiency.

• Executive-ready reporting:

  • Providing clear, defensible documentation that supports prudent fiduciary management.

A Broader Shift: The Launch of TrumpRx

What it is: A prescription price comparison and discount platform for the public that provides consumers with a pathway to view and access lower cash prices at retail pharmacies.

What it is not: An employer health plan, a PBM replacement, or a structural reform of employer pharmacy benefits.

How it impacts employers: Increases price visibility at the retail level, which may lead to situations where the consumer cash price is lower than the insured rate. This reinforces the broader movement toward transparency without altering employee plan structure. While the mechanics are familiar to employers and brokers who have experience with other prescription discount cards or coupon programs, the key distinction is that TrumpRx discounts are manufacturer-sponsored and tied to specific participation requirements.

Looking Ahead

While the CAA is now federal law, the specific rules will continue to take shape over the next 18 months. Federal agencies are tasked with defining standards for ‘bona fide service fees’ and formatting for transparency reports. With continuously evolving standards, proactive contract review is an essential part of the enhanced fiduciary oversight.