No More PBM Surprises
The Consolidated Appropriations Act of 2026 improves PBM transparency and takes an important step toward reducing prescription drug costs.
It was an act from the Legislative Gods: on the same day in early February that Council members visited Capitol Hill during our annual Legislative Summit, President Donald Trump signed into law sweeping reforms aimed at lowering prescription drug prices.
The Consolidated Appropriations Act of 2026 (CAA) codified a broad set of measures for the pharmacy benefit manager (PBM) market, including provisions championed by The Council for years, clarifying that PBMs are fully subject to ERISA compensation transparency obligations.
Most notably, the CAA affirmatively states that PBMs and other third-party administrators (TPAs) must disclose their means of compensation to group health plan fiduciaries. Brokers already comply with these rules under the 2021 Consolidated Appropriations Act. Now, covered plan fiduciaries cannot enter into a contract with a PBM or TPA that has not satisfied this disclosure requirement. Some in the industry believe existing law already mandated that PBMs adhere to these transparency rules. Section 202 of the 2021 CAA stipulates that “covered service providers” disclose in advance of signing, extending, or renewing a contract all compensation they expect to receive in connection with services provided to a group health plan, including direct and indirect compensation and incentive-based payments such as commissions or finder’s fees.
Covered service providers include a provider of brokerage services and “consulting…related to the development and implementation of…pharmacy benefit management services.” Some large PBMs have argued that since they directly serve plan sponsors, they are not “consulting” and thus not subject to the 2021 law.
Clarification in the 2026 appropriations legislation gives plan sponsors and patients greater insight into contracts negotiated between PBMs and other segments of the pharmaceutical supply chain, as well as into drug pricing, including associated rebates or discounts. That will empower them to make better decisions about what pharmaceutical benefits they offer and how.
Data Transparency
The 2026 CAA also includes new data-sharing requirements for pharmacy benefit managers. Among other information, PBMs are required to report to group health plans estimated net prices for prescription drugs, estimated costs per claim, fee structures, total net drug spending, and total rebates received.
For large group health plans, defined as covering more than 100 employees, these new disclosures include most importantly the compensation paid by the plan to the PBM and by the PBM to the pharmacy for each drug, as well as the difference between the two—aka spread pricing. Charging a plan more than the PBM pays for a drug and pocketing the difference as profit is a widespread but often opaque practice that has been blamed for driving up prescription drug costs for health plans.
Participants in health plans, regardless of size, may also directly request from PBMs claim information for their own prescriptions, including spread pricing.
The 2026 CAA offers commercial plans an unprecedented window into the practices of the PBMs they rely on in offering pharmaceutical benefits. This will enable more informed decision-making regarding pharmaceutical benefits, and the new requirements may also pressure PBMs to ensure reasonable fee structures and pricing practices.
The Pass-Through Model
In addition, the CAA obligates PBMs contracted with group health plans to change how they make money. Traditionally, most of these businesses have profited through spread pricing, administrative and other fees, and rebates from drug manufacturers, essentially payments in exchange for placing their products on a PBM’s formulary. PBMs can also profit from data collection and analysis and consulting.
Lack of transparency into PBM compensation structures and contracts has led to sharp criticism over nebulous pricing, including poorly explained or hidden fees, aggressive spread pricing, and retaining the bulk of drug manufacturer rebates instead of passing them on to plan sponsors.
Under the new language in the CAA, PBMs are mandated to adopt the pass-through operational model. Here, the PBM passes through all remuneration it receives from drug manufacturers, such as rebates, to the plan sponsor and makes its money (at least theoretically) solely from known administrative fees.
Specifically, the new law requires pharmacy benefit managers to remit to plan sponsors every payment they receive related to drug utilization (encompassing rebates), fees paid to the PBM by drug manufacturers (such as manufacturer administrative fees), other discounts, and any other remuneration received from drug manufacturers and wholesalers and rebate aggregators.
We can’t promise every Legislative Summit will feature a significant achievement from The Hill, but it’s nice to end this one with a victory for Council members and their clients.
