Extensive PBM transparency reforms now law 

Pharmacy Benefit Managers will have to detail their business practices and compensation and pass through all rebates from drugmakers to plan sponsors as part of government funding legislation — the Consolidated Appropriations Act, 2026 – signed into law on Feb 3.

As we continue to monitor implementation of the new requirements and provide updates, there are a number of key provisions to highlight.

The measure requires PBMs to report detailed information about prescription drug utilization and spending to large, self-funded employer-sponsored group health plans on a semi-annual basis, and quarterly upon request. This includes information about gross and net drug spend, drug rebates, spread pricing arrangements, direct and indirect compensation and the business practices of PBM-affiliated pharmacies.

Sponsors of large insured plans may opt to receive the reports. PBMs must provide all group health plans with a summary report useful for PBM selection, plus a summary document for plans to provide to members on request. The law allows for enforcement against PBMs that fail to provide the reports. The law also requires that certain contracting by group health plans, insurers and PBMs ensures disclosure of information necessary for the PBM reports.

In addition, the law amends ERISA’s prohibited transaction provisions to require that PBM contracts pass on to employer group health plans 100% of the rebates, fees, alternative discounts and other remuneration that PBMs get from drugmakers, wholesalers, rebate aggregators and certain other entities. PBMs must allow annual audits by an auditor selected by a plan fiduciary and not paid for by the PBM.

These changes will be effective no sooner than plan years beginning on or after 30 months after the date of the law's enactment, which for calendar year plans is Jan. 1, 2029.

The law also clarifies that the ERISA broker and consultant compensation disclosures required under the Consolidated Appropriations Act, 2021 apply to PBMs and a range of other plan service providers.

PBM reforms to Medicare in the new law will, among other things, eliminate the link between PBM compensation and list prices for drugs, mandate extensive reporting of PBM operations and require a federal study of price-related PBM compensation in the Part D and Medicare Advantage prescription drug plans.

Also included in the law is a requirement that hospital off-campus outpatient departments obtain and bill Medicare for services under a unique national provider identifier. This requirement, effective Jan. 1, 2028, is intended to help Congress and regulators design site-neutral payment reforms that would pay the same amount for the same service regardless of location.

Not included in the law is an extension of the enhanced and expanded ACA premium subsidies that expired on Jan. 1, 2026. Although bipartisan talks on extending the subsidies continue, a viable path forward has yet to emerge. If the enhanced subsidies are not extended, higher ACA marketplace premiums may make employer coverage more attractive to current and potential employees, while hospitals and other healthcare providers may shift the cost of uncompensated care to employer plans if the number of uninsured Americans rises.