After years of legislative debate, Congress has formally codified PBM reform into federal statute. Tucked within the Consolidated Appropriations Act, 2026 (H.R. 7148), signed on February 3, 2026 are structural mandates that will reshape Pharmacy Benefit Manager (PBM) operations in Medicare Part D and the commercial sector by 2028. The legislation targets three primary pillars: revenue delinking, rebate transparency, and pharmacy network equity. I summarize some of the key provisions of the Act below.
1. Medicare Part D: Ending Price-Linked Incentives
The most significant shift for Medicare is the mandatory “delinking” of PBM compensation from drug prices.
Flat-Fee Models: Service fees must now follow a defined schedule and cannot be pegged to a percentage of list prices or rebate volume. The legislation states PBMs shall have “No income other than bona fide service fees.”100% Pass-Through: PBMs are required to pass through all rebates and price concessions to Part D plans.Granular Reporting: PBMs must file drug-level reports with HHS and plan sponsors, detailing enrollee out-of-pocket costs versus the PBM’s retained spread.
2. The Commercial Market: ERISA and Fiduciary Clarity
The Act brings the commercial market into focus by reclassifying PBMs as covered service providers under ERISA. This change carries significant implications for employer-sponsored plans:
Mandatory Disclosure: PBMs must disclose all fees, rebates, and alternative discounts to plan fiduciaries.Audit Rights: The law strengthens a plan’s ability to audit PBM performance. This matters because previously PBMs engaged in spread pricing. For instance, a PBM might charge a plan $100 for a drug but only pay the pharmacy $80, keeping the $20 “spread.” Previously, PBMs often blocked plans from auditing the actual pharmacy remittance advice, calling it “proprietary. Because plans will have an ability to audit this information, it may shift more of the market towards “cost-plus” or flat-fee administrative contracts.Fiduciary Accountability: By providing fiduciaries with more data, the law increases the legal pressure on employers to ensure their PBM contracts are truly cost-effective.
3. Protecting Pharmacy Access
To address the closure of independent pharmacies, the Act empowers CMS to define “reasonable and relevant” contract terms.
Essential Retail Pharmacies: CMS will now recognize and protect pharmacies in underserved areas to ensure PBM-affiliated chains cannot use “take-it-or-leave-it” contracts to dominate a region. The government will designate an “Essential Retail Pharmacy” based on whether it is located in an “underserved” area. Specifically, this would mean no other pharmacy with in 10, 2, or 1 mile in rural, suburban and urban areas respectively. Conflict of Interest Transparency: New reporting requirements will highlight when PBMs steer patients toward their own specialty or mail-order pharmacies.
The Bottom Line: Transparency vs. Savings
These reforms provide unprecedented visibility into the drug supply chain, but their impact on net drug spending remains a subject of debate.
By removing the incentive for PBMs to favor high-list-price drugs, the law could shift formularies toward lower-cost generics or biosimilars. Further, patients using these drugs will benefit rom lower cost sharing if list prices fall. Impacts on overall net drug prices, however, are les clear; while list prices are likely to fall, rebates may shrink in size as well. It is unclear which effect is likely to dominate.
