After years of legislative debate, Congress has formally codified PBM reform into federal law. hidden within Consolidated Appropriations Act, 2026 (HR 7148)There are structural mandates signed on February 3, 2026 that will reshape pharmacy benefit manager (PBM) operations in Medicare Part D and the commercial sector through 2028. The law 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 change to Medicare is the mandatory “decoupling” of PBM compensation from drug prices.
- Flat-fee model: Service charges must now follow a set schedule and cannot be tied to list prices or percentages of discounted amounts. The law states that PBMs “shall have no income other than truth service fees.”
- 100% pass-through: PBMs are required to pass through all rebates and price concessions for Part D plans.
- Granular Reporting: PBMs must file drug-level reports with HHS and plan sponsors detailing enrollees’ out-of-pocket costs compared to the PBM’s retained prescription.
2. Commercial Market: ERISA and Fiduciary Clarity
Act brings commercial market into focus by reclassifying PBMs Covered Service Providers Under ERISA. This change has important implications for employer-sponsored plans:
- Mandatory Disclosure: PBMs must disclose all fees, rebates and optional discounts to plan fiduciaries.
- Audit Powers: The law strengthens plans’ ability to audit PBM performance. This matters because in the past PBMs engaged in spread pricing. For example, a PBM may charge the plan $100 for a drug, but will only pay $80 to the pharmacy, keeping a “spread” of $20. Previously, PBMs often prevented plans from auditing the actual pharmacy dispensing advice, calling it “proprietary.” Because plans will have the ability to audit this information, it could shift more of the market toward “cost-plus” or flat-fee administrative contracts.
- Fiduciary Accountability: By providing fiduciaries with more data, the law increases legal pressure on employers to ensure that their PBM contracts are truly cost-effective.
3. Securing pharmacy access
To address the closing of independent pharmacies, the Act gives CMS the authority to define “reasonable and relevant” contract terms.
- Essential Retail Pharmacies: CMS will now identify and protect pharmacies in disadvantaged areas to ensure that PBM-affiliated chains cannot use “take it or leave it” contracts to dominate an area. The government will designate an “essential retail pharmacy” based on whether it is located in an “underserved” area. Specifically, this would mean no other pharmacies within a 10, 2, or 1 mile radius in rural, suburban, and urban areas, respectively.
- Conflict of Interest Transparency: New reporting requirements will emerge as PBMs move patients to their specialty or mail-order pharmacies.
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 incentives for PBMs to favor higher-list-price drugs, the law could shift formularies toward lower-cost generics or biosimilars. Additionally, if list prices fall, patients using these drugs will benefit from lower cost sharing. However, the effects on overall net drug prices are less clear; While list prices are likely to drop, the size of the discount may also be smaller. It is not clear which effect is likely to dominate.
