2026 Pharmacy Benefit Manager Reform: What Employers Need to Know

PBM Reform Actions
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2026 CAA

DOL Proposed Rule

FTC Settlement

Covered Entities

Whether an entity is covered by the CAA depends on the provision, as its various requirements affect different types of entities.

For reporting and disclosure obligations, the following entities are covered:

1. Group health plans (both fully insured and self-funded)

2. Health insurance issuers offering group health insurance coverage under ERISA, the Internal Revenue Code, and the Public Health Service Act

3. Entities that provide PBM services on behalf of such plans or issuers via contract requirements related to PBM fees

For the rebate pass-through requirements, the CAA provides that a contract for PBM services will not be reasonable (and thus eligible for the prohibited transaction exemption) unless contracts require full rebate pass-through. Therefore, entities providing PBM services for ERISA plans will be impacted. 

1. Self-insured group health plans subject to ERISA (fully insured group health plans are explicitly excluded for now)

2. Covered service providers who can reasonably expect to receive $1,000 or more in direct or indirect compensation in connection with services provided, specifically:

a. providers of PBM services; and

b. providers of advice, recommendations, or referrals regarding PBM services who are themselves providers of PBM services or their affiliates

Express Scripts, Inc.

Reporting Requirements

The level of reporting required of PBMs varies based on the size of the employers. In short, the CAA requires drug-level reporting for large employers (100 or more employees) and plan-level reporting for all employers, including those with fewer than 100 employees. 

Entities providing pharmacy benefit management services must disclose the following, drug-level information to large employers (100 or more employees) and plans on a semi-annual basis (or quarterly upon a plan’s request):

1. The compensation received by the PBM for each covered drug

2. The compensation paid to the pharmacy by the PBM

3. The spread between the compensation received by, and paid out by, the PBM

4. The rebates, fees, and other remuneration received by the plan and the PBM for each drug and therapeutic class

5. How much the PBM spent on drugs

6. How much the PBM paid to brokers and consultants for referrals

7. Any benefit design that favors affiliated pharmacies

The plan-level reporting, which must be provided to all health plans regardless of size, will include summaries of drug pricing, cost information, and claims information. PBMs must also supply a document for plans to provide to participants and beneficiaries upon request that includes a summary of aggregate data related to claims, drug spending, rebates, and remuneration.

Additionally, large employers who offer group health insurance may opt to require their PBM to submit a combined report to the group health plan, including both the drug-level reporting information and the plan-level summaries.

Health plans must notify their participants and beneficiaries annually of the PBMs’ reporting obligations and provide relevant reporting documents received by the Plan to participants upon request.

PBMs must provide the following required disclosures:

1. Initial disclosures—in advance of when a contract or arrangement is entered, extended, or renewed

2. Ongoing disclosures—within 30 days after each six-month period

Initial Disclosures

1. Description of services to be provided under the contract

2. Compensation expected for services under the contract

3. Drug manufacturer payments expected (rebates, fees, etc.) on a quarterly basis, including the amounts passed through to the plan and amounts retained by the PBM

4. Spread compensation expected on a quarterly basis

5. Copay claw-backs expected to be recouped from a pharmacy

6. Description of inflation protection or price protection agreements entered into with any drug manufacturer or related entity in connection with prescription drugs dispensed under the contract

7. Compensation reasonably expected for termination of contract, including calculation and refunds for prepaid amounts

8. All other compensation reasonably expected on a quarterly basis under the contract

9. Description of formulary placement incentives and arrangements entered into with drug manufacturers for services under the contract

10. Description of net cost to the plan or pricing methodology to determine the cost of each drug on the formulary

11. Acknowledgement that PBM will be providing fiduciary services to the plan under the contract, with a pledge to disclose activity or policies that may create conflicts of interest with the contract and plan

12. Audit rights of the plan

Ongoing Disclosures

1.  Compensation received on a quarterly basis for services under the contract

2.  Drug manufacturer payments received on a quarterly basis for services under the contract

3.  Spread compensation received on a quarterly basis

4.  Copay claw-back compensation recouped from pharmacies on a quarterly basis

5.  Amounts received from inflation protection or price protection agreements on a quarterly basis

6.  All other compensation received for services under the contract

7.  Identification of any compensation materially exceeding the quarterly estimate (5 percent or more, unless otherwise agreed upon with the plan)

8.  Audit rights of the plan

Under the terms of the settlement, Express Scripts’ PBM service offerings will include the following:

1. Automated reporting to plan sponsors, including an annual report disclosing drug costs and pharmacy claim-level reporting

2. The disclosure of data to plan sponsors that will ensure compliance with the Transparency in Coverage Regulations

3. The disclosure to plan sponsors of any payment or facilitation of compensation to consultants or brokers that Express Scripts utilizes in connection with its provision of PBM services to those plan sponsors.

Rebate Pass-Through, Spread Pricing, and Other Requirements

PBMs must fully (i.e., 100 percent) pass through rebates to ERISA plans on a quarterly basis. The pass-through requirement includes specific obligations related to timing (remitted to the plan within 90 days of the end of each quarter, or 45 days if coming from rebate aggregators or group purchasing organizations).

“Rebates” are defined broadly to include fees, alternative discounts, and other remuneration from any “applicable entity related to drug utilization or spending.”

PBMs are prohibited from requiring any contract terms that restrict or delay disclosure of compensation, fees, or information on manufacturer and pharmacy payments. 

Under the terms of the settlement, Express Scripts will also have to make the following changes to its PBM standard service offerings:

1. The offering must not discriminate in any way against low wholesale cost versions of drugs. To accomplish that, Express Scripts agreed not to provide any standard formulary where a lower-cost drug is omitted, placed on a less favorable tier, or encumbered by additional restrictions such as pre-authorization or step therapy when the higher cost version of the drug is not.

2. The offering must pass through all rebates and discounts directly at the point of sale to “enable members to receive the benefit” and charge no fee for the administration of such rebate program.

3. The offering must refrain from making any guarantees to plan sponsors regarding any pre-determined amount of compensation.

4. The offering must refrain from employing spread pricing.

5. The offering must provide health plan participants access to its Patient Assurance Program’s insulin benefits, if applicable.

6. The offering must compensate each retail pharmacy based on its actual cost of acquiring drugs, plus a dispensing fee, so long as such retail pharmacies meet certain conditions.

7. The offering must agree to pay retail pharmacies for all non-dispensing services performed by such retail pharmacies.

8. The offering may not exclude any retail community pharmacy from participating in its standard offering for retail community pharmacies.

9. Importantly, and despite the limitations related to its standard offering imposed by the settlement, Express Scripts may make changes to its standard offering upon the written request of a plan sponsor or its agent, so long as Express Scripts makes its standard offering to plan sponsors available to the plan sponsor requesting changes. If changes are made, the parties must fill out an exhibit provided by the FTC, acknowledging that the plan sponsor understands and agrees to the changes.

Audits

PBMs must allow, on an annual basis, ERISA plans to audit the PBM’s rebate contracts with aggregators and manufacturers.

The plan fiduciary must select an auditor, and the PBM may not pay for the auditor.

PBMs must notify plans of audit rights and procedures.

Plans can audit at least on an annual basis.

Audits are used to verify the accuracy of PBM disclosures.

Upon five days’ notice, any member of the FTC shall be entitled to access Express Scripts’ records and interview Express Scripts employees related to compliance with the settlement.

Civil Penalties and Fiduciary Relief / Safe Harbor

$10,000 per day where a group health plan, health insurance issuer, or PBM fails to provide information required by the CAA.

$100,000 for each piece of false information provided by a group health plan, health insurance issuer, or PBM.

There may be plan fiduciary exemptions for failures attributable to PBMs, provided the fiduciary did not know and reasonably believed compliance occurred.

Noncompliance with the rebate pass-through can result in a prohibited transaction under ERISA.

PBM noncompliance with disclosures can result in a prohibited transaction under ERISA, subject to enforcement action and civil penalties by the DOL.

If plan fiduciaries become aware of noncompliance, plan fiduciaries must request PBM come into compliance within 90 calendar days.

If the PBM does not come into compliance within 90 calendar days, plan fiduciaries must notify the DOL and decide whether to terminate the contract.

Plan fiduciaries are not required to automatically terminate contracts with PBMs for noncompliance.

Relief provided to plan fiduciaries who reasonably believed requirements were met and took steps to correct noncompliance.

None specified in the settlement.

Timeline

The requirements of the CAA are effective August 3, 2028—30 months after the effective date of the CAA. For plan years based on the calendar year, the requirements of the CAA will be applicable on or after January 1, 2029.

In addition, final regulations must be issued no later than August 3, 2027—18 months after the effective date of the CAA.

Effective 60 days after the publication of the final rule.

Applicable to plan years beginning on or after July 1, 2026.

Most of the requirements listed above, including the reporting requirements, rebate pass-through, guaranteed compensation prohibition, spread pricing prohibition, and requirements related to retail community pharmacies, must be implemented as soon as commercially feasible, but no later than January 1, 2028.

Other requirements imposed upon Express Scripts’ standard PBM service offerings but not discussed in this article must be implemented as soon as commercially feasible, but no later than January 1, 2027.