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February 5, 2026 – Often in the policy realm (and especially in the health space), major reforms are tackled in both the legislative and regulatory arenas. Congress may enact standalone policies that regulators are required to implement, or Congress may decide to modify existing regulations. Regulators may also decide to issue regulations to carry out separate policy priorities. The intersection between legislation and regulations is interesting to explore, as sometimes Congress and regulators will work together on certain policy ideas and goals, while other times they pursue different paths altogether. Pharmacy benefit manager (PBM) reform is a recent example of this dynamic, as both Congress and regulators have put their own mark on this policy area. PBMs function as intermediaries between group health plans and insurance providers, on one hand, and pharmaceutical manufacturers and pharmacies, on the other. They are one of many players in the complicated drug supply chain that have received attention from policymakers. To help me dive into recent PBM reform legislative and regulatory activity, I’m bringing in my colleagues Amy Kelbick and Lynn Nonnemaker.
Over the last several years, Congress has explored various options and advanced legislation that would increase PBM transparency and reporting obligations and modify other PBM business practices. In the 118th Congress, the House and Senate both advanced legislation that included PBM reforms, and they reached a bipartisan agreement on these policies in the December 2024 package that ultimately failed.
Many of the reforms in that ill-fated package have just been enacted as part of a broader healthcare package included in the government funding bill that was signed into law on February 3, 2026. The legislation contains three reforms that apply to Medicare Part D and two that apply to commercial PBMs.
Section 6223 requires Part D plan sponsors (and, by implication, the PBMs that provide services to plan sponsors) to contract with “any willing pharmacy,” defined as a pharmacy that meets the standard contract terms and conditions for network pharmacies. This requirement would mostly codify “any willing pharmacy” rules already in place through regulations issued by the Centers for Medicare & Medicaid Services (CMS). The US Department of Health and Human Services (HHS) secretary must establish standards, likely under CMS, for standard contract terms and conditions no later than April 2028.
This section also requires the HHS secretary to publish reports on essential pharmacy trends at least every two years until 2034. The legislation defines “essential retail pharmacy” as a pharmacy that is an affiliate and is located in a rural area in which there is no other retail pharmacy within 10 miles, a suburban area in which there is no other retail pharmacy within two miles, or an urban area in which there is no other retail pharmacy within one mile. Beginning in plan year 2028, the secretary will publish a list of essential retail pharmacies on the CMS website.
Section 6224 contains additional Part D reforms related to plan transparency and “delinking” PBM compensation from the price of a drug. For plan years beginning on or after January 1, 2028, the legislation prohibits PBM compensation based on the price of a drug as a condition of entering into a contract with a prescription drug plan (PDP). Instead, PDPs are allowed to pay PBMS a “bona fide service fee” that reflects fair market value for an itemized service performed on behalf of the PDP that the PDP would otherwise perform, and that is not passed on to a client or customer. The fee must be a flat dollar amount and cannot be based on or contingent upon drug prices, discounts, rebates, fees for covered drugs, or coverage or formulary placement decisions.
Beginning in 2028, the law requires PBMs to submit an annual report to PDP sponsors and the HHS secretary on drug dispensing and cost data no later than July 1. These requirements apply to plans that combine Medicare Advantage and Part D benefits in the same manner as they apply to stand-alone Part D plans. The report must include a list of covered drugs dispensed, prescriptions dispensed by affiliated pharmacies, information on biologics and biosimilars, benefit designs, and total gross spending.
The law also requires PBMs that enter into agreements with a drug manufacturer to provide rebates, discounts, or other financial incentives contingent upon coverage, formulary placement, or utilization management to submit a written explanation of the agreement to the PDP sponsor within 30 days of the agreement. The explanation must identify the manufacturer and covered drugs subject to the agreement and describe the agreement’s terms.
Section 6224 allows PDP sponsors to audit PBMs annually to ensure compliance and accuracy of submitted information and allows the sponsors to select the auditor. It also requires reports from the US Government Accountability Office on how PBM compensation impacts prescription drug prices and from the Medicare Payment Advisory Commission on plan agreements between PBMs and PDPs within two years of enactment.
The legislation includes two provisions that will impact PBMs operating in the commercial space. Section 6701 requires commercial PBMs to report to the group plan sponsor the same information required of those in the Part D space. PBMs also must provide group health plan sponsors with a summary document for purposes of selecting pharmacy benefit management services and must prepare a summary document for plan beneficiaries that outlines their coverage and benefits.
Finally, Section 6702 requires commercial PBMs to remit 100% of all rebates, discounts, fees, and other remuneration received from any applicable entity related to utilization of drugs or drug spending to the group plan sponsor on a quarterly basis. This section holds harmless any responsible plan fiduciary that did not know that the covered service provider acting as a PBM failed to make required remittances and directs that the service provider take steps to remit the required amounts.
Federal regulators, particularly CMS, have their marching orders from this recent legislation and will likely put out new regulations in the coming years to effectuate some of these policies. Interestingly, the Department of Labor (DOL) put out a proposed rule that intersects with aspects of the legislation before it was enacted. While the law was enacted on February 3, 2026, DOL issued a proposed rule on January 29, 2026, to require commercial PBMs to report on several transparency measures to plan fiduciaries of self-insured group health plans subject to the Employee Retirement Income Security Act (ERISA). The rule would implement section 12 of President Trump’s Executive Order 14273, “Lowering Drug Prices by Once Again Putting Americans First,” which instructs DOL to propose regulations to “improve employer health plan fiduciary transparency into the direct and indirect compensation received by [PBMs].”
The proposed rule would require PBMs that contract with ERISA plans to report on:
The proposed rule would allow plan fiduciaries to audit the accuracy of PBM disclosures and would provide relief for plan fiduciaries if their PBM fails to meet its obligation.
The policies in the proposed rule align with Section 6701 of the healthcare package, which requires PBMs that contract with ERISA plans to provide a longer transparency report that includes the data mandated by the proposed rule. Similarly, the legislation allows for plan fiduciaries to audit contracted PBMs.
Comments on the DOL proposed rule are due on March 31, 2026. When issuing the final rule, DOL may modify certain policies to ensure that they reference and align with the new law.
With a new law and proposed regulation out there (and possibly more regs to follow), McDermott+ will carefully monitor how these PBM reforms are implemented over the next several years. As with any piece of legislation or regulation, both Congress and federal regulators will continue to assess whether additional changes are necessary as different stakeholders begin to experience the effects of the PBM reforms.
Until next week, this is Jeffrey (and Amy and Lynn) saying, enjoy reading regs with your eggs.
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