PBM Reform Act: Part D Changes, Timeline, and Costs

The PBM Reform Act is the shorthand used for the federal pharmacy benefit manager reforms enacted on February 3, 2026, as part of the Consolidated Appropriations Act of 2026, together with a related standalone bill (H.R. 4317) introduced in July 2025. The enacted provisions require PBMs to pass 100 percent of manufacturer rebates through to health plans, sever the link between PBM pay and drug prices in Medicare Part D, open pharmacy networks to any pharmacy willing to accept standard terms, and subject PBMs serving employer health plans to ERISA transparency and audit rules for the first time. Most requirements phase in between 2027 and 2029.1AJMC. PBM Reforms Signed into Law Reshaping Medicare Part D Drug Pricing Transparency

What the Law Changes in Medicare Part D

PBM Pay Is Delinked from Drug Prices

Starting with the 2028 plan year, a PBM working for a Medicare Part D plan sponsor cannot receive any income tied to drug utilization other than a “bona fide service fee.” To qualify, the fee must be a flat dollar amount, consistent with fair market value, paid for a service actually performed, and independent of a drug’s price, the size of any rebate, or the volume of business between the PBM and the plan sponsor.2Mintz. Congress Passes Landmark PBM Reform in 2026 Spending Bill Any compensation that fails the test must be disgorged to the plan sponsor.

The point of the change is to remove the historical financial incentive PBMs had to prefer higher-priced drugs, because their compensation was often calculated as a percentage of the list price or a share of manufacturer rebates tied to that price.

All Rebates Pass Through to the Plan

PBMs must remit 100 percent of manufacturer rebates, discounts, and price concessions to the Part D plan sponsor. Keeping any portion of those concessions is no longer allowed.3Myers and Stauffer. Medicare Part D Reforms: 2026 Consolidated Appropriations Act CMS can impose civil monetary penalties for noncompliance, and if a plan sponsor is penalized because of a PBM’s failure to follow the rules, the PBM is liable for that penalty.2Mintz. Congress Passes Landmark PBM Reform in 2026 Spending Bill

Any Willing Pharmacy Can Join the Network

For plan years beginning January 1, 2029, a Medicare Part D plan must let any pharmacy that agrees to standard contract terms participate in its network. HHS has to publish standards for what counts as “reasonable and relevant” contract terms by April 3, 2028, and CMS can penalize plans that violate those standards.4Barclay Damon. National PBM Reforms Enacted in 2026: What Independent Pharmacies Need to Know A formal complaint process for pharmacies must be running by January 1, 2029, and the law protects pharmacies that file complaints from retaliation.

HHS also has to begin publishing a list of “essential retail pharmacies” starting January 1, 2028. Those are pharmacies in medically underserved, rural, or specific urban and suburban areas with few nearby options. HHS must issue biennial reports through 2034 comparing conditions at essential and non-essential pharmacies.4Barclay Damon. National PBM Reforms Enacted in 2026: What Independent Pharmacies Need to Know

Detailed Reporting and Annual Audits

Beginning July 1, 2028, PBMs must submit annual reports to plan sponsors and to HHS covering drug-level pricing, prescription volume, acquisition costs, rebate amounts, pharmacy reimbursement, payments to affiliated pharmacies, and written justifications for preferring brand-name drugs on the formulary over cheaper generic or biosimilar alternatives.5Health Affairs. Federal PBM Reforms in Action and Context Plan sponsors get the right to audit their PBMs once a year, and PBMs have six months from the start of an audit to produce the information requested.2Mintz. Congress Passes Landmark PBM Reform in 2026 Spending Bill

What Changes for Employer Health Plans

For the first time, PBMs that service self-funded employer health plans face meaningful federal oversight. The law classifies PBMs as “covered service providers” subject to ERISA’s compensation disclosure rules.6Morgan Lewis. Consolidated Appropriations Act of 2026: The New Landscape of PBM Fiduciary Oversight Most of the employer-plan provisions take effect for plan years beginning on or after August 3, 2028, meaning calendar-year plans start complying on January 1, 2029.

The core requirements are:

Penalties are significant. A PBM that fails to provide required reports can be fined up to $10,000 per day, and knowingly submitting false information can trigger a penalty of up to $100,000.8AJMC. FAQs About New Legislation on PBM Reform: How It Affects Patients

A parallel Department of Labor rulemaking, proposed on January 30, 2026, would add more granular PBM fee-disclosure requirements for ERISA plan fiduciaries, covering direct compensation, manufacturer payments, spread compensation, copay clawbacks, formulary placement incentives, drug pricing methodology, and termination fees, along with audit rights to verify the disclosures.9Federal Register. Improving Transparency Into Pharmacy Benefit Manager Fee Disclosure The comment period closed March 31, 2026, and a final rule has not yet been issued.

Implementation Timeline

The reforms roll out in stages. CMS received $188 million in appropriations to carry them out.10NCPA. PBM Reform Key Provisions Summary

The Standalone Bill Named the PBM Reform Act

The name “PBM Reform Act” attaches most literally to H.R. 4317, a bipartisan bill introduced on July 10, 2025 by Representatives Earl “Buddy” Carter (R-GA) and Debbie Dingell (D-MI) with twelve original cosponsors from both parties. By August 2025 the bill had 21 cosponsors.11Rep. Buddy Carter. PBM Reform Act Introduction12AMA. Advocacy Update: Spotlight on Pharmacy Benefit Managers

H.R. 4317 overlaps heavily with what ended up in the spending bill. It bans spread pricing in Medicaid, requires 100 percent rebate pass-through, delinks PBM compensation in Medicare Part D, and authorizes HHS to enforce fair contract terms.12AMA. Advocacy Update: Spotlight on Pharmacy Benefit Managers The Medicaid spread-pricing ban was reportedly cut from an earlier reconciliation package after billionaire Elon Musk, a close advisor to the president, criticized that package.13Healthcare Dive. House Reconciliation Bill Healthcare Provisions

As of mid-2026, H.R. 4317 has not advanced as a standalone bill. A Senate companion effort, the PBM Price Transparency and Accountability Act (S. 3345), was introduced in December 2025 by Senators Mike Crapo (R-ID) and Ron Wyden (D-OR) and remains in the Finance Committee.14Congress.gov. S. 3345 Legislative History Practically, the reforms that are now binding law are the ones inside the Consolidated Appropriations Act, not those in H.R. 4317 itself.

What It Will Cost or Save

The Congressional Budget Office scored the enacted PBM provisions as reducing the federal deficit by $2.12 billion over 2026–2035. About $444 million of that comes from delinking and Part D transparency, and about $1.865 billion from the new employer-plan oversight. CBO also expects a “modest reduction in premiums” in the group health insurance market as insurers gain more information about PBM operations.15KFF. What to Know About Pharmacy Benefit Managers and Federal Efforts at Regulation

Other economists disagree. A National Bureau of Economic Research working paper modeling a delinking policy estimated that Medicare Part D net drug prices could rise 5 to 18 percent, annual drug plan premiums could climb $4 billion to $13 billion, and federal Part D premium subsidies could grow by $3 billion to $10 billion a year. The paper argued that removing rebate-based incentives could weaken PBMs’ motivation to negotiate steep manufacturer discounts, shifting money from patients and taxpayers to drug manufacturers and pharmacy companies.16NBER. Working Paper on PBM Delinking

The core uncertainty is whether PBMs will absorb the new constraints or make up lost revenue through higher administrative fees.

What the Law Does Not Reach

The enacted federal reforms focus on Medicare Part D and ERISA-governed employer health plans. Fully insured commercial plans regulated by state insurance departments continue to fall under state PBM laws, which vary widely. Pennsylvania’s Act 77 of 2024, for example, covers roughly 24 percent of that state’s insurance market and prohibits copay clawbacks, restricts steering to PBM-owned pharmacies, mandates accessible pharmacy networks, and requires PBM reporting on rebates, fees, and reimbursements.17Pennsylvania Insurance Department. Understanding Pharmacy Benefit Reform

Separate from the statute, the Federal Trade Commission has pursued the three largest PBMs (CVS Caremark, Express Scripts, and OptumRx) in an administrative case (Docket 9437) over insulin pricing filed on September 20, 2024. Express Scripts settled on February 4, 2026, agreeing among other things to base patient out-of-pocket costs on a drug’s net price rather than list price, to compensate retail community pharmacies at acquisition cost plus a dispensing fee, and to move its offshore group purchasing organization, Ascent Health Services, back to the United States. Cases against Caremark and OptumRx remain pending.18FTC. FTC Secures Landmark Settlement with Express Scripts to Lower Drug Costs19FTC. In the Matter of Caremark Rx, Zinc Health Services, et al. Those enforcement actions bind only the settling companies and are distinct from the statutory reforms in the 2026 law.