New Legislation Aims to Address Transparency in PBMs as First Major Step in Reform

In a bipartisan effort, the Consolidated Appropriations Act of 2026 was passed by the Senate in a 71-29 vote on January 30 and signed into law on February 3.¹ The law included major provisions to address the role of pharmacy benefit managers (PBMs) in the steadily increasing prices of prescription drugs for patients on Medicare Part D. With the law set to take effect in 2028, experts say that this is a good first step, but legislation will still need to be passed to address the role of PBMs in setting the price of prescription drugs for those with private insurance, with transparency a key component to helping patients understand how prices are set.

PBMs Play an Integral Part in Setting Prices for Prescription Drugs

The role of PBMs has come under scrutiny by both sides of the aisle in their work as a middleman between employers and insurers in setting prices for prescription drug plans. The role of the PBM was established in the 1960s as a means of helping to control prescription drug spending by insurers.² However, with the vertical integration of many PBMs, such as CVS having both its own pharmacy services and a PBM,³ a lack of competition has raised concerns about whether patients are receiving the best price.

Miriam Paramore, CEO and founder of RxUtility, explained that insurers often outsource the pharmacy management to PBMs. This includes hiring PBMs such as CVS or Express Scripts to negotiate with the drug manufacturer for the price and settle on a list of drugs that the insurer will cover, called a formulary.

“In order to have a good placement on a formulary, or even get on a formulary, somebody decided that they would come up with this rebate…and that’s to say the employers and the PBMs who are buying the drugs from the manufacturer will buy them from you at list price, but then if they’re dispensed [they’ll] give [PBMs and employers] 50% back,” Paramore explained.

These rebates, she said, are being hoarded by the PBMs, with PBMs often holding onto a higher percentage of the rebates and not telling the employers just how much the rebate was worth. With no way to know how much the rebate was worth, PBMs put that money in a slush fund that is often hidden from both employers and patients. For independent pharmacies in particular, this can be truly difficult, as they have no means of knowing if they are getting different prices than their competitors, and PBMs can introduce different charges and hidden fees.

This also affects patients, she says, as patients in the deductible phase will still need to pay full list price for prescription drugs, whereas employers are getting money back through their PBM. “The consumer is always penalized for high list prices, which doesn’t seem right. Doesn’t seem like the reason that you’re trying to have health care in the first place for your employees,” she said.

How the Consolidated Appropriations Act Seeks to Address Transparency

With the passing of the Consolidated Appropriations Act comes an attempt to increase transparency in the way that PBMs operate. Jesse Dresser, Esq, a partner in Frier Levitt’s Life Sciences Department, explained that PBMs had historically passed rebates to plan sponsors and used rebate group purchasing organizations or aggregate entities to extract a percentage-based fee and allowed PBMs to claim full rebate remittance to plan sponsors and hide their upstream fees. This law aims to address that.

“It says no part of a PBM’s compensation can be derived from anything tied to the cost or the list price of the drug. Things that are percentage-based arrangements, whether they be retaining a portion of the rebates, whether they be collecting a data fee or administrative fee that is tied to the price of the drug, those can no longer be sources of revenue for either the PBMs or their affiliates,” Dresser said.

The law also allows CMS to act as an arbiter for disputes between plan sponsors, network pharmacies, and PBMs. CMS, he said, had not enforced the provision of the Any Willing Provider law that said that any pharmacy willing to participate in terms and conditions applicable to other pharmacies must be allowed to participate. This new law codifies previous regulation that had said that terms and conditions needed to be reasonable and relevant.

“It now sets CMS as the standard setter of what constitutes reasonable and relevant terms and conditions, and it enumerates a number of factors that CMS is expected to use in determining whether or not terms are reasonable and relevant, including whether the reimbursement rate and dispensing fees are sufficient to cover the ingredient costs and operational costs of pharmacies, whether they are using quality measures, whether they are engaged in abusive auditing tactics, and a variety of other factors that are now to be utilized by CMS,” Dresser said.

This law, he says, is a “complete 180” on the stance that CMS had previously taken, which was to not get involved in the negotiations between pharmacies, PBMs, and manufacturers.

What This Means for the Future

PBMs will likely be looking for ways to get around the law, said Dressel, as previous moves by PBMs to increase transparency were, in his opinion, done to appease the public rather than make meaningful change. However, he said that certain PBMs that are transparent could be positioned well as they are able to compete to give better services at a lower price.

However, both experts believed that there was more to do to improve how PBMs function in the US. Enforcement of the current laws, Paramore said, is the first step in seeing real change.

“We know that the PBM industry and the companies that own and operate those PBMs are going to be fighting back…. So let’s get the law across, let’s focus on enforcement, and then let’s enforce the other things that we already have,” she said.

Data transparency, she said, is the key to making sure that PBMs are operating in the best interest of the patients. Payers need to be publishing their negotiated drug prices so that patients can understand what their drugs cost and make sure that PBMs are passing along all rebates to the employer, which could result in lower out-of-pocket costs and lower premiums.

“We are making real progress as an industry. I’m actually quite hopeful because at least there’s some data out there. But we’ve got to get better at getting the data out there,” said Paramore. Being able to see the math of the contract can help to illustrate any potential harm done to both pharmacies and employers, she said.

Dresser explained that, on the policy side, extending these reforms to commercial insurance should be the next step, as the current law only covers Medicare Part D. “While you’re getting a lot more protection in Medicare, you’re still really not addressing anything as it relates to pharmacies submitting claims in the commercial context… I do think that the work needs to continue, needs to expand into the commercial market,” Dresser said.

References

1. Consolidated Appropriations Act, HR 7148, 119th Cong (2026). Accessed February 5, 2026. https://www.congress.gov/bill/119th-congress/house-bill/7148/all-actions
2. What are pharmacy benefit managers (PBMs) and why we need reform? AMA. Updated February 4, 2026. Accessed February 5, 2026. https://www.ama-assn.org/health-care-advocacy/access-care/what-are-pharmacy-benefit-managers-pbms-and-why-we-need-reform
3. Pharmacy benefit manager. CVS Health. Accessed February 5, 2026. https://www.cvshealth.com/services/prescription-drug-coverage/pharmacy-benefits-management.html