February 13, 2026
On February 3, 2026, the Consolidated Appropriations Act, 2026 (CAA 2026) was signed into law and will introduce reforms for pharmacy benefit manager (PBM) prescription drug pricing and compensation structures. Under the CAA 2026, new rules shall be applied to PBMs on the following topics:
These new PBM reforms are scheduled to be applied to plan years beginning on or after 30 months from the date of the CAA 2026 February 3, 2026, enactment. Plans that operate on a calendar year cycle will have an effective date of January 1, 2029.
While the new reforms will take several years to implement, the potential impact to pharmacy benefits is significant.
Which employer / plan sponsors and plans shall be impacted?
Employers that average a minimum of 100 employees on business days during the preceding calendar or plan year will be impacted by the reforms. The employers who meet this threshold shall be referred to as “specified large employers”.
Health plans that average a minimum of 100 participants on business days during the preceding calendar or plan year will be impacted by the reforms. The plans that meet this threshold shall be referred as “specified large plans”.
What are the PBM requirements to the impacted employer / plan sponsors and plans?
PBMs that serve self-insured plans sponsored by a “specified large employer” or that qualify as a “specified large plan” are subject to the most extensive reporting requirements.
Under these new requirements, PBMs are tasked with new reporting requirements that address:
Please note that large employers / plan sponsors that utilize fully insured plans shall have the option to “opt-in” on an annual basis to receive the enhanced detailed reporting by electing to require the PBM to provide equivalent detailed reports as those required for self-insured plans.
What actions must employer / plan sponsors take under to be compliant?
Employers / plan sponsors of self-insured plans do not need to take any action for the reforms to apply to their plans.
Employers / plan sponsors of fully insured plans must determine on an annual basis whether they shall “opt-in” to require their PBM to adhere to the detailed reporting requirements.
Employers / plan sponsors, regardless of size or funding arrangement, who are eligible to receive the new reform detailed reports are required to provide employees and dependents with a written notice advising them of the PBM reporting requirements. The notice shall advise employees and dependents of their right to request a summary of the PBM report. The summary shall include a statement that employees and dependents may request specific claims-level information that details if there is a difference between what the health plan paid to the PBM and what the PBM paid to the pharmacy.
Template notice formats will be published for use and reference.
What optional actions are available for employer / plan sponsors for compliance?
It is suggested that employers / plan sponsors of self-insured plans should consider “incorporating the PBM reporting requirements notification into the plan documents provided to the participant or beneficiary”. This recommendation also suggests including the language into the wrap plan document’s summary plan description (SPD), relevant materials provided by the partnering vendor carrier and TPA such as the evidence of coverage (EOCs), policies, certificates of coverage (COCs), benefit summaries, and any other annual notices that the employers / plan sponsors provide in administering the health plan.
Due to employers / plan sponsors of fully insured plans having the option to “opt-in” for the equivalent reporting on an annual basis, it may be appropriate to not add the language to the plan documents being that the decision to “opt-in” may change year by year.
What requirements must the PBMs comply with?
Pass-Through Compensation Required
PBM contracts shall be required to use pass-through pricing and fee transparency. Under this format, the health plan will be permitted to pay what the pharmacy is reimbursed or the PBM’s acquisition / cost basis and any stated administrative / dispensing fee. This pass-through requirement will essentially eradicate PBM’s practice of keeping the “spread” or dollar amount difference obtained from billing the health plan a higher rate than the reimbursement rate given to the pharmacy. This newly required compensation format will not only provide clarity regarding the unit costs and fees, but it will also provide an improved incentive alignment for the contracting parties.
The PBM must provide the plan or insurance carrier with 100% of all prescription drug rebates, fees, alternative discounts, and other similar compensation. The PBMs will be required to provide these rebates / fees no later than 90 days after each quarter.
PBM Compensation Disclosures
Under the CAA 2026, PBMs and other vendors shall now face the equivalent §408(b)(2) requirement to disclose any indirect compensation that was placed on brokers and consultants under the CAA 2021. Aside from PBMs, vendors that are explicitly required to disclose indirect compensation related to health plans will now include recordkeepers, medical management providers, benefits administration selection services, stop-loss insurance, wellness design and management services, transparency tools, disease management, compliance services, EAPs, and TPAs.
What Enforcement Provisions will be applied for non-compliance?
CAA 2026 carries a civil monetary penalty of $10,000 per day for each day that a plan, insurance carrier, or other regulated entity fails to satisfy these new PBM reform rules. Health insurance carriers, PBMs, and certain third-party administrators may be subject to a civil monetary penalty of up to $100,000 if either entity is found to have knowingly provided false information related to these PBM mandates. The penalty shall be applied to each allegation of providing false information.
Long-Term Impact
The PBM industry has been criticized for its opaque pricing models by almost all participants along the supply chain, including drug manufacturers, pharmacies, consumers, and health plans. This law is an attempt to create transparency while calling out value extracting profits that negatively impact health plans and their members.
The provisions in this law combined with continued pressure being exerted on the pharma industry are positive developments for employer health plan sponsors.
DISCLAIMER
The information provided by The Fedeli Group’s Compliance Alert is not intended to be, nor should it be, interpreted as conferring legal advice to the reader of the Compliance Alert. The Fedeli Group Compliance Alerts are designed specifically and solely for informational purposes. Should the reader have any legal questions or concerns after reading this Compliance Alert, it is recommended that the reader seek counsel for a formal opinion.
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