Landmark Bill Aims to Increase Openness in Prescription drug Pricing, reforming PBM Practices
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A sweeping new law signed by president Donald J. Trump on February 3, 2026, promises to reshape how pharmacy benefit managers (PBMs) operate, potentially lowering prescription drug costs for consumers and increasing transparency within the complex pharmaceutical supply chain. The legislation, passed by the house of Representatives on Tuesday afternoon and afterward approved by the Senate, amends the Consolidated Appropriations Act of 2026 to address longstanding concerns about PBM practices.
Delinking PBM Compensation from Drug List Prices
at the heart of the reform is a move to “delink” PBM compensation from the list prices of drugs and the rebates they negotiate with manufacturers. Currently, PBMs profit from these rebates and through a practice known as spread pricing – billing payers more for a prescription than the amount reimbursed to pharmacies. The new policy mandates that PBMs receive flat administrative fees instead, aiming to reduce the incentive to favor higher-priced medications.
“This is a meaningful step towards ensuring that PBMs are working to secure the lowest possible prices for patients, not maximizing their own profits,” stated a senior official familiar with the legislation.
How the New Law Reshapes PBM Compensation
Traditionally, PBMs receive a portion of the rebates paid by drug manufacturers, with the majority passed back to the payer (such as an insurance company or Medicare) as an incentive to prefer a specific drug on their formulary. They also generate revenue by retaining the difference between what they bill payers and what they reimburse pharmacies – the spread.
Under the new amendment, pbms will be required to pass through 100% of all rebates, fees, and other remuneration to the payer. Non-compliance will result in monetary penalties imposed by the Centers for Medicare & Medicaid services (CMS). Furthermore,CMS is tasked with defining and enforcing “reasonable and relevant” contract terms related to PBM transparency regarding reimbursement and dispensing fees,and establishing an appeals process for pharmacies challenging unfavorable terms.
Increased Transparency Requirements for PBMs and Pharmacies
The legislation introduces robust transparency requirements, enabling CMS to track the financial flow between PBMs, pharmacies, and drug manufacturers. Data collection will include semiannual reports on prescription drug spending, both gross and net, manufacturer rebates, spread pricing arrangements, formulary placement rationale, and incentives related to affiliated pharmacies.
These requirements are designed to shed light on the often-opaque practices of PBMs and ensure accountability. “the goal is to create a more level playing field and empower payers to negotiate better rates on behalf of their members,” explained one analyst.
A Long Road to Reform
The bill’s passage marks a rare victory for PBM reform,as previous attempts stalled amid broader government negotiations in late 2024.It was approved by the Senate on January 21, 2026, and underwent further negotiations related to Department of Homeland Security funding before final approval by both chambers.
Will the Reforms Translate to Lower Drug Prices?
Despite the significant changes, questions remain about the extent to which the reforms will translate into tangible savings for consumers. Industry leaders have already begun adjusting their business models. For example, Cigna announced plans to eliminate the rebate-retention model within its PBM subsidiary, Express Scripts, and pass negotiated rebates through to payers. UnitedHealth Group’s Optum Rx has made a similar commitment, starting in January 2026, while CVS Health’s CVS Caremark has offered rebate pass-through options as 2019.
Though, critics caution that large PBMs may offset lost rebate revenue through increased administrative fees or other pricing mechanisms. proponents of the reform emphasize that sustained oversight and transparency will be crucial to ensuring that any cost savings ultimately benefit consumers, rather than being absorbed elsewhere in the drug supply chain.
As PBMs adapt to the new regulatory landscape, the effectiveness of these reforms will depend on diligent enforcement and a continued commitment to transparency.
