PBM Transparency Under the CAA, 2026: Will It Lower Prescription Drug Costs?

By: Bryan M. Dunton, Esq.

Prescription drug costs remain one of the most visible challenges for employer-sponsored health plans and the employees who rely on them. Over the past several years, policymakers have increasingly focused on pharmacy benefit managers (PBMs), which are the entities that administer prescription drug benefits and negotiate pricing arrangements within the pharmaceutical supply chain. The latest development arrived earlier this year with the enactment of the Consolidated Appropriations Act, 2026 (CAA, 2026) on February 3.

The CAA, 2026 represents the largest federal legislative effort to regulate PBMs to date. While many reforms affecting PBMs have historically occurred at the state level, this new federal framework broadly applies to employer-sponsored group health plans, including both self-funded and fully insured plans. The legislation signals a clear policy approach focused on greater transparency into PBM compensation and drug pricing structures.

The central question for plan sponsors and plan participants alike is whether such transparency will ultimately translate into lower prescription drug costs.

What the Consolidated Appropriations Act, 2026 Changes

The CAA, 2026 introduces several significant reforms affecting PBMs and self-funded group health plans. At the center of the legislation are new requirements relating to rebate-pass-through, compensation disclosures, and reporting obligations.

Perhaps most notably, the law requires PBMs to pass through one hundred percent of manufacturer rebates and other price concessions to ERISA-covered group health plans. “Rebates” is defined broadly to include alternative discounts, fees, and other payments tied to prescription drug utilization. PBMs must remit rebates to plans on a quarterly basis and provide sufficient accounting information so plan fiduciaries can audit to verify compliance.

The new law also clarifies that PBMs are “covered service providers” under ERISA Section 408(b). This change placed PBMs within the same compensation disclosure framework that already applies to other ERISA service providers, meaning PBMs must now disclose both direct and indirect compensation to plan sponsors.

Through the lens of plan governance, this means employers will have greater visibility into how PBMs earn revenue within the prescription drug supply chain process and plan sponsors will be able to evaluate whether PBM compensation arrangements are reasonable.

In addition, the CAA, 2026 establishes substantial new reporting requirements for PBMs. PBMs serving large employer plans (one hundred or more employees) will be required to provide detailed semiannual reports containing information such as:

• Drug-by-drug pricing data, including net prices after rebates
• Total prescription drug spending by the plan and its participants
• Spread pricing information
• Formulary design information and inclusion rationale
• Disclosures regarding PBM-affiliated pharmacies
• Compensation information involving pharmacies and other third parties

In addition, PBMs must provide all plan sponsors, regardless of plan size, with summary reports describing overall prescription drug costs, utilization patterns, as well as information on rebates, fees, and discounts received.

Importantly, the law also introduces new audit rights for plan sponsors, allowing plans to conduct annual audits of their PBMs using an auditor of the plan’s choosing. PBMs may not restrict the choice of auditor, which is an issue that has historically surfaced in contracts between plan sponsors and PBMs.

Effective Dates and Transition Period

The “covered service provider” status conferred onto PBMs by this law appears to be effective upon enactment. This means compensation disclosure obligations likely already apply. In contrast, all other changes take effect on or after thirty months from the date of the CAA’s enactment on February 3, 2026. Practically speaking, that means much of this legislation will take effect on August 3, 2028. For groups with plan years based on a calendar year, the effective date is January 1, 2029.

This transition period will allow regulators to develop additional guidance, allow PBMs to build out reporting infrastructure, and provide plan sponsors with time to review and update their PBM contracts accordingly.

Will Increased Transparency Reduce Participant Cost?

The CAA, 2026 has been heralded as a major success relating to transparency initiatives. Legislators have argued that greater visibility regarding PBM compensation could improve plan sponsor oversight of pharmacy benefit arrangements since it will give plan sponsors a better understanding of those arrangements. Enhanced reporting and rebate pass-through requirements may also help plan sponsors better negotiate pricing arrangements.

However, transparency alone may not meaningfully change what plan participants pay for prescription drugs. The American Journal of Managed Care notes that participant cost-sharing is often times calculated based on the list price of a drug, not the net price paid after rebates and concessions are applied. As a result, plan participant out-of-pocket costs may not noticeably change, but plan sponsors may receive significant savings. Even so, this could still be beneficial for plan participants, as plan sponsors may use these savings to ensure stabilized benefit offerings year over year.

Implications for Plan Sponsors

For self-funded group health plans, the CAA, 2026 creates new opportunities to evaluate arrangements with their PBMs due to increased fiduciary oversight. Under ERISA, plan fiduciaries must ensure arrangements with service providers are reasonable and prudent. Now that PBMs are classified as “covered service providers” and are subject to ERISA compensation disclosure rules, the law aligns PBM oversight in a way plan sponsors are used to with their other vendors.

This increased transparency may allow plan sponsors to better assess compensation structures, understand prescription drug spending trends, and evaluate the PBM’s arrangement to ensure it is aligned with the plan’s cost containment strategies. New audit rights also place novel responsibilities on plan sponsors to review the additional information that PBMs must now supply them with and document their findings accordingly.

Looking Ahead

The CAA, 2026 represents an important milestone in the evolving pharmacy benefit management and prescription drug pricing landscape. Introducing new requirements focused on transparency, disclosure, and audits, the law aims to provide plan sponsors with greater insight into pharmacy benefits they offer to their plan participants. The additional transparency may give plan sponsors more tools to negotiate contract terms, but the extent to which this new law ultimately leads to lower prescription drug costs remains an open question.

Plan sponsors should review their PBM agreements to ensure contractual terms align with the upcoming legal requirements relating to disclosures, access to data, compensation, and audit rights. Here at The Phia Group, we are well-positioned to assist plans in evaluating PBM contract language to support such compliance and governance efforts.