FAQ: PBM Reform, 340B, and Medicare Shifts Payers Face in 2027

The midterm elections are scheduled for November 3, 2026, as pharmacy benefit managers (PBMs) face serious reform, more Medicare Advantage (MA) insurers pull out of that market, and consumers face higher health care premiums and prescription drug costs.

Here are 5 common questions about current legislation, policies, and reform relevant to the upcoming midterms and what payer and managed care stakeholders need to know.

What Do the CAA 2026 PBM Reforms Mean for Health Plans and Employers Before 2028?

The Consolidated Appropriations Act of 2026 (CAA 2026) was signed into law on February 3, 2026. The act aims to reform how health groups and plans negotiate contracts and drug pricing with PBMs, increasing transparency for consumers and strengthening fiduciary oversight.¹ Although many of the changes targeted Medicare Part D, other adjustments extend to plans governed by the Employee Retirement Income Security Act, the Internal Revenue Code, and the Public Health Service Act.¹

The 3 major reforms introduced in this law eliminate spread pricing for PBMs, require 100% of manufacturer rebates to be passed through to the plan, and limit PBM compensation to "bona fide service fees" that cannot be linked to drug pricing or utilization volume. Most provisions take effect for plan years beginning on or after August 3, 2028, or January 1, 2029, for calendar-year plans.¹

"This rule puts some additional responsibility on the plan fiduciary because it says, well, the PBMs now have to completely open their books and be transparent," Adino "A.J." Barbarito, Esq., senior associate at Frier Levitt, said in an interview with The American Journal of Managed Care, describing a related Department of Labor disclosure rule for self-insured employer plans. "You have to use that transparent information to provide the best possible plan that you can to your beneficiaries under your plan, so it adds responsibilities to both the PBM and to the plan fiduciary."

For Medicare Part D, CMS has already issued a request for information on pharmacy reimbursement terms in PBM contracts, with responses due November 23, Barbarito said. He expects a proposed rule around April 2027, ahead of the pharmacy contract standards taking effect for plan years beginning January 1, 2029.

Under this law, PBMs are also required to provide detailed drug pricing and claims reports to large group health plans every 6 months, or quarterly upon request. These changes, in theory, could increase the adoption of generics and biosimilars among employers and plans, as they are inherently lower net-cost alternatives.

How Will Medicare Advantage Plan Exits Affect Seniors' Drug and Pharmacy Access in 2027?

Commercial health plans are downsizing their Medicare Part D options yet again. Four parent organizations—Humana, UnitedHealth Group, CVS Health, and Aware Integrated, which sold Blue Cross–branded plans in Minnesota—account for half of the 2.8 million individual Medicare Advantage prescription drug (MA-PD) plan enrollees expected to lose their coverage at the end of 2026.²

Furthermore, another 1.2 million enrollees in stand-alone prescription drug plans (PDPs) will also have their plans terminated by the end of the year.² For many MA-PD enrollees, this means shopping for another MA plan in their area if one is available or being automatically switched to traditional Medicare. However, those MA-PD enrollees are eligible for a Medigap special enrollment period with guaranteed issue rights to help supplement out-of-pocket costs not covered by traditional Medicare.²

PDP enrollees, however, will need to choose a new stand-alone PDP or an MA-PD if they want continued Medicare Part D coverage.²

These plan exits particularly affect older individuals living in rural communities. Specifically, nonmetro counties account for 63 of the 67 counties losing their last general-enrollment MA plan in 2027, Barbarito said.

"The narrow network can mean that they're switched to a new pharmacy, that they're steered toward more mail order or specialty pharmacies that are affiliated with a PBM," he explained. "They [also] have new prior authorizations or formulary changes, which can be just incredibly burdensome."

Why Should Payers Watch the 340B Rebate Pilot Lawsuit Before January 1?

The Health Resources and Services Administration announced the revised 340B Rebate Model Pilot Program on July 31, 2026. It provides qualifying drug manufacturers a pathway to satisfy the 340B ceiling price through claims-based rebates as opposed to upfront discounts.³

However, the American Hospital Association (AHA), the Maine Hospital Association, and 4 safety-net hospitals filed a lawsuit on October 9, 2026, challenging the pilot program. The plaintiffs argued that the program would "impose massive new costs and divert resources that support care for millions of patients," according to a statement from AHA President and CEO Steve Walsh.⁴

Barbarito suggested the incentives behind such pushback are related to cash flow, since covered entities would have to pay full price upfront and not recoup their costs until a later date through rebates. Data burden also plays a role, as covered entities struggle to build the infrastructure necessary to submit the specific data elements required through third-party vendors.

"It's going to make covered entities more selective about which drugs they buy and which pharmacies they contract with to dispense them," Barbarito explained. "So, the ultimate patient impact there is that it could be fewer retail options for patients [and] member dissatisfaction, which we always see when they are sent to typically a PBM-affiliated pharmacy but a specialty pharmacy that they wouldn't have originally chosen and that they're being forced to go through because of these kinds of changes."

As the pilot is expected to take effect January 1, 2027, Barbarito suggested plan sponsors begin closely monitoring their spending on affected drugs and members' access to them.

"I think that they have a responsibility to members and patients because, you know, where those patients want to fill their prescriptions is important," he said.

How Is the Loss of Enhanced ACA Subsidies Affecting Prescription Affordability?

The enhanced premium subsidies under the Affordable Care Act (ACA) expired at the end of 2025, leaving numerous people with higher health insurance costs. With the expiration, any household earning more than 400% of the federal poverty level is ineligible for any premium relief. Extra help for many people using Medicaid was also reduced.⁵

Although MA premiums are projected to fall from 2026 to 2027, cost remains a barrier to adherence: among 104 physicians surveyed, 96% said they have had a patient stop taking a medication because of cost without telling them first.⁶ These data highlight the potential downstream effects that occur when patients no longer receive support for their health insurance coverage costs, especially when it comes to taking their prescriptions.

"It's a heartbreaking scenario, right? A patient doesn't take the med. They go in with a hypertensive emergency, and they get a $50,000 bill, and they simply can't afford it," Siva Mohan, MD, a board-certified general and interventional cardiologist and cofounder and chief medical officer of RazorMetrics, said in an interview with AJMC about the survey results. "They can't make the payments, even if they have a payment plan."⁶

"At the end of the day, higher deductibles always mean reduced access," Barbarito said. "Higher deductibles always [mean] compliance problems. You know, medication adherence issues, medication rationing."

Some patients can already find lower prices outside of insurance, Barbarito noted. He pays cash for some prescriptions through Mark Cuban Cost Plus Drugs because it is cheaper than going through his health plan, but none of that spending counts toward his deductible.

"What plans can do is change the way that they're negotiating for those drugs so that the lowest price that you can pay also goes to patients' deductibles and maximum out-of-pocket," he said. "I'd say that's something concrete that they can and should do."

What Should Payers Expect From PBM Oversight After the 2026 Midterms?

Barbarito said that regardless of who controls Congress, PBM oversight will continue, as it remains a bipartisan issue. He said that nearly everyone agrees PBMs need to be "reined in."

He said the general public and managed care stakeholders can expect administrative agencies to continue championing the regulatory efforts already in play.

Even before the CAA 2026 reforms take effect, PBMs are already shifting their models. Barbarito pointed to Optum Rx's model change moving away from spread pricing ahead of CAA 2026, but he expects PBM economics to remain relatively the same despite these shifts.

"I think it's going to be the same, and [PBMs are] going to do whatever they [can] because it's basically their job to their shareholders to say, 'Hey, our value is not going to go down. We're going to continue making the same amount of money or more than we've been making in the past,'" he explained. "That's the economic pressure on them. Everybody else says PBMs need to make less money. I don't think that that's something that the PBMs are ever going to agree to."

References

1. Hollan K. Federal PBM compensation shifts: early CAA 2026 considerations. Am J Manag Care. 2026;32(9):In Press. doi:10.37765/ajmc.2026.90007

2. McCrear S. Medicare plan terminations hit 4.3 million as Part D market shrinks. AJMC. October 27, 2026. Accessed October 30, 2026. https://www.ajmc.com/view/medicare-plan-terminations-hit-4-3-million-as-part-d-market-shrinks

3. Steinzor P. CANN responds to HRSA's revised 340B rebate model pilot. AJMC. August 5, 2026. Accessed October 30, 2026. https://www.ajmc.com/view/cann-responds-to-hrsa-s-revised-340b-rebate-model-pilot

4. AHA, MHA, and four safety-net hospitals file suit to stop costly 340B rebate program from harming hospitals and patients. News release. AHA. October 9, 2026. Accessed October 30, 2026. https://www.aha.org/press-releases/2026-10-09-aha-mha-and-four-safety-net-hospitals-file-suit-stop-costly-340b-rebate-program-harming-hospitals-and

5. Bonavitacola J. FAQs about expiration of enhanced subsidies under the Affordable Care Act. AJMC. April 16, 2026. Accessed October 30, 2026. https://www.ajmc.com/view/faqs-about-expiration-of-enhanced-subsidies-under-the-affordable-care-act

6. McCrear S. FAQ: How payers can ease drug cost burdens for patients, physicians. AJMC. October 16, 2026. Accessed October 30, 2026. https://www.ajmc.com/view/faq-how-payers-can-ease-drug-cost-burdens-for-patients-physicians