PBM Reforms Signed Into Law, Reshaping Medicare Part D Drug Pricing Transparency

Tuesday afternoon, the House of Representatives voted in favor of a spending bill that includes major pharmacy benefit manager (PBM) reforms aimed at increasing price transparency for consumers and potentially reducing out-of-pocket pharmacy costs. Hours after the vote, President Donald J. Trump signed the bill into law.¹

The bill includes amendments to the Consolidated Appropriations Act of 2026 that would “delink” PBM compensation from Medicare Part D list prices and rebates. Instead, the policy requires PBMs to receive flat administrative fees, reducing incentives to favor higher-priced drugs. PBMs currently generate profit through manufacturer rebates and spread pricing, practices that often lack transparency and could result in consumers paying out-of-pocket costs or co-pays based on list prices rather than negotiated rates.²

How the Bill Reshapes PBM Compensation in Medicare Part D

PBMs typically receive a portion of rebates paid by drug manufacturers, the majority of which are passed back to the payer as an incentive to prefer a drug on a formulary. PBMs may also retain revenue through spread pricing by billing payers more for a prescription than the amount reimbursed to pharmacies.

Under the amendment, PBMs would be required to pass through 100% of rebates, fees, and other remuneration to the payer. Failure to comply would allow CMS to impose monetary penalties. CMS will also have to define and enforce “reasonable and relevant” Medicare Part D contract terms related to PBM transparency around reimbursement and dispensing fees, as well as establish an appeals process for pharmacies to dispute contract terms deemed unreasonable or irrelevant.

What New Transparency Requirements Mean for PBMs and Pharmacies

These transparency requirements will enable CMS to track financial flows between PBMs and pharmacies, as well as PBM-negotiated rates between payers and drug manufacturers. Data collection would include semiannual prescription drug spending, gross and net drug spending, manufacturer rebates, spread pricing arrangements, formulary placement rationale, and information related to incentives that encourage use of affiliated pharmacies.³

The bill was approved by the Senate on January 21. It was subsequently returned to the House for negotiations related to Department of Homeland Security funding. Approved by both chambers, the spending package was signed by Trump hours after the vote on February 3, after publicly expressing his support for the bill.¹

While the legislation represents a rare instance of PBM reform advancing through Congress, it is not the first attempt to address drug pricing practices. A previous effort stalled in late 2024 amid broader government reform negotiations.²

Why the Impact on Drug Prices May Be Limited

Industry leaders have already begun adjusting their business models in anticipation of PBM reform. For example, Cigna announced plans to eliminate the rebate-retention model within its PBM subsidiary, Express Scripts, and to pass negotiated rebates through to payers. UnitedHealth Group’s PBM subsidiary, Optum Rx, is similarly committed to full rebate pass-through beginning in January 2026. CVS Health’s PBM, CVS Caremark, has offered rebate pass-through options since 2019.²

Despite these shifts, critics argue that large PBMs may offset lost rebate revenue through administrative fees or other pricing mechanisms. As PBMs adapt to potential regulatory changes, proponents of reform emphasize that sustained oversight and transparency will be critical to ensuring that cost savings ultimately reach consumers rather than being absorbed elsewhere in the drug supply chain.

References:

1. Kapur S, Leach B. Trump signs bill to end government shutdown and fund DHS for two weeks. NBC News. February 3, 2026. Accessed February 3, 2026. https://www.nbcnews.com/politics/congress/house-path-end-government-shutdown-tuesday-dhs-trump-rcna257138

2. Lim D, Chu A. Congress is about to overhaul the drug market. Consumers may never feel it. POLITICO. February 3, 2026. Accessed February 3, 2026. https://www.politico.com/news/2026/02/02/prescription-drug-costs-pharmacy-benefit-managers-00761503

3. Carter celebrates passage of his key PBM reforms to lower costs for patients. News release. Congressman Buddy Carter. January 22, 2026. Accessed February 3, 2026. https://buddycarter.house.gov/news/documentsingle.aspx?DocumentID=16283