When your health plan buys medicine for employees, it uses a middleman company called a PBM (Pharmacy Benefit Manager). Drug companies pay the PBM money back, called a “rebate”, for putting their medicine on the plan’s list. The problem: PBMs haven’t had to say how much of that money they keep for themselves versus how much they hand back to the plan. New federal rules change that, starting in 2028.
What’s Driving These Changes?
The primary legislation is the Consolidated Appropriations Act, 2026 (CAA 2026), signed into law on February 3, 2026. The law introduces new transparency and rebate pass-through requirements for PBMs serving employer-sponsored health plans.
Separate proposed regulations from the U.S. Department of Labor, issued on January 30, 2026, would further require PBMs to disclose compensation and pricing information directly to employer plan fiduciaries. Those regulations have not yet been finalized but signal the federal government’s broader push for greater accountability throughout the prescription drug supply chain.
What’s Actually Changing?
The new requirements are intended to make PBM pricing more transparent and ensure employer health plans receive the full value of manufacturer rebates.
- 100% Rebate Pass-Through
PBMs must return 100% of manufacturer rebates to the employer-sponsored health plan. They can no longer retain a portion of rebate dollars without disclosure. - Detailed Reporting
PBMs must provide comprehensive reports every six months, or quarterly upon request, detailing prescription drug costs, manufacturer rebates, administrative fees, and other compensation. - Expanded Audit Rights
Employer health plans gain stronger rights to audit PBM financial records and verify that rebates and fees are being reported accurately. - Restrictions on Spread Pricing
PBMs can no longer charge employer health plans more than they reimburse pharmacies and retain the difference without disclosure. - Meaningful Enforcement
PBMs that fail to meet federal reporting requirements may face penalties of up to $10,000 per day, along with additional penalties for other violations.
When Do the Rules Take Effect?
The timing varies depending on the type of health plan.
- Medicare Part D plans: January 1, 2028
- Employer-sponsored (commercial) health plans: Generally effective 30 months after enactment (approximately August 2028), which translates to January 1, 2029 for most calendar-year employer plans.
Can PBMs Simply Pay the Fine and Ignore the Rules?
Not realistically.
The widely discussed $10,000-per-day penalty primarily applies to reporting failures, not to retaining rebate dollars that should have been passed through to employer health plans.
Improperly retaining manufacturer rebates may constitute a prohibited transaction under ERISA, exposing PBMs to excise taxes based on the amount improperly retained, potential civil penalties, employer lawsuits, contract termination, and significant reputational damage.
In addition, knowingly submitting false reports can result in penalties of up to $100,000 per false statement, making inaccurate reporting extremely costly.
For most PBMs, the financial and legal consequences of noncompliance far outweigh any potential benefit.
What Employers Should Do Now
While the new requirements are still being phased in, employers don’t need to wait to begin preparing.
- Review your current PBM agreement. Understand exactly how your PBM is compensated, including manufacturer rebates, administrative fees, and any spread pricing arrangements.
- Plan for future contract negotiations. Begin incorporating 100% rebate pass-through provisions, enhanced reporting requirements, and audit rights into your next PBM renewal.
- Request greater transparency today. Ask for detailed pharmacy reporting now rather than waiting until it becomes mandatory.
- Document fiduciary oversight. Regularly review pharmacy spending and PBM performance, and maintain records demonstrating active oversight of your health plan.
- Use the data to drive decisions. Transparency only creates value if employers use the information to negotiate better pricing, improve contract terms, or evaluate alternative PBM partners.
Will These Changes Reduce Prescription Drug Costs?
The new rules are designed to improve transparency, not directly lower prescription drug prices.
Employers will finally gain greater visibility into where pharmacy dollars are going and whether manufacturer rebates are reaching the health plan as intended.
Some organizations may realize meaningful savings if their PBM previously retained a significant portion of rebates. Others may find PBMs replacing lost rebate revenue with different administrative fees or pricing structures.
Ultimately, transparency alone doesn’t reduce costs. It gives employers the information they need to negotiate more effectively, hold their PBM accountable, and make better purchasing decisions.
For employers willing to use that information, these reforms represent an opportunity to strengthen fiduciary oversight, improve pharmacy benefit management, and potentially reduce long-term healthcare spending.