Federal PBM Reform Is Finally Law

On February 3, 2026, the president signed into law the Consolidated Appropriations Act, 2026 (CAA 2026), which includes significant pharmacy benefit manager (PBM) reforms that will impact all group health plans.

Background  

The CAA 2026 builds on years of bipartisan efforts to increase transparency in PBM pricing and compensation and follows the DOL’s proposed PBM fee disclosure rule for ERISA plans, which was discussed in our February 10, 2026, article. Both the CAA 2026 and DOL proposed rule seek to give employers greater visibility into prescription drug pricing by standardizing PBM reporting and expanding federal oversight of PBM practices. However, as explained below, there are important distinctions between the two initiatives.

CAA 2026 PBM Reforms vs. DOL Proposed PBM Fee Disclosure Rule  

Applicability and Effective Date  

Significantly, the CAA 2026 PBM reforms generally apply to all group health plans, with some differences based on plan size, funding type and ERISA status. Most provisions are effective for plan years beginning 30 months after enactment (i.e., January 1, 2029, for calendar year plans). One notable exception may take effect sooner: the extension of ERISA Section 408(b)(2) compensation disclosure requirements to all health plan service providers, not just brokers and consultants.

By comparison, the DOL proposed PBM rule applies only to self-insured ERISA plans, regardless of size, and is proposed to take effect for plan years beginning on or after July 1, 2026.

New PBM Reporting Requirements  

The CAA 2026 imposes two separate reporting obligations on PBMs.

First, PBMs must provide drug-level reports to sponsors of large, self-insured plans (i.e., those with 100+ participants or employees in the prior year) every six months — or quarterly upon request. Large, fully insured plans may receive the drug-level reports by opting in annually. The reports must be in machine-readable format and include detailed information on drug costs, rebates, PBM compensation, formulary decisions, and the use of PBM‑affiliated pharmacies.

Second, PBMs must prepare plan‑level summary reports for all group health plans, regardless of size, and a higher-level summary document for plans to provide to participants upon request.

Additionally, group health plans must provide an annual notice to participants regarding the PBM reporting requirements and their right to request a summary PBM report. It is anticipated that regulators will develop a template notice for this purpose.

Separately, the DOL proposed rule also requires PBMs to provide initial and semi-annual disclosures (similar to the CAA 2026 drug-level reports) but only to ERISA self-insured health plans.

Mandatory Rebate Pass-Through  

Notably, the CAA 2026 requires PBMs to pass through 100% of all rebates, discounts, fees, and other remuneration received for an ERISA group health plan to the sponsor (for a self-insured plan) or the carrier (for a fully insured plan) on a quarterly basis. PBM contracts that do not include full pass-through provisions will not be considered reasonable under ERISA. This requirement aims to eliminate “spread pricing,” where PBMs charge plans more than they reimburse pharmacies and keep the difference.

The DOL proposed rule requires PBMs to disclose rebates to ERISA self-insured plan sponsors, but in contrast, it does not require that rebates be passed through to group health plans.

Audit Rights  

The CAA 2026 requires PBMs to make rebate records available for audit at least annually, so employers can confirm the accuracy of the rebates remitted to the plan.

The DOL proposed rule provides broader audit rights, allowing an ERISA plan fiduciary to perform an audit to verify the accuracy of the entire PBM compensation disclosure.

Penalties  

The CAA 2026 provides a direct means of enforcement by imposing clear civil penalties for PBM disclosure failures ($10,000 per day for nondisclosure; up to $100,000 for knowingly providing false information).

To address noncompliance, the DOL proposed rule relies on the ERISA prohibited transaction framework, which lacks fixed penalties but can result in the imposition of excise taxes and equitable remedies.

Employer Takeaway  

Although the CAA 2026 reforms represent a significant shift in federal PBM oversight, employers do not need to take immediate action in response. Most requirements won’t apply until 2029 (for calendar year plans), and regulations are anticipated within 18 months that will clarify aspects of these reforms.

However, ERISA self-insured plans should continue to monitor the status of the DOL proposed PBM fee disclosure rule, which may be finalized and implemented sooner, although the DOL is likely to eventually align its rule with the CAA 2026 requirements.

Once effective, the CAA 2026 reforms and DOL PBM fee disclosure rule will give plan sponsors far more insight into PBM pricing and compensation. This improved transparency is designed to help employers evaluate PBM arrangements and negotiate favorable pricing terms, but it will also increase expectations of group health plan sponsors. Accordingly, employers may want to begin evaluating whether their governance, vendor management, and fiduciary review processes are positioned to effectively analyze and act on expanded PBM disclosures in the years ahead.

NFP will continue to monitor PBM reform legislation and report relevant updates in Compliance Corner.

Consolidated Appropriations Act of 2026 (CAA)