The federal spending package that President Trump signed into law Feb. 3 includes provisions aimed at reining in pharmacy benefit manager tactics that have drawn fire from employers, insurers and lawmakers for allegedly driving up costs.
The changes in the Consolidated Appropriations Act of 2026 are designed to ensure that manufacturer rebates and other drug-price concessions flow back to plans and self-insured employers, while giving plan fiduciaries better data to evaluate whether PBM contracts actually lower costs.
The goal is for health plans to pass those funds to employer customers as lower premiums as they have in West Virginia after similar legislation took effect there, according to studies.
PBMs contract with drugmakers, pharmacies and payers, and handle formularies, pharmacy networks and claims processing while negotiating rebates and discounts with manufacturers. Critics across the political spectrum argue that PBMs’ incentives can push plans toward higher list-price drugs with bigger rebates, which PBMs have been accused of pocketing. This means employers and employees pay more overall, especially when cost sharing is tied to list price.
Skeptics worry that PBMs will adjust to the legislation by replacing lost rebate-related revenue with administrative fees or other contract mechanisms.
The two core reforms
Rebate and discount pass-throughs — The law requires PBMs to pass through 100% of manufacturer rebates, fees, discounts and other remuneration (excluding “bona fide service fees”) to ERISA-covered group health plans or plan sponsors. In practice, it targets business models in which PBMs retain a share of rebates or embed revenue in “spread pricing.”
The pass-through requirement will apply to PBM contracts entered into, renewed or extended for plan years beginning on or after Aug. 3, 2028. For many calendar-year plans, that effectively means Jan. 1, 2029.
Transparency and reporting — PBMs will have to provide detailed reporting to group health plans at least twice a year, with an option for quarterly reporting upon request.
Reports are expected to include information that helps sponsors understand drug spending and PBM revenue sources such as rebates, fees and spread pricing, plus data tied to formulary decisions. Civil penalties can apply for failure to disclose information and for knowingly providing false information.
What’s in it for employers
A key reason employers and other payers are hopeful is the experience in West Virginia, where state officials reported that a rebate pass-through approach was associated with materially smaller group premium increases in the state’s 2026 small-group and large-group filings.
For 2026, the rebate pass-through mandate cut the average group health plan rate increase to 12.6% from 19.5%, according to data calculated by insurers and published in a report compiled by the West Virginia Offices of the Insurance Commissioner. The pass-through mandate caused one insurer to cut its large-group rates by 3% rather than increasing premiums by 5%.
That said, state results can be hard to generalize because plan design, market competition and underlying claims trends differ.
For employers that purchase group health insurance, the new PBM rules could eventually help reduce prescription drug costs by ensuring that rebates and discounts negotiated by PBMs flow back to health plans instead of being retained by intermediaries.
However, because the reforms do not take effect for several years and PBMs may adjust their pricing models, employers should not expect immediate savings. Employers should also work with us to monitor how their carriers incorporate the new requirements into future pharmacy benefit arrangements.
