The Consolidated Appropriations Act of 2026, signed February 3, requires pharmacy benefit managers to remit 100% of rebates, fees, alternative discounts and other remuneration to plan sponsors, and restricts PBM compensation to flat-dollar service fees that cannot vary with drug price or volume.

For ERISA plans the provisions bite on contracts entered or renewed for plan years beginning on or after August 3, 2028, which is January 1, 2029 for calendar-year plans. The 2029 renewals are already in the pricing pipeline.

Key Takeaways

  • 100% passthrough covers rebates, fees, alternative discounts and other remuneration from manufacturers, group purchasing organizations and rebate aggregators. Only transparent bona fide service fees may be retained.
  • $10,000 per day in civil penalties applies to disclosure failures under new ERISA Section 726, with $100,000 per occurrence for knowingly false information.
  • 8% to 15% is the range by which net drug cost projections move on a shift from retained-rebate to full passthrough, depending on formulary and therapeutic mix.
  • GLP-1 rebates run below 10% against roughly 30% for established brand classes, so a blended rebate assumption understates the fastest-growing cost component.
  • PCMA says 98% to 100% of negotiated rebates already flow to employers under recent contracts, which if accurate makes the data change larger than the dollar change.

What the Statute Actually Requires

The scope is deliberately wide. "Remuneration" captures categories prior state transparency laws did not reach: volume-based bonuses, formulary placement fees, price protection guarantees and administrative fees from manufacturer-funded patient assistance programs.

It also sets a two-tier clock. Rebate aggregators and GPOs must pass 100% of funds to the PBM within 45 days of each quarter-end, and the PBM has 90 days from quarter-end to remit to the plan.

The one carve-out is the bona fide service fee, which must be a flat dollar amount, disclosed to the plan fiduciary, and not calculated as a function of drug price, wholesale acquisition cost or utilization volume. The DOL's companion proposed rule of January 30, 2026 sets the disclosure mechanics and applies to self-insured plans with 100 or more participants. The practical effect is that PBM revenue has to move from spread-based to fee-based.

Enforcement is what separates this from earlier attempts. The Act classifies PBMs as covered service providers under ERISA Section 408(b)(2) and folds the passthrough requirement into the definition of reasonable compensation. A contract that retains remuneration beyond disclosed service fees is no longer reasonable, so it falls outside the prohibited transaction exemption and exposes both the PBM and the plan fiduciary. New Section 726 adds $10,000 per day for disclosure failures and $100,000 for knowingly false information.

Date Milestone Actuarial Implication
Feb 3, 2026 CAA 2026 signed; PBM classified as covered service provider under ERISA Begin monitoring PBM contract language for passthrough provisions
Jan 30, 2026 DOL proposed PBM fee disclosure rule published Track final rule for applicability to plan years beginning July 1, 2026
Jan 1, 2028 Express Scripts standard offering available; Part D reforms effective Update Medicare Part D bid models for delinked PBM compensation
Apr 1, 2028 HHS any-willing-pharmacy contract standards finalized Model network adequacy and reimbursement rate impact on Part D costs
Jul 1, 2028 First Part D annual PBM reports due (plan year 2027 data) First plan-level drug cost decomposition data available for Part D
Aug 3, 2028 ERISA passthrough provisions effective for new/renewed contracts All 2029 plan year renewals must use full-passthrough cost assumptions
Jan 1, 2029 Calendar-year ERISA plans, Part D any-willing-pharmacy effective Full-year pricing models must reflect passthrough, delinked PBM fees

What Passthrough Does to a Net Cost Assumption

The modelling change is not a disclosure adjustment. It moves the number.

Where a plan shifts from retained-rebate to full passthrough, net drug cost per member per month moves by the previously retained spread, and that runs 8% to 15% depending on therapeutic mix. Plans heavy in specialty utilization, oncology, autoimmune and rare disease, see the largest shift, because specialty rebates have been the most variable. Generic-dominated formularies see the smallest, because generics carry minimal manufacturer rebates.

The class that breaks a blended assumption is GLP-1. Rebate levels for semaglutide and tirzepatide sit below 10%, against roughly 30% for established brand classes. Applying an average rebate percentage across the formulary therefore understates GLP-1 net cost and overstates the rebate credit on everything else, in the exact class driving trend. That is the case for class-specific percentages rather than a single credit line, and it is the same NDC-level discipline our GLP-1 trend factor framework sets out.

Settlement timing changes separately from level. Legacy contracts often settled annually or semiannually with true-ups that produced large period-to-period swings in net PMPM. Quarterly settlement compresses that lag, and the volatility reduction in early-adopter employer groups has run 1.5 to 2.5 percentage points of trend.

West Virginia supplies the only multi-year calibration. It mandated full rebate passthrough in 2022. For 2026 coverage, average group health plan rate increases there fell from 19.7% to 12.6%, with one large insurer filing a 2.91% cut in place of a 5.09% increase, and small group increases cut 52% in 2025. That is an empirical anchor rather than a portable factor: market size, insurer mix and formulary composition all differ from national averages, so it carries partial credibility at best.

The reporting provisions are what let an actuary decompose any of this. Semiannual reports, quarterly on request, must cover gross and net drug spending, manufacturer rebates, spread pricing by network pharmacy, formulary rationale on drugs above $10,000 in annual plan spend, affiliated pharmacy dispensing and member cost sharing. That converts a single net PMPM line into the four-component trend decomposition at drug level and plan level rather than PBM-wide.

The Baseline May Already Be Most of the Way There

The PCMA stated on April 9, 2026 that market practice and federal law have made full passthrough the industry baseline, with PBM chief executives testifying that 98% to 100% of negotiated rebates already flow to employers under recent contracts.

If that holds, the cost structure change for most large plans is close to nil and the real change is the reporting. The plans that see the 8% to 15% shift are the ones that never had the leverage to negotiate passthrough: smaller employer groups, which are also the groups least equipped to audit the disclosures they will now receive.

That distribution matters because the statute puts the audit obligation on the plan fiduciary. Receiving disclosures is not sufficient; fiduciaries must review them, assess whether PBM compensation is reasonable, identify conflicts and audit at least annually, with sole discretion over auditor selection and no PBM funding or influence. The innocent fiduciary exception requires documented lack of knowledge, a written demand letter on discovering failures and notice to the DOL if noncompliance persists beyond 90 days.

The pricing problem underneath is a basis break. Historical experience was collected net of retained rebates; forward projections must be gross with an explicit credit. Early-adopter experience suggests two to three renewal cycles before data on the new basis carries enough credibility to stand alone, which means 2029 renewals get priced on a bridge between two regimes rather than on either one.

That bridge sits inside an already-loaded pharmacy assumption. With employer health costs at a 15-year high and pharmacy the fastest-growing component, the rebate credit is the highest-leverage line in the renewal model and the one with the least experience behind it, while newly public prior authorization metrics make the interaction between formulary design and utilization management visible at the same moment.

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