PBM Transparency Just Became Law. Here's Why Your Costs May Not Drop a Cent.

In February 2026, Congress passed the Consolidated Appropriations Act, 2026, requiring PBMs to pass through 100% of manufacturer rebates to self-funded plans and to report drug-level spend, spread pricing, and formulary rationale on a semiannual basis. Two days earlier, the Department of Labor proposed rules forcing PBMs to disclose their fees to ERISA plans directly. Two days after that, the FTC settled with Express Scripts over allegations that it steered insulin formulary placement toward the manufacturer offering the largest rebate rather than the lowest net cost. If you're an employer plan sponsor, the headlines all say the same thing: the PBM industry is finally being forced into the light. What the headlines don't say is that none of this guarantees your plan will spend less on drugs next year, and the reason has nothing to do with whether your PBM complies with the law.

The Misconception

Most benefits leaders read "100% rebate pass-through" and hear "we're now getting all our money back." That's a reasonable inference, and it's incomplete. A rebate is one line item in a PBM's revenue model. When a contract requires 100% pass-through on that single line, a PBM under margin pressure has several other places to recover it, administrative fees, network access fees, differential pricing between retail and mail channels, and a new category the CAA 2026 legislation itself creates: the "bona fide service fee," a flat payment meant to reflect the fair market value of PBM services, phasing in as the standard compensation model by 2029. A PBM can honor the letter of a rebate pass-through mandate and still land in the same place financially by re-pricing everything around it. Transparency laws regulate disclosure. They don't regulate whether the number disclosed is reasonable.

Why Employers Miss This

Plan sponsors typically evaluate PBM performance using two or three headline metrics reported at renewal: rebate guarantee, generic effective rate, and total plan spend trend. Those numbers now come with more paperwork attached, which reads as progress. But a rebate guarantee met at 100% pass-through says nothing about whether the rebate itself was negotiated against the lowest available net price, or whether the flat fees layered around it grew to offset the rebate employers finally started keeping. Most benefits teams don't have the claims-level infrastructure to check, and most brokers present the new disclosure reports as a compliance deliverable rather than an analytical one. The report arrives, it satisfies the legal requirement, and it gets filed.

A Framework for the Post-Reform Environment

Before assuming the new transparency rules have changed your plan's economics, walk your contract and your semiannual disclosure report through five checkpoints.

1. How is "bona fide service fee" defined in your contract, and is it capped?

The CAA 2026 language sets fair market value as the standard, but fair market value is not a fixed number, it's a range your PBM will define unless your contract does it first. If your renewal language doesn't specify a dollar cap, a percentage-of-spend ceiling, or a third-party benchmark for what counts as fair market value, you've replaced one opaque revenue stream with another one wearing a compliant label.

2. Does the rebate definition in your contract match the rebate definition in the law?

CAA 2026 requires passing through "rebates, fees, and other remuneration." Some existing PBM contracts still define "rebate" narrowly, excluding price protection payments, market share incentives, or administrative fees paid by manufacturers for formulary placement. If your contract's definition is narrower than the statute's, you can be in a technically compliant relationship where meaningful manufacturer payments never make it onto your disclosure report at all.

3. Where does spread pricing show up outside the ingredient cost line?

Spread pricing traditionally means the PBM charges the plan more for a drug than it reimburses the pharmacy. The FTC's Express Scripts settlement is a reminder that spread-like economics can also live in formulary placement itself, steering utilization toward the drug that pays the PBM the most, independent of what shows up on any single claim. Your semiannual report will show net cost by drug. It won't necessarily show why that drug was preferred over a clinically equivalent, lower-net-cost alternative. That rationale disclosure is required under the new rules; ask for it specifically rather than assuming it's embedded in the standard report.

4. What's the actual cash-flow timing on your rebates?

The law requires rebate payments within 90 days of quarter-end. That's a meaningful improvement over the annual, often-delayed reconciliations common in older contracts, but a 90-day lag is still a working-capital cost your plan is financing. If your PBM's new disclosure shows rebates "passed through" but paid on day 89 of a 90-day window, on drugs your plan already paid full price for three months earlier, you're not receiving a discount, you're receiving a delayed refund on an interest-free loan you didn't agree to make.

5. Can you independently audit the numbers, or only receive them?

Semiannual reporting is a floor, not an audit right. Reporting means the PBM tells you what happened. An audit right means you or a third party can verify it against underlying claims data. Several major PBMs, including Cigna's Express Scripts subsidiary and UnitedHealth Group's Optum Rx, have publicly committed to eliminating rebate retention and full pass-through starting in 2026, commitments worth taking at face value operationally, but still worth verifying contractually, because a public commitment is not the same instrument as an audit clause.

What This Looks Like in Practice

Consider a mid-sized self-funded employer with roughly 2,000 covered lives and a specialty drug spend concentrated in a handful of high-rebate categories, GLP-1s among them. Illustratively, if that plan's PBM contract defines "rebate" to exclude manufacturer administrative fees, which, unlike rebates, are frequently retained by the PBM as compensation rather than passed through, the plan could see 100% pass-through on the rebate line in its disclosure report while still missing several hundred thousand dollars annually in manufacturer payments that never got classified as a rebate in the first place. Nothing about that arrangement violates the new law. It just means the law's guarantee is only as strong as your contract's definitions.

Where This Connects to Renewal and Negotiation

Every one of these five checkpoints is renewal language, not just a reporting exercise. As contracts come up for renewal in 2026 and 2027, this is the moment to tighten definitions, rebate scope, bona fide service fee caps, audit rights, and disclosure specificity, while PBMs are already rewriting their standard contract templates to comply with CAA 2026 anyway. Asking for stronger language now costs little, because the PBM's legal and contracting teams are doing this rewrite regardless of what any single employer asks for.

Actions to Take This Quarter

Pull your current PBM contract and locate the rebate definition, the fee schedule, and the audit rights clause. Compare the rebate definition against the CAA 2026 statutory language your broker or benefits counsel can provide. When your first semiannual disclosure report arrives, ask your broker or PBM account team, in writing, for the formulary placement rationale by drug, not just the net cost summary, since that rationale is a required disclosure element even when it isn't included by default. If you haven't already, ask whether your contract permits an independent, claims-level audit, and if it doesn't, flag that as a renewal priority rather than a nice-to-have.

Key Takeaways

The 2026 reforms are a genuine structural change to how PBMs are required to operate, and the disclosure requirements alone represent more visibility than most employer plans have ever had. But transparency is a tool, not an outcome. A PBM can comply fully with CAA 2026, the DOL's fee disclosure rule, and still deliver a plan trend that looks exactly like it did in 2025, because the law regulates what must be disclosed, not what a fair price looks like. The employers who benefit from this reform will be the ones who use the new disclosure requirements as a starting point for their own analysis, not as a substitute for it.