The Consolidated Appropriations Act, 2026 (CAA 2026) has been enacted by Congress following a complicated legislative journey. The President signed the Act on Tuesday, February 3, 2026. This extensive law brings important reforms aimed mainly at pharmacy benefit manager (PBM) prescription drug pricing and compensation practices.

Starting in 2029, these new regulations will require PBMs to provide contractual protections for the following.

• employer data access,
• comprehensive reporting to employers,
• enhanced employee notifications,
• improved disclosure standards, and
• a mandate for pass-through compensation.

The New CAA 2026 PBM Reform Requirements: Start Date in 2029

The federal PBM reforms introduced by the CAA 2026 will apply to plan years beginning at least 30 months after the law is enacted. For plans that follow the calendar year, this means the rules take effect on January 1, 2029.

These wide-ranging reforms will become clearer as the industry adjusts during the lengthy transition period. Meanwhile, below is a brief overview of the key provisions that employers should start reviewing now:

Contractual Restrictions on Disclosure Prohibited

• Employer-sponsored group health plans and health insurance carriers are not permitted to enter into contractual arrangements with pharmacy benefit managers (PBMs) that restrict or delay the disclosure of specified information to the plan.
• Contracts must also clearly state that PBMs will be granted the necessary access to information required to fulfill the new reporting obligations described below.

PBM Reporting Requirements

• Upon implementation of the new law, PBMs are required to submit comprehensive reports to group health plans—typically the employer sponsoring such plans—at least biannually, or quarterly in particular cases.
• These reports must be delivered both in plain language and in a machine-readable format.
• The specific reporting obligations may differ based on various criteria; however, they generally pertain to prescription drug claims, associated costs, and PBM compensation.
• PBMs administering self-insured or level funded plans sponsored by a “specified large employer” or classified as a “specified large plan” are subject to the most extensive reporting standards.
• Fully insured large employers or plans may elect to participate annually by ‘opting in’ for this level of detailed reporting, requiring their PBM to submit the same comprehensive report demanded of self-insured or level funded plans.

For clarification, under these reforms, a “specified large employer” refers to an entity averaging at least 100 employees on business days during the prior calendar or plan year, while a “specified large plan” pertains to one averaging at least 100 participants within the same timeframe.

• Regardless of the plan’s size or funding arrangement, PBMs are obligated to provide a summary report that contains select, but not all, information applicable to large, self-insured or level funded plans.
• In addition, PBMs must prepare a separate summary for employees and their dependents with only aggregate data, though individuals retain the right to request more detailed, claims-level information in certain circumstances.

All PBM reporting activities must adhere to HIPAA requirements regarding the use and disclosure of protected health information (PHI), ensuring reported data is confined to summary health information.

Employee Notice Requirements

• PBM reform introduces new definitions for “large” employers/plans and adds an annual employee notice requirement.
• All group health plans must give written notice to employees and dependents about PBM reporting requirements.
• This notice can be included in plan documents, such as the summary plan description (SPD), ERISA wrap document, carrier/TPA materials (e.g., EOCs, policies, COCs, benefit summaries), or other annual notices.

Agencies are expected to provide a template notice format.

The notice informs recipients of their right to request a summary of the PBM report with aggregate data and explains how to obtain claims-level details showing differences paid by the health plan to the PBM and by the PBM to the pharmacy.

Pass-Through Compensation Required

• Once implemented, PBM contracts will mandate both pass-through pricing and transparent fees. This model typically means the plan pays the pharmacy's reimbursement amount (or the PBM’s cost basis) along with an explicit administrative or dispensing fee. Such a structure improves clarity around unit costs and aligns incentives more effectively among all parties.
• Additionally, PBMs must forward 100% of prescription drug rebates, fees, alternative discounts, and related compensation directly to the plan or insurance carrier. These payments need to be returned quarterly, within 90 days after each quarter ends.
• The CAA 2026 requirements will put an end to spread pricing models, which let PBMs charge the plan more than what they reimburse pharmacies and retain the difference as profit. Spread pricing is widely criticized for its lack of transparency, as plan sponsors cannot see actual pharmacy costs or PBM margins, leading to possible misalignment of incentives.

PBM Compensation Disclosures

• The CAA 2021 requires explicit disclosure of any indirect broker or consultant compensation under §408(b)(2), now clearly covering PBMs and other vendors.
• Other vendors that must disclose indirect compensation for health plans include recordkeepers, medical management providers, benefits administrators, stop-loss insurers, wellness program managers, transparency tool providers, disease management, compliance services, EAPs, and TPAs.

Enforcement

• Civil monetary penalties of $10,000 per day will be imposed for each day that a plan, insurance carrier, or other regulated entity does not comply with the new PBM reform regulations.
• Health insurance carriers, PBMs, and specified third-party administrators may be subject to civil monetary penalties of up to $100,000 for knowingly submitting false information related to these PBM requirements, with the penalty assessed for each instance of false reporting.

Summary

The PBM reforms in CAA 2026 mark a major shift in group health plan law by clarifying permissible compensation structures, expanding reporting requirements for cost containment, and increasing transparency to fulfil fiduciary duties.

Although full implementation is set for 2029, regulations are expected within 18 months to address complex issues. Meanwhile, market forces and state regulations will likely prompt the PBM industry to start complying with CAA 2026 requirements sooner.

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