Pharmacy Benefit Managers did not have a good February: What happened and what’s next?
February turned out to be a tough month for the PBM community. Congress finally passed substantial PBM reform legislation (which President Trump signed into law on February 3), the U.S. Department of Labor began accepting comments on a new proposed rule requiring transparency to the fees and compensation PBMs receive and the Federal Trade Commission announced that it had secured a “landmark settlement” with Express Scripts, requiring ESI to adopt “fundamental chances to its business practices that increase transparency”. It’s expected that similar agreements are forthcoming with Optum Rx and CVS Caremark.
What’s in the new law passed by Congress? The PBM reform provisions were included as part of the Consolidated Appropriations Act of 2026. Described as the most comprehensive federal regulation of the pharmacy benefit management industry to date, the law draws from the PBM Reform Act of 2025.
Rebate Pass-Through (Commercial Market & Medicare): PBMs are required to remit 100% of rebates, fees, alternative discounts, and other remuneration received from manufacturers to their plan clients on a quarterly basis, no later than 90 days after the end of each quarter. This effectively eliminates spread pricing models where PBMs could pocket the difference between what they charged plans and what they paid pharmacies.
Medicare Part D Reforms: The law “delinks” PBM compensation from Medicare Part D list prices and rebates, instead requiring PBMs to receive flat administrative fees — reducing incentives to favor higher-priced drugs. Beginning in 2028, PBMs and their affiliates will be prohibited from receiving remuneration for Part D services other than “bona fide service fees,” which must be a flat dollar amount, related to services genuinely performed, and consistent with fair market value.
Any Willing Pharmacy: Section 6223 requires Part D plan sponsors to contract with “any willing pharmacy,” defined as a pharmacy that meets the standard contract terms and conditions for network pharmacies.
Transparency & Reporting: The law mandates that PBMs provide detailed, semiannual reporting to employer plans regarding net drug spending, rebates, and spread pricing arrangements, including explanations of benefit designs that steer patients toward PBM-affiliated pharmacies. For large employers with 100 or more employees, these reports will include drug-level details. Group health plans must also provide an annual written notice to all participants about the availability of this PBM reporting information.
Expanded Definition of PBM: The law defines “pharmacy benefit manager” broadly to include rebate aggregators, group purchasing organizations, and utilization management entities — covering any entity carrying out PBM functions regardless of what it calls itself.
Enhanced Federal Oversight: The law grants enhanced oversight authority to the HHS Secretary, in consultation with the OIG, to review whether remuneration under PBM arrangements is consistent with fair market value.
ERISA Fiduciary Protections: PBMs are now classified as “covered service providers” under ERISA, subject to compensation disclosure requirements.
Enforcement: Civil monetary penalties of up to $10,000 per day apply for failures to provide required information, with additional penalties of up to $100,000 for knowingly providing false information.
The law was hailed by community pharmacists, independent pharmacies, many patient advocacy groups and the biopharma community, as well as several members of Congress who have long introduced legislation to rein in PBM practices, only to see efforts stall. One of those congressional champions, Rep. Buddy Carter (R-GA), himself a pharmacist by training, called on his colleagues to prioritize enactment of the “Pharmacists Fight Back Act” bipartisan legislation to expand the reforms to all federal health plans. The Act, H.R. 6609, is cosponsored by 18 Republicans and 16 Democrats.
Trump claims credit for lowering prescription drug costs, but refrains from announcing any new proposals in State of the Union address
If you listened to President Trump’s State of the Union address, you’d think that the price of all prescription drugs has dropped up to 600% in the last year. While that’s not the case, the President wasn’t shy for taking credit for major drug pricing reforms (whether the actual policy reforms exist or not). However, he didn’t announce any new programs or initiatives on the topic beyond calling on congressional leaders to codify his Most Favored Nation (MFN) drug pricing policy, which would theoretically force companies to charge the same amount for prescription drugs in the U.S. as they charge in other developed nations. Congressional leaders remain lukewarm at best to Trump’s ongoing obsession with MFN, with many conservatives bristling at the notion of the government price controls and others warning that policies like MFN will result in less medical innovation and fewer new therapies for patients. Trump’s push for legislation codifying MFN policies may be due to growing concern that any administrative action taken, without formal congressional approval, could be struck down in the courts. The Centers for Medicare & Medicaid Services (CMS) closed its public comment period on two MFN models that would tie prices in the Medicare program to international prices on February 23. The GUARD (Medicare Part D) and GLOBE (Medicare Part B) models would be mandatory for all manufacturers. Comments from both BIO and PhRMA, called on CMS to withdraw the rules, questioning whether CMS has the authority to implement such sweeping proposals. “CMS proposed these two mandatory Most Favored Nation (MFN) drug pricing policies in Medicare Parts B and D, pitching them as efforts to lower costs for American patients. Instead, the proposals have serious flaws, exceeding CMS’ authority, failing to deliver patient savings and risking long‑term harm to innovation and access,” PhRMA commented. The The U.S. Chamber of Commerce also submitted comments critical of the proposed rules, stating “The proposals would fundamentally alter the incentive structure that has made the United States the global leader in biopharmaceutical innovation. This leadership is driven by strong intellectual property rights, high R&D investment, and a robust startup ecosystem. The biopharmaceutical sector depends on a stable and predictable policy environment to attract the long-term investment required to bring breakthrough medicines to patients. By tying Medicare rebates to price controls imposed by foreign governments, these proposals would import the very policies that have stifled innovation abroad and have created significant barriers to patient access in other developed nations.” The Chamber also said wider implementation of these models would eventually lead to substantial U.S. job losses. We’ll be watching whether CMS finalizes the GUARD and GLOBE rules (keep an eye out for potential action this summer). There is no hard statutory deadline forcing CMS to finalize these rules — they could be withdrawn, delayed, or finalized on a different timeline entirely. Any finalization is also subject to potential legal challenges under the Administrative Procedure Act, which could further complicate or delay implementation.
FDA announces new rare disease study framework, sparking praise and skepticism
The FDA released long awaited guidance on February 23 introducing a “plausible mechanism” framework to establish a new approval process for individualized therapies for rare disorders. According to an FDA press release, the draft guidance “focuses on therapies that target a specific genetic, cellular, or molecular abnormality and are designed to correct or modify the underlying cause of disease.” FDA Commissioner Marty Makary stated: “Our system is built for common diseases, not rare ones. Historically, rare diseases have been at the FDA an afterthought.” The new framework is designed to streamline regulatory pathways when evidence must sometimes be generated in very small populations, even in an n-of-1 (single patient) setting. Today ultra-rare diseases affect very small numbers of patients — sometimes only a handful worldwide — and conventional drug development frameworks remain poorly suited to evaluating such treatments. Under the framework, one well-controlled clinical investigation, supported by confirmatory evidence, can support approval. At its core is the Plausible Mechanism Framework — a novel regulatory concept allowing individualized therapies to demonstrate effectiveness through a scientifically supported mechanism of action, rather than relying solely on large clinical trials. Acceptable evidence includes well-characterized natural history data, biomarkers predicting clinical benefit, and demonstration of successful target engagement or gene correction. Under the new framework, a disease with 100 mutations of the same gene would no longer require 100 separate clinical trials. In a February 18, 2025 NEJM article, FDA Commissioner Makary and CBER Director Vinay Prasad also signaled a wider policy shift: going forward, the FDA’s default position will be that one adequate and well-controlled study, combined with confirmatory evidence, will serve as the basis for marketing authorization for new drugs broadly — not just rare disease treatments. The draft guidance is open for public comment until April 27, 2026. The National Organization for Rare Disorders (NORD) expressed general support for the framework. In an official statement, NORD CEO Pam Gavin said, “For families facing a rare disease, regulatory policy isn’t abstract. It is life-defining. It can mean the difference between watching a disease progress with no options and finally having a treatment that improves quality of life and restores hope. The Plausible Mechanism Framework offers promise, and its impact will depend on consistent, transparent implementation that drug developers and patients can trust.” Critics of the pathway claim that the pathway is duplicative of existing regulatory flexibilities and will be difficult to implement given FDA staffing cuts.
Health Policy Snippets
- We told you so! Florida just can’t get drug importation program off the ground. Florida remains the only state in the country the FDA has authorized to import prescription drugs after the legislature passed a bill allowing importation in 2019. But according to a February 2 report by Politico,the state’s effort has stalled in part because it failed to win over key players in the Canadian drug supply chain, which has consistently warned the Canadian government that the U.S. program jeopardized the country’s drug supply. Florida’s Canadian drug program was expected to save the state close to $180 million by taking advantage of the country’s pricing structure for prescription drugs. In his run for the Republican nomination for president, Governor Ron DeSantis held up the program as a model for other states to follow. After years of delay, the FDA granted Florida final authorization to import Canadian prescription drugs more than two years ago with a promise from the state that it would begin importing drugs in a matter of months. But the state subsequently failed to launch its program, amid years of fierce headwinds brought by the Canadian market. The FDA sent the state a letter in June 2025 giving Florida until November 2025 to make progress. Meanwhile, Florida legislators are beginning to ask questions as how the money appropriated to implement the program has been spent. Drug importation might make for a cute talking point on the campaign trail, real-world implementation has yet to prove workable (or safe!).
- Cell and Gene Therapy leaders sound the alarm about recent FDA rejections and approval processes. While the Trump Administration’s major health leaders have touted their commitment to transformative cell and gene therapies, leaders are expressing concern that the administration’s rhetoric isn’t lining up with reality, especially in light of recent FDA rejections of some new therapies. In a February 23 op-ed in the New York Post, Alliance for Regenerative Medicine CEO Tim Hunt called for a “course correction” at the FDA, “We urgently need a common-sense course-correction at FDA that puts patients first…the agency should honor the commitments it originally made to companies and patients about what evidence would be acceptable for approval.” Hunt’s comments echo other industry leaders who have accused FDA review teams of “moving the goal posts” late in the review process. In response, FDA Commissioner Marty Makary defended the agency’s recent rejections, claiming the negative decisions were based on a thorough review of evidence.
