After several failed attempts, Congress has finally addressed one of the major drivers of high drug prices: pharmacy benefit managers (PBMs). The PBM market has operated in the shadows, allowing middlemen to retain rebates intended for patients. Patients, insurers, and employers rarely see the true costs of drugs—only the prices PBMs set for them. That is set to change with the passage of the recent Consolidated Appropriations Act. Despite delayed implementation, its PBM provisions will impose long-overdue reporting requirements on an industry that has avoided them for years.
Markets require transparency. Transparency fosters competition, disciplines prices, and rewards companies that find more efficient ways to deliver medicine to patients. Without it, prices are not really negotiated; they are dictated by whoever controls the information.
Right now, that is what PBMs are doing. PBMs know manufacturers’ prices and rebates, leaving them in the position to keep all or part of the rebates. Additionally, patients and insurers don’t know when more expensive name brands are being privileged over lower-cost generic medicines. As it stands, PBMs are have all the knowledge and everyone else is left to simply trust their decisions.
Once the reforms take effect, PBMs will be required to provide standardized reports to health plans every six months. With consistent disclosure across the industry, insurers, employers, and patients will be able to make true apples-to-apples comparisons between PBMs.
The required information is extensive and includes several critical pieces of data: the spread between a drug’s acquisition cost and what insurers paid the PBM; all rebates, fees, and discounts received from manufacturers; and detailed information on the highest-cost drugs for each insurance plan—including whether brand drugs are being favored over less expensive generics.
The reports will also detail PBMs’ relationships with pharmacies, including differences in reimbursement and fee structures between affiliated pharmacies and independent ones. PBMs have frequently been accused of steering patients to pharmacies they own or control while imposing higher fees on independent pharmacies. PBM’s have often vertically integrated by buying pharmacies, and by steering patients to these pharmacies, PBMs have more control over prices. Requiring disclosure of these arrangements will allow plans to identify whether a PBM’s practices restrict patient access or are harmful to competition.
In addition to plan-level reporting, PBMs must also provide a simplified version of these disclosures to employers and plan beneficiaries. Greater visibility into how medicines are sourced and priced will give insurers and patients leverage to select PBMs that align with their interests.
Beyond transparency, the law requires PBMs to pass through 100 percent of rebates, fees, and alternative discounts to plans and patients. PBMs will no longer be allowed to retain a portion of pharmaceutical manufacturers’ discounts. Eliminating the rebate retention reduces the incentive for PBMs to prefer higher-priced drugs with larger rebates. Instead, PBMs will need to compete on administrative fees and their ability to obtain lower net prices—especially as direct-to-consumer pharmaceutical platforms like LillyDirect, PfizerForAll, and CostPlus expand and increase competitive pressure.
One significant drawback of the reform is its delayed implementation. Because the transparency and rebate pass-through provisions do not take effect until 2028, patients and employers will wait nearly two more years before seeing any meaningful change in pricing behavior. Every year of inaction allows PBMs’ opaque rebate arrangements and spread pricing practices to continue prioritize high-cost drugs. Reform that is structurally sound but postponed still carries a real cost: millions of patients will continue paying prices shaped by opacity rather than competition until the new rules finally take effect.
After years of stalled reform, PBMs will finally be required to demonstrate the value they bring instead of relying on their customers’ ignorance. Insurers and employers will be able evaluate PBMs based on comparable data, creating meaningful competition. A functioning market will remove the distortions that have come about by disconnecting patients from prices and put downward pressure on drug costs and ultimately lower prices for patients at the pharmacies of their choice.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization that advocates for consumers through evidence-based analysis and data. Follow Justin on X @JustinLeventhal.