New Regulations on PBMs Become Law: What This Means for Pharmacies Nationwide—A Q&A With Jesse Dresser, Esq

Pharmacy benefit managers (PBMs) have come under particular fire from both sides of the aisle, as the price of prescription drugs has risen across the country.1 A new bill attached to the federal spending bill, the Consolidated Appropriations Act of 2026, signed into law Tuesday,2 aims to address some of the major concerns that have been plaguing Medicare beneficiaries when it comes to PBMs. In an interview with The American Journal of Managed Care® (AJMC®), Jesse Dresser, Esq, partner in Frier Levitt’s Life Sciences Department, discussed what this act will do and how it could affect patients and pharmacies.

This transcript has been lightly edited for clarity.

AJMC: The Consolidated Appropriations Act of 2026 was just signed into law. What does this law change when it comes to PBMs?

Dresser: There's a couple of things that the law does. The first, the kind of biggest and most seminal piece, is it changes how PBMs are allowed to be compensated in the Medicare Part D space. Historically, PBMs have received compensation revenue originally through retained rebates, and then as planned sponsors began to get wise to the rebates that were being received by PBMs, they passed more and more of the rebates on to plan sponsors, and eventually passed nearly all of the rebates on to plan sponsors. But instead, they began to use entities called rebate GPOs [group purchasing organizations], or rebate aggregators, that were these affiliate companies, many of whom were located offshore, in Switzerland, Ireland, and elsewhere. And essentially, instead of taking the rebate money at the PBM level, they took the rebate money at the rebate GPO level. This meant that what they would do is they would take a percentage out of those monies in the form of a data fee or an administrative fee, or some other type of percentage-based fee at the rebate GPO level, and only give a portion of that back to the PBM, who then could provide literally 100% of that to the plan sponsor and say, “Hey, I’m giving you all the rebates I’m receiving, but not telling the plan sponsors that they’re receiving money up the supply chain in the rebate GPO level.”

What the law does now is it says no part of a PBM’s compensation can be derived from anything tied to the cost or the list price of the drug. Things that are percentage-based arrangements, whether they be retaining a portion of the rebates, whether they be collecting a data fee or administrative fee that is tied to the price of the drug, those can no longer be sources of revenue for either the PBMs or their affiliates, and the way that affiliate is defined is defined broadly enough to include rebate GPOs and rebate aggregators. That means that it’s going to radically change how PBMs can derive money in the Medicare Part D space.

Jesse Dresser, Esq | Image credit: Frier Levitt

The other thing that the law does is it redefines the relationship between PBMs [and] network pharmacies and, importantly, injects CMS into the middle to be sort of a standard setter and, in some instances, an arbiter of disputes between plan sponsors, PBMs, and network pharmacies. There long had been a law in the books, the Any Willing Provider law, that essentially says any pharmacy willing and able to participate in terms and conditions applicable to other participating pharmacies must be allowed to participate. However, CMS hadn't really enforced that provision at all, and one of the things that was unclear was, do those terms and conditions have to be reasonable? Is there any standard of what those terms and conditions have to be? Under this new law, it codifies regulation that had previously said terms and conditions have to be reasonable and relevant and now explicitly says in statute the terms and conditions for participation have to be reasonable and relevant. And it now sets CMS as the standard setter of what constitutes reasonable and relevant terms and conditions, and it enumerates a number of factors that CMS is expected to use in determining whether or not terms are reasonable and relevant, including whether the reimbursement rate and dispensing fees are sufficient to cover the ingredient costs and operational costs of pharmacies, whether they are using quality measures, whether they are engaged in abusive auditing tactics, and a variety of other factors that are now to be utilized by CMS in determining what is or is not reasonable and relevant.

It also creates a pathway for pharmacies to be able to complain to CMS when they believe that terms and conditions aren't reasonable and relevant and creates a pathway for CMS to actually investigate and make findings in and direct activities by Part D plan sponsors and PBMs when those terms and conditions are not reasonable and relevant. That’s a pretty big shift from what CMS’ previous position was, which was, essentially, “We are bound by the noninterference clause. We’re not going to get involved in negotiations between manufacturers, PBMs, and pharmacies. We're not going to take any steps here.” Now, it's a complete 180: CMS is literally being expected to help decide those types of disputes and engage in direct enforcement against PBMs and party sponsors over this issue of terms and conditions for participation.

AJMC: How do you think this law will be interpreted and enforced?

Dresser: In terms of how the PBMs are going to react, a lot of the PBMs have already come out with what they are terming as either “cost plus” or trend their own “transparent” versions of their PBM model. Up until this point, they’d largely been PR moves, I think. I think it had largely been efforts to kind of react to the developments in the marketplace, rather than be real, concrete efforts at change. I think we will see PBMs perhaps start to embrace it, although PBMs have already said that their belief is that it’s going to cost the system much, much more money because they’re not going to be able to negotiate as well with manufacturers, or because they’re going to have to change their premium structure. What I do foresee is PBMs, who are very good at the whack-a-mole game, looking to come up with alternative ways to potentially try to get around this.

One of the areas that I do foresee as being an area of more importance is the PBMs role in either drug cobranding and colabeling or even manufacturing. CVS has already pioneered this a little bit with their Cordavis manufacturing affiliate, essentially, that is cobranding and producing a biosimilar to Humira. And if you look at biosimilar adoption, the only one that really had any meaningful adoption is CVS’ version of their biosimilar. I do think that is going to be a new area of focus. If the PBMs are no longer able to derive revenue from the list price of the drug. What is interesting, though, is that I do think it positions certain transparent PBMs well, if they are able to basically compete to give better service at a lower price, something that the traditional PBMs haven’t necessarily focused on. I do think that that’s going to be another area of focus as this law comes into effect.

References

1. Caffrey M. FTC finds PBMs drive up drug costs, squeeze out competitors. AJMC. July 9, 2024. Accessed February 4, 2026. https://www.ajmc.com/view/ftc-finds-pbms-drive-up-drug-costs-squeeze-out-competitors

2. McCrear S. PBM reforms signed into law, reshaping Medicare Part D drug pricing transparency. AJMC. February 3, 2026. Accessed February 4, 2026. https://www.ajmc.com/view/pbm-reforms-signed-into-law-reshaping-medicare-part-d-drug-pricing-transparency