Generally, the CAA’s PBM provisions are effective for plan years beginning on or after August 3, 2028 (i.e., 30 months after the law’s enactment date). For calendar-year plans, the PBM requirements would be effective for plan years beginning on January 1, 2029.

The CAA will require plan sponsors to ensure that contracts with PBMs contain all of the contractual requirements set forth in the CAA. Plan sponsors will also need to monitor both PBM reporting obligations and PBM compensation.

Within 18 months, the government must issue implementing regulations and finalize reporting guidance and formats.

Mandatory PBM reporting

On a semiannual basis, PBMs must report extensive information to self-insured large employers and large group health plans. A large employer or plan is one with at least 100 employees or participants on business days during the previous calendar year or plan year. Employers and plan sponsors may request the reports on a quarterly basis as well. Large fully insured plans may annually opt to have the PBM issue a combined report to the group health plan containing the semiannual information and the summary reports discussed below.

The reporting requirements are tied to new contractual requirements for PBMs and plan sponsors. Group health plans, insurers and PBMs cannot enter into contracts that limit or delay the disclosure of information, and entities such as manufacturers, distributors, wholesalers and rebate aggregators, must agree to provide the PBM information necessary to make these reports.

PBMs must report extensive data for each drug with a claim, including but not limited to:

• The difference between the price paid to the pharmacy and the price the plan pays to the PBM
• Gross and net prices to the plan
• Manufacturer rebates, fees and other remuneration received by the PBM
• Utilization details by dispensing channel (i.e., retail, mail order and specialty pharmacy) and whether drugs were dispensed by PBM-affiliated pharmacies
• Wholesale Acquisition Cost or WAC (for brand-name drugs) and Average Wholesale Price or AWP (for generic drugs)

In addition to the semiannual reports, PBMs must provide all plans, regardless of size, with:

• A summary report with drug pricing, cost and claims information
• A participant-facing summary with aggregate data disclosing claim-level details, total net drug spending, rebates and remuneration

Mandatory plan reporting

Each plan year, group health plans, including both self-insured and insured plans, must provide written notice to each participant or beneficiary informing them of the requirement for entities providing PBM services to submit reporting to the plan. Notices may be incorporated into plan documents or via individual notification.

Additionally, group health plans must provide the following information to participants and beneficiaries upon request:

• The participant-facing PBM summary document described above
• For each claim made by or on behalf of the participant or beneficiary, the difference between the compensation paid by the plan and the compensation paid to the pharmacy

The reporting requirements apply to all group health plans subject to ERISA, the Internal Revenue Code and the Public Health Service Act, including non-federal governmental plans.

Penalties

Failure to provide the required information by a PBM or group health plan may result in a civil monetary penalty of $10,000 for each day the information is not reported. Additional penalties up to $100,000 may apply for knowingly submitting false information.

Penalties may be waived if the entity has made good-faith efforts to comply.

Full rebate pass-through to ERISA plans

The CAA amends ERISA Section 408(b)(2) to provide that PBMs must pass 100 percent of all rebates, fees, alternative discounts and other remuneration to the group health plans or insurer. In the absence of this requirement, the arrangement would not be considered reasonable and would be considered a prohibited transaction under ERISA.

However, the law provides that plan fiduciaries would not be in violation of ERISA if they are an “innocent plan fiduciary.” To be an “innocent plan fiduciary” the fiduciary must not know that the PBM failed to make these payments, upon discovering that the payments were not made must request them in writing, and if the payments are still not made, must notify the Secretary of Labor of the PBM’s failure.

Generally, these rebates, fees and other remuneration must be paid quarterly and not later than 90 days after the quarter. PBMs, third-party administrators (TPAs) or insurers must make rebate contracts with rebate aggregators or drug manufacturers available for audit by a group health plan.

Audits must be performed by an auditor selected by the plan fiduciary and payment for the audit cannot be made directly or indirectly by the PBM.

Fee disclosure to ERISA plans

Additionally, the CAA amends ERISA Section 408(b)(2) to require PBMs, TPAs and any other entity providing services to group health plans to disclose all direct and indirect compensation received by the service provider to the group health plan sponsor.

Proposed rule on PBM fee transparency

The Department of Labor published a new proposed rule under 408(b)(2) of ERISA on January 30, 2026. The DOL’s rule proposes PBM and related service provider reporting on compensation that may be comparable to the PBM reporting requirements in the CAA 2026. Among the information that would be required to be disclosed under the proposed rule are rebates, compensation based on spread pricing and payments recouped from pharmacies. The deadline for commenting on the proposed rule is March 31, 2026.

It’s likely that the DOL will revise the regulations to ensure consistency with the new requirements related to PBMs under the CAA of 2026.

Implications for plan sponsors

While the new law may appear to be targeting disclosure and procedural changes rather than directing specific reforms, the new disclosures, coupled with a strong enforcement mechanism, could provide plan sponsors with the data, previously unavailable, necessary to monitor drug costs and PBM pricing practices. The law targets not only PBMs, but the entities related to them, like manufacturers and rebate aggregators, and may also give plan sponsors access to  clearer information to enable negotiating benefit terms in a manner better aligned with the interests of the individuals enrolled in the plan.

Plans with current aggressive PBM contract arrangements may be able to leverage the new rules to obtain even better oversight over PBMs. As noted above, ERISA-governed plans that may have had insufficient market power to obtain 100 percent pass-through of rebates will now be entitled to this by law.

Along with the new information, plan sponsors will have new responsibilities with respect to their relationships with PBMs and other related service providers, including monitoring contracts and delivery of new information. ERISA-governed plans will be required to monitor receipt of rebate compensation and determine appropriate audit mechanisms. If the PBM is not meeting its obligations, the fiduciary could be in breach of fiduciary duty including if they do not follow the “innocent fiduciary” reporting requirements of the law.

PBMs will be pressured to accurately disclose compensation — both in the new law and because of recently issued DOL regulation.

Plan sponsors are faced with rapid and intense changes in pharmaceutical pricing and policy. These changes include the legislative requirements, a new regulatory framework, potential DOL enforcement for ERISA plans and impacts of executive branch activities, including the launch of the new TrumpRX website for direct-to-consumer purchasing and price deals being negotiated by the administration with drug manufacturers.

Plan sponsors should consult with their professional advisors about the impact of these developments on their plan’s prescription drug benefits.