Articles | June 18, 2026
Plan sponsors’ ongoing efforts to manage rapidly rising prescription drug costs should include identifying and mitigating waste and abuse associated with common pharmacy benefit manager (PBM) practices that may have adverse events on costs. Examples include PBM retention of some manufacturer rebates and the use of spread pricing (where plan sponsors are charged more than the amount reimbursed to retail pharmacies).
With major regulatory changes on the horizon for PBMs, including how they make money, now is an ideal time to take a fresh look at your PBM contract.
To reduce waste and keep costs in check, consider taking the tangible steps outlined below.
This is one of the most powerful levers that plan sponsors have to manage PBM costs. In fact, it’s the top action item.
Knowing exactly which drugs are generating rebates enables plan sponsors to better assess whether the PBM’s formulary decisions are truly based on lower net costs or on rebate incentives.
This step really matters. It’s important to thoroughly review the fine print.
Examine how rebates, guarantees and exclusions are defined in the contract. Small nuances in contract language can drive costs over time.
Plan sponsors should review fees for services, such as clinical programs, to ensure that they are competitive and to determine whether they should be incorporated into the standard administrative fee.
Finally, hold the vendors accountable for doing what they said they would do.
When a plan’s PBM is incentivized to managing future price increases, prescription drug cost trend tends to improve.
For example, instead of paying a PBM purely off rebate volume, a plan sponsor could enter into a shared-risk model where the PBM is financially accountable for year-over-year drug trend. If overall trend grows faster than the agreed-upon target, the PBM’s compensation is reduced. If the overall trend comes in below target, the PBM shares in the savings. Aligning incentives in this way not only drives better cost management but also encourages more appropriate formulary decision-making.
Stay on top of PBM market changes — new drug pricing models are constantly emerging.
Particularly for plan sponsors that signed their PBM contract years ago, it’s worth exploring options, because drug pricing dynamics and PBM pricing models have recently changed dramatically.
In addition to the “big-three” PBMs that are integrated with large healthcare organizations, alternative options have expanded. Mid-market PBMs often differentiate themselves through greater flexibility, enhanced transparency and more disciplined formulary and utilization-management approaches. Smaller, niche PBMs may offer even greater customization with formularies.
Considering what other PBMs are offering is a terrific way to make sure your contract terms, pricing and clinical strategy remain competitive.
We’ve created a handy downloadable checklist that covers 11 actions plan sponsors can take to manage prescription drug costs by focusing on three areas:
Earlier this year, within a five-day period, a new rule was proposed and a law was passed regarding new requirements for PBM reporting and fee disclosures. The DOL published a new proposed rule that would require PBMs to disclose rebates they receive along with other disclosure requirements related to how they are compensated, including spread pricing and other payments, such as those recouped through incentive arrangements with preferred pharmacies. The Consolidated Appropriations Act, 2026, requires PBMs for plans that have at least 100 participants to provide detailed disclosures about each drug for which a claim was filed and regular reports starting in 2029 for calendar-year plans. More guidance is coming.
As PBMs adapt to this evolving regulatory landscape, the market is likely to shift. Plan sponsors should closely monitor how these changes affect their current PBM arrangements and remain prepared to evaluate alternative business models and vendors.
Keep in mind that PBMs will look for ways to make up for lost revenue. Watch out for more focus on the list price or the overall net cost, higher administrative fees, new service charges, different pricing structures, alternative pricing structures and/or redesigned formularies.
Remaining vigilant to these dynamics will be critical to managing costs and ensuring alignment with plan objectives.
In a recent webinar, two health compliance colleagues — Elena Lynett and Julia E. Zuckerman — and I discussed various developments affecting PBMs. You can watch the recording of the webinar, “PBM Transparency, Fiduciary Risk & Emerging Compliance Issues: A 2026 Update for Plan Sponsors.”
To gain more insights into prescription drug benefits and developments affecting PBMs, check out these resources:
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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
