The February 2026 federal PBM law and your contract

Your PBM contract is probably costing you
more than you’re being told. That’s going to change.

A new federal law signed February 3rd just changed the rules significantly and for the first time, plan sponsors have real leverage to find out by how much.

Four key changes:

1. PBMs are now explicitly covered service providers under ERISA §408(b)(2). The same framework that governs brokers and consultants now applies to PBMs. They must disclose all direct and indirect compensation, and that compensation must be “reasonable” or the arrangement becomes a prohibited transaction. This one is effective now, not in 2029.

2. 100% rebate pass-through is now the statutory default. All rebates, fees, alternative discounts, and price concessions must flow back to the plan. Historically employers had to negotiate for this with mixed results. That negotiation is over. It’s now the floor.

3. Semiannual reporting to plan sponsors is required. For plans with 100+ participants, PBMs must report gross and net drug spending, spread pricing data, rebate and remuneration details, and formulary rationale. Quarterly reporting is available on request.

4. There’s an “innocent fiduciary” exception, but don’t get too comfortable with it. It protects fiduciaries who didn’t know their PBM failed to remit rebates, reasonably believed they would comply, and took written steps to compel remittance when they found out. It doesn’t eliminate your ongoing duty to monitor.

Provisions 2-4 kick in for contracts beginning January 1, 2029 but there’s nothing saying you can’t ask now.

Before your next renewal, ask your PBM three questions to vet them out:

1. Where do my rebates actually go today?

2. What spread compensation are you receiving on my claims?

3. And will you agree in writing to the audit rights this law requires?

If they won’t answer, that’s the answer.