Net Effective Cost Transparency and Prescription Drug Affordability Act of 2026
- Sponsor
- Rep. Mackenzie, Ryan [R-PA-7]
- Committees
- Energy and Commerce Committee (primary)
- Last action
- Sep 14, 2026
Bottom line
The bill aims to increase transparency and accountability for Pharmacy Benefit Managers across Medicare and commercial health plans to potentially lower prescription drug costs for consumers and the government.
What it actually does
This bill mandates a standardized public bidding process for Pharmacy Benefit Managers (PBMs) in Medicare Part D and Medicare Advantage plans, requiring detailed disclosure of expected costs and price concessions. It establishes enhanced oversight mechanisms for Medicare plans, including annual audits, real-time cost-sharing tools, and penalties for deviations from projected costs or 'beneficiary bait-and-switch' practices. Additionally, it extends net effective cost transparency requirements to commercial health plans under ERISA.
Proponents argue
Supporters argue that this legislation will bring much-needed transparency to the opaque practices of PBMs, fostering greater competition and ultimately driving down the high cost of prescription drugs for Medicare beneficiaries and those covered by commercial plans. They contend it will protect enrollees from unexpected cost increases and ensure that health plans deliver on their promised benefits.
Opponents contend
Critics, likely including PBMs and some health plans, may argue that the bill imposes excessive regulatory burdens and administrative costs that could stifle innovation or be passed on to consumers. They might also contend that mandating the disclosure of proprietary pricing information could undermine PBMs' ability to negotiate effectively with drug manufacturers, potentially leading to higher drug costs.
The bill is moderately detailed, requiring careful reading to understand the technical amendments to existing law, but is accessible for an informed reader to evaluate its core provisions.
Section 2(a), adding new SSA 1860D-12(i)
Mandates Annual Standardized PBM Bidding for Part D Sponsors
This provision requires Medicare Part D plan sponsors (PDPs) to solicit bids from Pharmacy Benefit Managers (PBMs) annually using a standardized public process. Sponsors must submit detailed bid information to the Secretary of HHS, including projected net effective costs and price concessions. If a sponsor selects a bid that is not the lowest projected net effective cost, they must provide a justification demonstrating it advances a significant programmatic interest.
Supporters argue
Supporters argue this will drive down prescription drug costs by fostering genuine competition and transparency among PBMs, ensuring that Medicare plans secure the most cost-effective services. It aims to eliminate opaque practices that may inflate drug prices.
Critics contend
PBMs and some plan sponsors might contend that this process creates an undue administrative burden and could force them to disclose proprietary information, potentially undermining their ability to negotiate the best deals with drug manufacturers.
Tradeoffs
The provision balances the desire for increased transparency and potential cost savings against concerns about administrative complexity and the potential impact on PBMs' negotiating leverage in a competitive market.
Section 2(a), adding new SSA 1860D-12(j)
Establishes Enhanced Oversight and Penalties for Part D Sponsors
This section mandates enhanced oversight for Medicare Part D sponsors, requiring them to submit actual cost-sharing data, maintain a real-time cost-sharing tool for enrollees, and hold funds in an escrow account for potential refunds. It directs the Secretary of HHS to conduct annual audits, perform bid reconciliation analysis, and implement risk-based monitoring with penalties for significant deviations between projected and actual net effective costs. It also includes formulary monitoring to prevent 'beneficiary bait-and-switch' practices and establishes civil monetary penalties and restitution requirements for non-compliance.
Section 3(a), amending SSA 1857(f)(3)(G)
Extends Part D PBM Bidding Requirements to Medicare Advantage Plans
This provision ensures that the new standardized public bidding process for Pharmacy Benefit Managers (PBMs) and related requirements, as established for Medicare Part D plans, also apply to Medicare Advantage Prescription Drug (MA-PD) plans. This creates consistency in PBM oversight across both types of Medicare drug coverage.
Section 3(b), amending SSA 1853(o)
Establishes PBM Performance Measure in MA-PD Star Ratings
This provision mandates the creation of a new performance measure for MA-PD plans to evaluate prescription drug cost variations, specifically the percentage difference between projected and actual net effective costs. This measure will be integrated into the existing 5-star quality rating system for MA-PD plans with significant weighting, impacting quality bonus payments. It requires public reporting of plan performance and notification to enrollees of low-performing plans. A comparable system must also be established for standalone Part D plans.
Section 4(a), amending ERISA (29 U.S.C. 1108(b)(2)(B)(iii) and 29 U.S.C. 1002)
Requires Net Effective Cost Reporting for Commercial Plans
This provision amends the Employee Retirement Income Security Act of 1974 (ERISA) to require covered service providers, including PBMs, to disclose the projected net effective cost for each PBM bid received by a commercial covered plan. It also adds a new definition of 'net effective cost' to ERISA, specifying it as the total annual cost to the covered plan of all covered drugs in the formulary if a particular bid were accepted.
Defines 'net effective cost' as the total cost to a plan sponsor (Medicare) or covered plan (commercial) of all covered drugs on the formulary for a given year.
Section 2(a), new SSA 1860D-12(i)(5) and Section 4(a)(2), new ERISA 3(46)
Why it matters:Standard legislative practice to define key terms within the relevant sections of law.
Case for: Provides a standardized, comprehensive metric for evaluating PBM bids, ensuring that all direct and indirect costs and concessions are accounted for, which is crucial for true transparency and comparison.
Case against: The precise calculation and interpretation of 'net effective cost' could become a point of contention, potentially leading to disputes or attempts to manipulate the metric if not rigorously defined and enforced.
Estimated impact: Fundamental to the bill's goals; its clarity and enforcement will determine the success of the transparency measures.
Requires that if a Medicare Part D sponsor provides its own pharmacy benefit management services, the PBM bidding requirements apply to that sponsor as if it were contracting with an external PBM.
Section 2(a), new SSA 1860D-12(i)(4)
Why it matters:Ensures comprehensive application of the bidding rules without creating a separate, prominent section for vertically integrated entities.
Case for: Prevents vertically integrated health plans (those that own or are affiliated with a PBM) from circumventing the new transparency and bidding requirements, ensuring fair competition and accountability across all market structures.
Case against: Could be seen as imposing an unnecessary regulatory burden on integrated health systems that argue their internal PBM operations already provide efficiencies and cost savings.
Estimated impact: Closes a potential loophole for a significant segment of the market, ensuring broader application of the bill's intent.
States that any civil monetary penalty imposed under the new oversight provisions for Medicare Part D sponsors shall be subject to judicial review in the United States district court for the district in which the violation occurred.
Section 2(a), new SSA 1860D-12(j)(4)(C)
Why it matters:Standard legislative practice to provide for judicial review of administrative penalties, ensuring due process.
Case for: Provides an important safeguard for health plans and PBMs, allowing them to challenge penalties they believe are unwarranted or incorrectly applied, ensuring fairness in enforcement.
Case against: Could potentially lead to lengthy legal challenges, delaying the enforcement of penalties and the recovery of funds for beneficiaries or the government.
Estimated impact: Affects the practical enforceability and timeline of penalties, providing a check on administrative power.