PBM Reform Act of 2025
- Sponsor
- Rep. Carter, Earl L. "Buddy" [R-GA-1]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jul 10, 2025
Bottom line
The bill aims to increase transparency and accountability for Pharmacy Benefit Managers across various health programs to reduce drug costs, ensure fair pharmacy reimbursement, and improve patient access.
What it actually does
This bill significantly reforms Pharmacy Benefit Manager (PBM) practices across Medicare Part D, Medicaid, and commercial group health plans. It mandates transparency in PBM contracting, limits PBM remuneration to bona fide service fees, requires detailed reporting on drug costs and rebates, and prohibits abusive spread pricing in Medicaid. The bill also establishes enforcement mechanisms and provides funding for oversight agencies.
Proponents argue
Proponents argue that the bill will lower prescription drug costs for consumers and health plans by eliminating opaque PBM practices, such as spread pricing and hidden fees, which they contend inflate costs. They also assert that it will ensure fair reimbursement for pharmacies, particularly independent and essential retail pharmacies, thereby preserving patient access to vital pharmacy services in underserved areas.
Opponents contend
Opponents, primarily PBMs, contend that the bill's extensive transparency requirements and restrictions on their business models will hinder their ability to negotiate effectively with drug manufacturers, potentially leading to higher drug prices for plans and beneficiaries. They also argue that the new regulations impose significant administrative burdens and could disrupt the efficient management of prescription drug benefits.
The bill is lengthy and contains highly technical language, requiring a substantial time investment for a thorough understanding of its complex amendments to existing law.
Section 2(a), amending 42 U.S.C. 1395w-104(b)(1)
Any Willing Pharmacy Participation and Standardized Contract Terms in Medicare Part D
This provision requires Prescription Drug Plan (PDP) sponsors in Medicare Part D to allow any pharmacy that meets standard contract terms and conditions to participate in their network. It further mandates the Secretary of Health and Human Services to establish standards for what constitutes 'reasonable and relevant' contract terms and conditions by April 2028, to take effect in 2029.
Supporters argue
Supporters argue that this provision promotes fair competition among pharmacies, prevents exclusionary practices by PBMs, and ensures Medicare beneficiaries have broader access to their preferred pharmacies, especially in underserved communities.
Critics contend
Critics, often PBMs and some PDP sponsors, may argue that 'any willing pharmacy' requirements limit their ability to negotiate favorable drug prices and manage efficient, high-quality pharmacy networks, potentially leading to higher costs for plans.
Tradeoffs
The provision balances the goal of increasing pharmacy access and choice for beneficiaries with the potential impact on PDP sponsors' ability to control costs through selective network contracting and negotiation.
Section 2(b), adding 42 U.S.C. 1395w-152(e)
Reporting on Essential Retail Pharmacies in Medicare Part D
This section requires the Secretary to publish biennial reports, starting in 2028, on trends affecting 'essential retail pharmacies' in Medicare Part D. These pharmacies are defined as non-affiliated retail pharmacies located in medically underserved, rural, suburban, or urban areas with limited other pharmacy access. The reports will cover reimbursement trends, network participation, and cost-sharing comparisons.
Section 2(c), amending 42 U.S.C. 1395w-104(b)(1)
Enforcement and Anti-Retaliation for Medicare Part D Pharmacy Contracts
This provision establishes a formal process, starting January 2028, for pharmacies to submit allegations of violations of 'reasonable and relevant' contract standards by PDP sponsors. The Secretary is mandated to investigate these allegations and may impose civil monetary penalties. Crucially, it includes strong anti-retaliation and anti-coercion protections for pharmacies submitting allegations.
Section 3(a)(1)(A), adding 42 U.S.C. 1395w-112(h)(1)(A)
PBM Remuneration Limited to Bona Fide Service Fees in Medicare Part D
This core provision prohibits PBMs and their affiliates from deriving any remuneration from Medicare Part D services other than 'bona fide service fees.' It defines bona fide service fees as flat dollar amounts reflecting fair market value for actual services, not tied to drug price or rebates. Rebates and discounts are permitted if fully passed through to PDP sponsors and compliant with existing direct and indirect remuneration (DIR) rules. Any non-compliant remuneration must be disgorged to the PDP sponsor.
Section 3(a)(1)(C)(i), adding 42 U.S.C. 1395w-112(h)(1)(C)(i)
Annual Detailed Drug Cost and Remuneration Reporting by PBMs in Medicare Part D
Beginning in 2028, PBMs must submit annual reports to PDP sponsors and the Secretary with extensive, detailed information. This includes drug-specific data on brand/generic names, NDC, number of claims/dosage units, dispensing channel, average wholesale acquisition cost (WAC), average wholesale price (AWP), National Average Drug Acquisition Cost (NADAC), enrollee out-of-pocket spending, total rebates, other direct and indirect remuneration (DIR), average pharmacy reimbursement, and total manufacturer-derived revenue retained by the PBM or its affiliates.
Section 4(b), adding 42 U.S.C. 300gg-11(b)
Semiannual PBM Reporting for Commercial Group Health Plans
For commercial group health plans, PBMs must submit semiannual (or quarterly, if requested) reports to the plans, detailing drug costs, compensation, and remuneration. This includes the difference between what the plan pays the PBM and what the PBM pays the pharmacy, proprietary drug names, dispensing channel, WAC/AWP, net price after rebates, enrollee out-of-pocket spending, and remuneration received by the PBM from applicable entities. Specific reporting is also required for affiliated pharmacies and formulary placement decisions.
Section 5(a)(1), amending 42 U.S.C. 1396r-8(f)(1)
Modernizing Medicaid National Average Drug Acquisition Cost (NADAC) Surveys
This provision modernizes the Medicaid NADAC survey process by requiring the Secretary to determine acquisition costs for 'applicable non-retail pharmacies' (e.g., mail order, specialty) separately from retail community pharmacies. It mandates all pharmacies receiving Medicaid payments to respond to these surveys and establishes civil monetary penalties for non-compliance or providing false information. It also prohibits states from using non-retail pharmacy pricing to set rates for retail pharmacies.
Section 6(a)(1), amending 42 U.S.C. 1396r-8(e)
Mandate for Transparent Pass-Through Pricing in Medicaid Managed Care
This provision requires contracts between states/managed care entities and PBMs in Medicaid to adopt a transparent pass-through pricing model. Payments to pharmacies for covered outpatient drugs must be limited to ingredient cost plus a professional dispensing fee (not less than the state plan rate) and passed through entirely. PBM administrative fees must reflect fair market value, and any form of 'spread pricing' (where the PBM charges the plan more than it pays the pharmacy) is explicitly disallowed for federal matching payments.
The requirement for the Secretary to establish 'reasonable and relevant' contract terms and conditions for Medicare Part D pharmacies is delayed until April 2028, with implementation for plan years beginning on or after January 1, 2029.
Section 2(a), amending 42 U.S.C. 1395w-104(b)(1)(A)(ii)
Why it matters:This is standard legislative practice for provisions requiring extensive rulemaking and agency preparation, but it means the full effect of 'any willing pharmacy' is not immediate.
Case for: This phased implementation allows CMS sufficient time to gather input, develop, and finalize robust standards for pharmacy contracts, ensuring a smooth transition and avoiding unintended disruptions.
Case against: Critics might argue that delaying the establishment of these standards prolongs the period during which pharmacies may be subject to potentially unfair contract terms, delaying the intended benefits of the reform.
Estimated impact: Delays the full implementation of standardized, reasonable, and relevant contract terms for Medicare Part D pharmacies by several years.
Rebates, discounts, and other price concessions received by a PBM from manufacturers are explicitly *not* considered a violation of the 'no income other than bona fide service fees' rule if they are fully passed through to a PDP sponsor and comply with existing DIR requirements.
Section 3(a)(1)(A)(iii), adding 42 U.S.C. 1395w-112(h)(1)(A)(iii)
Why it matters:This is a technical carve-out designed to ensure that PBMs can continue to negotiate manufacturer rebates, provided those savings are transparently passed on to plans, rather than being retained by the PBM as a hidden profit.
Case for: This clarification ensures that PBMs can continue their role in negotiating manufacturer rebates, which are a significant source of drug cost reduction, while simultaneously enforcing transparency on how those rebates are handled.
Case against: Some critics might argue that even with pass-through requirements, the continued reliance on manufacturer rebates creates incentives for PBMs to favor higher-priced drugs with larger rebates, rather than the lowest net-cost options.
Estimated impact: Maintains the PBM role in rebate negotiation, but mandates full pass-through to plans, potentially shifting billions in retained rebates to PDP sponsors.
The Secretary is required to define a 'limited form' of the commercial PBM reporting requirement for group health plans established by a plan sponsor that is, or is affiliated with, a drug manufacturer, drug wholesaler, or other direct participant in the drug supply chain.
Section 4(b)(4)(G), adding 42 U.S.C. 300gg-11(b)(4)(G)
Why it matters:This provision aims to prevent anti-competitive behavior by limiting the amount of proprietary information that vertically integrated entities (e.g., a drug manufacturer owning a PBM) would have to disclose to themselves, which could then be used to disadvantage competitors. It's a technical safeguard.
Case for: This safeguard prevents the inadvertent disclosure of sensitive competitive information within vertically integrated companies, which could otherwise lead to anti-competitive practices or unfair advantages.
Case against: Some might argue that any limitation on reporting, even for anti-competitive reasons, reduces overall transparency and could create loopholes for certain entities to avoid full disclosure.
Estimated impact: Potentially limits the scope of transparency for a subset of group health plans tied to drug supply chain entities, affecting competitive dynamics.
Within the Medicaid pass-through pricing mandate, there's a carve-out for 340B drugs: payment for ingredient cost may exceed the actual acquisition cost (AAC) if the drug was subject to a 340B agreement, the payment doesn't exceed the maximum non-340B payment, and the covered entity annually reports the aggregate amount of such excess payments to the Secretary.
Section 6(a)(1)(A)(iii)(III), amending 42 U.S.C. 1396r-8(e)(6)(A)(iii)(III)
Why it matters:This is a technical provision designed to accommodate the unique pricing and reimbursement dynamics of the 340B drug pricing program, ensuring that 340B entities can still benefit from their discounted drug purchases while maintaining transparency.
Case for: This exception is crucial for 340B covered entities, allowing them to retain the financial benefits of the 340B program, which supports their ability to provide care to vulnerable populations, while still promoting transparency through reporting.
Case against: Some critics of the 340B program might argue that allowing payments above AAC, even with reporting, introduces complexity and could still obscure the true cost of drugs, potentially undermining the goal of full pass-through transparency.
Estimated impact: Preserves the financial integrity of the 340B program within Medicaid managed care, potentially involving billions in drug discounts for covered entities, while adding a new reporting layer.