On July 14, 2026, the Federal Trade Commission (FTC) announced that it reached a settlement with Caremark Rx, LLC (Caremark) and its affiliated rebate aggregator, Zinc Health Services, LLC (Zinc), in its action against the major pharmacy benefit managers. The announcement follows the settlement the FTC reached with Express Scripts earlier this year. Notably, the scope of relief sought by the FTC goes far beyond the insulin-pricing dispute raised in the administrative complaint. Instead, the settlement takes aim at the PBM’s operations as a whole, addressing concerns about PBM business practices such as spread pricing, underwater reimbursement (especially for independent and rural pharmacies), secret retention of rebates through the use of rebate aggregators like Zinc, and the general lack of transparency.
Specifically, the settlement requires Caremark to offer standard terms designed to eliminate spread pricing and rebate retention, among other practices, although it remains to be seen how the settlement will be implemented.
Although many of the settlement’s reforms do not take effect until January 1, 2028, plan sponsors should understand both the new requirements and the potential loopholes and gaps that may remain even after implementation.
How the Settlement Benefits Plan Sponsors and Pharmacies
The proposed FTC settlement with Caremark and Zinc largely mirrors the reforms the FTC secured from Express Scripts. Key provisions that stand out as improvements for pharmacies, patients, and plan sponsors include:
Cost-based reimbursement
Caremark must pay each retail community pharmacy based on its actual acquisition cost plus a dispensing fee, with disclosure of Caremark’s cost methodology where a pharmacy cannot supply its own data. It must also pay for non-dispensing services (e.g., immunizations, counseling, medication therapy management). Pharmacies willing to accept these terms cannot be excluded from the network.
No spread pricing or rebate guarantees
Caremark and Zinc cannot employ spread pricing or guarantee plan sponsors a set dollar amount of rebate compensation. Manufacturer compensation to Caremark or Zinc can no longer be tied to a drug’s list price.
No discrimination against low-cost drug versions
Formularies cannot omit, disadvantage, or add restrictions to a lower-list-price version of a drug relative to a higher-priced version with the same net cost.
Point-of-sale patient protections
Out-of-pocket costs cannot exceed the contracted price net of rebates or be based on list price. Insulin costs are capped at $25/$50/$75 depending on days’ supply.
Greater transparency
Caremark must give plan sponsors annual drug-cost and claim-level reporting, disclose broker/consultant compensation, and Zinc must keep its rebate-negotiation functions in the U.S. under GPO safe harbor reporting rules.
Hub pharmacy protections
Caremark cannot restrict a pharmacy’s use of pharmacy hub services providers or coerce plan sponsors into excluding such pharmacies absent documented cause (e.g., fraud, exclusion listings).
Real enforcement
An independent, FTC-approved monitor oversees compliance and must report annually for three years. Caremark and Zinc must file interim compliance reports every 90 days, then annually, and retain records for five years. The FTC keeps direct access and inspection rights, and the order runs for ten years after implementation. Caremark and Zinc must also spend $10 million annually for five years promoting these standard terms so pharmacies and plan sponsors are aware of them.
Overall, the proposed order promotes greater transparency, which will likely improve independent and community pharmacies’ contracts and reimbursement schedules.
Potential Loopholes in the Caremark Settlement
Although the settlement’s terms appear straightforward on paper, how the settlement operates in practice is harder to predict. The settlement contains ambiguities in how the settlement is worded such that Caremark may be able to continue non-transparent profiteering strategies, especially to the detriment of plan sponsors.
Caremark and Zinc Can Continue to Earn “Fees” For Rebate Administration
Nothing in the FTC-Caremark settlement prohibits rebate aggregators and other affiliates from earning “fees” for services and data provided to drug manufacturers. In fact, the settlement defines “rebate” (which must be passed through to the plans at the point of sale) as excluding administrative fees. The settlement also places no limits on how much Zinc or Caremark may charge in fees, such as requiring that any fees be reasonable or consistent with fair market value for the services rendered.
Although the settlement requires Zinc to maintain its operations in the United States and requires Caremark and Zinc to de-link their fees from drug list prices, Caremark could find other ways to charge “fees” that are not based on the drugs’ list prices. The settlement also does not address the fact that Caremark and Zinc may charge both the plan sponsor and the manufacturer fees for rebate administration.
Moreover, the settlement does not require Caremark or Zinc to disclose precisely how much revenue they earn from manufacturers for administrative services. Therefore, plan sponsors must remain vigilant and audit the fees and other revenues that manufacturers pay to PBMs and rebate aggregators like Caremark and Zinc.
Potential Loophole in the Pass-Through Point-of-Sale Rebate Provision
The settlement requires Caremark to pass through all rebates at the point of sale (defined as excluding administrative fees). Because the price of the drug at the point of sale can fluctuate based on the rebates paid on the claim, the settlement understandably prohibits Caremark from promising a “pre-determined dollar amount of compensation” from drug manufacturers.
However, the settlement creates an exception for the use of “net cost guarantee” terms in PBM contracts with plan sponsors. One example of a “net cost guarantee” program is Caremark’s own TrueCost program. But a “net cost guarantee” could be used to sidestep the rebate pass-through requirement, because the guarantee may incorporate point-of-sale rebates regardless of the rebates actually paid on a claim. Additional complexity may result from the fact that point-of-sale rebates are typically pre-funded using “estimated” rebate amounts that must be reconciled at the end of the year (and which reconciliation may be performed on an “aggregate” basis). Caremark may thus exploit the “net cost guarantee” exception to avoid passing through all the rebates paid by drug manufacturers to plan sponsors. Additionally, the settlement does not prohibit Caremark from taking fees and credits during the reconciliation process.
Lack of Improved Audit Rights for Plan Sponsors
Another notable omission by the FTC is that the settlement does nothing to increase plan sponsors’ audit rights under their PBM contracts, even under the “Standard Offering.” Most PBM contracts contain audit provisions that are limited in scope, lookback period, and the type of documents and data that may be reviewed. Although the settlement does attempt to expand plan sponsors’ access to plan-related data, this is far from ensuring that plans will receive all relevant documents required to ensure compliance with the PBM’s obligations, including the PBM’s contracts with rebate aggregators, affiliated pharmacies, drug manufacturers, and more. Claims-level reporting sounds great, but what fields are required? Will the claims-level data provide enough information for plan sponsors to meaningfully audit compliance with the pharmacy benefit services agreement and ERISA? Whether the answer is “yes” remains to be seen.
Although the FTC-approved monitor will provide general oversight, it is unlikely that the monitor will conduct a granular plan-specific review that understands the profitability generated through vertical integration. The omission of improved audit rights for plan sponsors appears to be a missed opportunity for the FTC.
How Frier Levitt Can Help
Like the Express Scripts settlement, the FTC’s settlement with Caremark will likely significantly impact the PBM’s operations moving forward. However, it remains to be seen how transparent Caremark will become once it implements the settlement’s terms, or whether it will exploit the remaining loopholes and ambiguities. Ultimately, the FTC settlement reinforces that plan sponsors must obtain their claims data and routinely audit their PBMs to ensure the PBM’s compliance with its contractual and fiduciary obligations. If you are a plan sponsor with a PBM contract with Caremark, contact Frier Levitt to evaluate your PBM contracts, audit your PBM for compliance with its contractual and legal obligations, and position your health plan to respond effectively to these evolving regulatory reforms.
Senior Associate
