Congress recently passed sweeping legislation aimed at increasing transparency and restructuring how pharmacy benefit managers (PBMs) are compensated. The new law requires PBMs participating in Medicare Part D to pass through manufacturer rebates directly to plan sponsors and instead be compensated through flat service fees. It also imposes significant reporting requirements designed to provide greater visibility into how PBMs generate revenue and distribute pharmaceutical rebates.
While the legislation represents one of the most significant federal efforts to regulate PBM practices to date, lawmakers from both parties have indicated that additional reforms may follow. In particular, members of Congress have begun scrutinizing group purchasing organizations (GPOs) affiliated with major PBMs, raising concerns about rebate aggregation practices, opaque corporate structures, and the role these entities may play in retaining a larger share of drug manufacturer rebates.
According to Frier Levitt Partner Jesse Dresser, the new legislation already provides regulators with tools to address some of these practices. Dresser explained that PBM-affiliated GPOs would still be subject to the law’s reporting and transparency requirements and could face enforcement action if they attempt to circumvent those obligations.
At the same time, Dresser noted that important gaps remain in the regulatory framework. While the law requires rebate pass-through for Medicare Part D plans, similar requirements do not currently apply to employer-sponsored health plans governed by the Employee Retirement Income Security Act (ERISA). As a result, some PBM practices could continue in the commercial market even after the new law takes effect.
Dresser also suggested that additional reforms could focus on expanding federal oversight to PBM-related entities operating outside the United States, which may complicate enforcement efforts.
As policymakers continue examining the role of PBMs in the pharmaceutical supply chain, the recent legislation may represent only the first step in a broader effort to reshape PBM regulation and increase accountability across the industry.
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