CMS Proposes Major Changes to MA, Part D, and PBM Requirements

On October 16, 2026, the U.S. Centers for Medicare and Medicaid Services (CMS) issued a proposed rule implementing key sections of the Consolidated Appropriations Act (CAA) of 2026, Section 6224 (“Modernizing and Ensuring Pharmacy Benefit Manager Accountability”). The agency also proposes a conforming change mandated by section 6219 of the CAA (“Adjustments to Medicare Part D Cost-Sharing Reductions for Low-Income Individuals”) that would reduce the generic-drug copayment from $1 to $0 for full-benefit dual eligible individuals. Comments to the proposed rule are due December 15, 2026.   

On September 24, 2026, CMS issued a request for information (RFI) under Section 6223 of CAA to establish federal standards for "reasonable and relevant" pharmacy contract terms and conditions under Medicare Part D. Stakeholders should also consider submitting comments in response to this RFI.  

Background 

On February 3, 2026, President Trump signed the CAA, a $1.2 trillion spending bill. Among other things, the CAA introduced significant regulatory changes for Medicare Part D plans, Medicare Advantage-Part D organizations (MA-PD) and pharmacy benefit managers (PBM) providing services to PDP sponsors in the MA and Medicare Part D programs. The CAA also imposed significant new transparency requirements for PBMs contracting with private group health plans.  

Subsequently, on June 18, 2026, CMS published an RFI seeking technical public input on PBM compensation arrangements and data collection to inform rulemaking implementing Section 6224 of the CAA. (See Client Alert: Federal Roundup: Key Regulatory Updates for PBMs and MA.) The Notice of Proposed Rulemaking (NPRM) proposes new and enhanced requirements governing the remuneration that PBMs and their affiliates may receive for services in connection with Part D drugs, data reporting by PBMs to Part D plan sponsors and CMS, transparency in price-guarantee arrangements between PBMs of their affiliates and Part D plan sponsors, and disclosure by PBMs to Part D sponsors. CMS also proposes definitions for a number of key terms and compliance and enforcement mechanisms related to these proposed provisions.  

PBM Manager Accountability Requirements (effective contract year 2028) 

CMS proposes implementing Section 6224 of the CAA, establishing new requirements governing PBM remuneration, data reporting, pricing transparency, disclosure of manufacturer agreements, and enforcement mechanisms, potentially resulting in disgorgement of funds to CMS for violations. These provisions are being implemented through a new Subpart BB, “Modernizing and Ensuring Pharmacy Benefit Manager Accountability,” at 42 C.F.R. § 423.2800 through 2822.   

New requirements on PBMs and their affiliates and intermediary organizations include all of the following: 

• Compensation restrictions: PBMs and their affiliates would be limited to receiving “bona fide service fees” (i.e., flat-dollar, itemized, fair-market-value fees) that are not tied to drug prices, rebates, formulary placement, or drug volume, for services connected to Part D drug utilization. The proposals would further prohibit a PBM or its affiliate from requiring a party to pay a bona fide service fee to cover any additional fee to access the benefit of an itemized service or to obtain sufficient information to oversee the service. The rule also proposes that a PBM may not condition the availability of an itemized service on an agreement by the plan (or other party on behalf of the plan) to provide remuneration for a separate itemized service that is not necessary in order to provide the contracted itemized service. 
• Rebate pass-through: Manufacturer rebates and other price concessions are specifically excepted from the “flat fee” compensation requirements proposed, but only if 100% of their gross economic value is passed through to the Part D plan sponsor. A price concession that is retained by a PBM or an affiliate, and that is misclassified as a service fee, omitted from DIR reporting, or otherwise not reflected in applicable Part D reconciliation, would not qualify for the exception. It could be considered improper compensation, potentially subject to disgorgement. 
• Annual reporting: PBMs would be required to report detailed data to both plan sponsors and CMS on drug utilization, prices, formulary placement, and remuneration, generally by July 1, 2028. 
• Audit and enforcement rights: Plan sponsors would receive rights to annually audit PBMs. PBMs that are found to be in violation would face disgorgement obligations. Plan sponsors, in turn, would be required to disgorge amounts received to CMS. 

What the Proposed Rule May Mean for Plan Sponsors and PBMs 

These proposed requirements could significantly alter the terms of pharmacy benefit management agreements between PBMs and MA-PDs and Part D plan sponsors and related compensation structures. Part D regulations already require that services provided by PBMs to plans be compensated at fair market value. The proposed rule would definitively prohibit any payment methodology that incorporates metrics based on the volume or value of drugs or formulary placement.   

In addition, the rule’s definitions of “PBM” and “PBM function” arguably expand what it means to be a PBM on behalf of a Part D to encompass group-purchasing entities and services that are discussed in the preamble to the regulation. The rule also prevents PBMs from bypassing compensation restrictions through the use of affiliates or intermediary organizations.  

Specifically, proposed definitions make clear that an entity will be considered to be a “pharmacy benefit manager, regardless of how it describes itself” if it has a written contract with a Part D plan sponsor, either directly or through a parent organization of such Part D plan sponsor, and if the “person or entity, directly or through an intermediary, performs at least one PBM function.” PBM function, in turn, includes “acting as a price negotiator or group purchaser or managing the prescription drug benefits provided by a Part D plan sponsor or plan, when performed by any person or entity, directly or through an intermediary, on behalf of a Part D plan sponsor or prescription drug plan.”  

The proposed rule appears to incorporate group purchasing organization (GPO) services on behalf of Part D plans in the scope of compensation restrictions, as well as prohibit PBMs from requiring a plan to use an affiliated GPO as a contracting condition.  

Existing contracts that rely on spread pricing, volume-based fees, or partial rebate retention would need to be restructured before contract year 2028. Plan sponsors should begin reviewing their PBM agreements now to identify arrangements that may no longer be permissible and to assess their negotiating position for future contracts. The disgorgement mechanism also creates a new layer of financial risk for plan sponsors that do not effectively monitor PBM compliance. 

CMS’s proposed rule fundamentally reshapes how PBMs are compensated for providing services to Medicare Part D and MA plans and may significantly impact the commercial relationship between PBMs and plans. Taken together, these proposals signal a significant shift away from the rebate-based business model that has traditionally been part of PBM contracting. Both PBMs and plans sponsors should monitor developments with the rule and ensure that contractual terms in agreements for pharmacy benefit services, beginning plan year 2028, comply with the rule and the CAA.

Stakeholders who wish to influence the final rule should submit comments by December 15, 2026.