This bill rewrites how pharmacy benefit managers (PBMs) operate inside Medicare Part D, Medicare Advantage prescription drug plans (MA‑PD), and Medicaid managed care contracts. It requires binding contract terms that set minimum pharmacy reimbursement, force PBMs to apply manufacturer rebates at the pharmacy counter to lower patient cost sharing, ban steering tactics that favor affiliate pharmacies, and impose regular reporting and state-level survey obligations to improve price transparency.
The measure also installs enforcement levers: it creates criminal and civil penalties for PBMs that knowingly fail to comply and adjusts plan‑bid accounting to reflect rebate remittance assumptions. For payers, pharmacies, plan sponsors, and state agencies, the bill shifts revenue flows, increases compliance obligations, and aims to move discounts from behind‑the‑scenes arrangements into visible reductions in patient out‑of‑pocket costs.
At a Glance
What It Does
The bill amends the Social Security Act to require Part D and Medicaid contracts to include PBM obligations: guaranteed pharmacy payment floors, point‑of‑sale rebate application that reduces enrollee coinsurance/copayments, a ban on steering toward affiliate pharmacies, and annual PBM certifications and reporting. It expands Medicaid survey requirements to collect pharmacy acquisition prices and requires certain rebate remittances to sponsors and the Secretary.
Who It Affects
Directly affects PBMs and their affiliates, Medicare Part D sponsors (including MA‑PD plans), state Medicaid agencies and managed care entities, and retail and specialty pharmacies (independent and chain). Drug manufacturers and plan actuaries will also be affected because rebate flows and bid assumptions change.
Why It Matters
This is a structural shift in how rebates and pharmacy payments are handled in major federal programs: it pushes discounts into the point‑of‑sale for beneficiaries, alters the economics that PBMs and plans use to manage formularies and premiums, increases state price transparency data, and attaches criminal and civil liability to noncompliance — all of which will ripple across contracting, pricing, and plan design.
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What This Bill Actually Does
The bill adds a new subsection to the Medicare Part D statute requiring PDP sponsors and any PBM they hire to meet four core obligations: comply with defined pharmacy payment floors, pass manufacturer rebates through at the point of sale to reduce patient cost sharing, submit annual certifications and reports that they complied and did not engage in steering, and contractually assure that any PBM affiliate is bound to the same duties. The text defines the terms at issue (affiliate, PBM, pharmacy benefits management services, and steering) and gives examples of steering conduct the law bars, such as creating narrow networks that exclude otherwise in‑network pharmacies or imposing design features that financially penalize enrollees who use non‑affiliate pharmacies.
For pharmacy payments the bill sets a clear methodology: ingredient reimbursement must be based on national pharmacy acquisition price surveys (or wholesale acquisition cost where no survey price exists) plus a percentage add‑on, and dispensing fees must match the State Medicaid dispensing fee reported under existing Medicaid survey rules. PBMs may not impose fees or contractual terms that effectively claw back or reduce the net amount a pharmacy receives under these rules.
For rebates, the bill requires that when a PBM or sponsor receives a manufacturer rebate tied to a drug dispensed at an in‑network pharmacy, the rebate must reduce the enrollee’s coinsurance or copayment at the point of sale; the PBM then remits the remaining rebate to the PDP sponsor, and the sponsor must remit specified amounts to the Secretary for subsidy‑eligible enrollees.The amendments sweep into MA‑PD plans by cross‑reference and extend parallel obligations to Medicaid by adding requirements to section 1927 and related Medicaid managed care contracting provisions. For Medicaid, any contract that makes a managed care entity or PBM responsible for outpatient drug coverage must require non‑steering, ingredient reimbursement according to national acquisition price surveys plus an add‑on, a dispensing fee equal to the State’s reported fee, and remittance of any manufacturer rebate to the State.
The bill also tightens Medicaid transparency by expanding the pharmacy survey to cover many non‑retail dispensing sites, obligating pharmacies to report net acquisition costs (or negotiated prices), and directing the Secretary to publish sampling methods, response rates, and available information on price concessions.Enforcement is explicit: the bill adds a criminal provision to the exclusion/criminal statute that makes knowing and willful violations of the PBM payment floor, rebate pass‑through, or steering prohibition a felony punishable by up to $1,000,000 and 10 years imprisonment; it also amends civil monetary penalty rules to authorize fines up to $1,000,000 per act. Several provisions carry the same effective date for contracts and penalties beginning January 1, 2027, and require PBMs to provide an annual certification to sponsors and the Secretary starting no later than July 1, 2028.
The Five Things You Need to Know
Ingredient reimbursement must be calculated from national pharmacy acquisition prices (or WAC if no national price exists) plus an add‑on of 4% of that price, capped at $50.
Dispensing fees paid to in‑network pharmacies must equal the State Medicaid dispensing fee reported under section 1927(f)(2).
Manufacturers’ rebates must be applied at point of sale to lower enrollee coinsurance/copayments, with PBMs remitting the remaining rebate to the PDP sponsor and sponsors remitting specified amounts to the Secretary for subsidy‑eligible enrollees.
The bill adds a felony penalty for knowing and willful PBM violations: fines up to $1,000,000 and imprisonment up to 10 years; civil monetary penalties can also reach $1,000,000 per act.
Medicaid survey rules now require nearly all dispensing pharmacies to report net acquisition prices (or negotiated prices) and direct the Secretary to publish survey response rates, methodology, and available data on discounts and rebates.
Section-by-Section Breakdown
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Short title
Names the measure the "Pharmacists Fight Back in Medicare and Medicaid Act." This is the formal label; it has no legal effect on implementation but signals congressional intent and policy focus.
Part D PBM obligations: payment floors, rebate pass‑through, anti‑steering, reporting
Creates a new subsection imposing four interlocking duties on PDP sponsors and any PBM acting for them: (1) reimburse in‑network pharmacies according to a statutorily defined ingredient‑cost formula and pay a dispensing fee tied to State Medicaid fees; (2) apply manufacturer rebates at the point of sale to reduce enrollee cost sharing and remit remaining rebates to sponsors (with further remittances to the Secretary for subsidy‑eligible enrollees); (3) provide annual PBM reporting and certification to sponsors and the Secretary; and (4) prohibit a broad set of steering practices. Practically, this establishes contract‑level obligations that CMS can enforce through plan oversight and that change the parties’ commercial bargaining around network design and rebate arrangements.
Plan bid assumptions and application to MA‑PD
Requires Part D bid templates to subtract expected rebate remittance payments from actuarial values starting with plan year 2027, which forces bidders to account for rebate flows differently when pricing premiums. It also incorporates the Part D PBM obligations into Medicare Advantage prescription drug plans by statutory cross‑reference, making the same PBM duties applicable within MA‑PD contracting and oversight frameworks.
Medicaid PBM and managed‑care contract requirements and remittance
Adds an explicit requirement that State contracts with PBMs or managed care entities responsible for outpatient drugs prohibit steering, set ingredient cost and dispensing fee obligations mirroring Part D, and require remittance of manufacturer rebates to the State. It adds conforming changes in section 1903(m) to condition federal payments on compliant contracts. This shifts rebate flows and payment guarantees into managed‑care contracts and gives States statutory authority to insist on PBM pass‑through and payment floors.
Criminal and civil penalties for noncompliance
Amends the exclusion/criminal statute to make knowing and willful violations of the payment, rebate pass‑through, or anti‑steering rules a felony with up to $1,000,000 in fines and 10 years imprisonment. It also revises the civil monetary penalty statute to authorize up to $1,000,000 per violation. These measures elevate enforcement beyond administrative remedies, creating high‑stakes criminal exposure for PBMs and their principals if the government proves knowing and willful misconduct.
Expanded pharmacy survey and public reporting
Broadens the Medicaid acquisition‑price survey to include many non‑retail dispensing sites, requires any pharmacy receiving payments or concessions related to dispensing to respond and report net acquisition costs (or negotiated price if net cost is unknown), and directs the Secretary to publish national acquisition‑price information, sampling methodology, response rates, and available data on discounts and rebates. It also bars States from using non‑retail pharmacy pricing to set retail community pharmacy reimbursement. The practical effect is to create a more centralized, public dataset CMS and States can use to benchmark pharmacy reimbursements.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Independent community pharmacies — The bill guarantees a minimum ingredient reimbursement tied to national acquisition prices plus an add‑on and disallows back‑end fees that reduce net receipts, reducing retroactive clawbacks and improving predictable margins for community pharmacists.
- Medicare and Medicaid beneficiaries — By requiring rebates to reduce coinsurance/copayments at point of sale, enrolled patients can see lower out‑of‑pocket costs immediately instead of receiving rebate‑driven premium reductions over time.
- State Medicaid agencies — States gain statutory authority to require contracts that force rebate remittance to the State, receive better acquisition‑price data from mandatory surveys, and get clearer information for setting reimbursement policies and budgeting.
- PDP sponsors and MA‑PD plans — Sponsors receive rebate remittance payments from PBMs and statutory clarity on how rebate assumptions should be treated in bids, reducing some counterparty risk and creating more transparent revenue streams.
- Plan actuaries and procurement officers — Greater transparency around acquisition prices and explicit contract terms reduce uncertainty when modeling plan bids and negotiating pharmacy networks.
Who Bears the Cost
- Pharmacy benefit managers and affiliates — PBMs face reduced ability to retain rebates, must change pricing and contracting models, absorb compliance costs for reporting and certifications, and face elevated criminal and civil liability risks.
- Integrated health insurers that rely on PBM affiliate economics — Vertical organizations will see affiliate revenue streams disrupted and may need to reprice products or restructure intra‑company agreements.
- Drug manufacturers — Manufacturers may face renegotiations of rebate contracts and could respond with list price or contracting changes; they also may need to restructure distribution terms if the law limits practices the bill deems steering.
- State Medicaid programs and managed care entities — States must update contracts, run expanded pharmacy surveys, and handle operational changes to process rebate remittances and reconcile reported acquisition costs, imposing administrative burdens and potential short‑term costs.
- PDP sponsors and Medicare Advantage plans — Although sponsors receive remitted rebates, they also take on added operational responsibility for reconciling remittances and complying with reporting and remittance obligations, increasing administrative overhead.
Key Issues
The Core Tension
The central dilemma is immediate patient relief versus systemic cost allocation: forcing rebates to reduce out‑of‑pocket costs helps individuals at the pharmacy counter but removes a flexible financing mechanism that plans and PBMs use to lower premiums and manage formularies, potentially increasing program spending or premiums while introducing substantial implementation, data quality, and enforcement complexity.
The bill trades a long‑standing opaque rebate model for immediate beneficiary relief and statutory clarity, but it raises thorny operational and market risks. First, the point‑of‑sale rebate pass‑through reduces the pool of rebates that PBMs historically used to lower premiums or finance supplemental benefits; unless manufacturers lower net prices, plan sponsors may see higher premiums or narrower formularies to offset lost behind‑the‑scenes revenues.
Second, the prescribed pharmacy payment formula relies on national acquisition‑price surveys (and WAC fallback), but survey coverage, timeliness, and representativeness vary; data gaps or noncompliant pharmacies will complicate reimbursements and could invite litigation over under‑ or over‑payment.
Enforcement and definitional boundaries present another set of challenges. The criminal standard requires knowledge and willfulness, but the bill’s broad definition of steering and affiliate relationships will invite disputes about intent, corporate structures, and permissible commercial practices.
PBMs may reorganize activities through affiliates, third parties, or offshore intermediaries to evade obligations; regulators will need investigatory tools and clear audit protocols. Finally, publicizing acquisition prices and partial information on discounts could trigger competitive concerns among manufacturers and pharmacies, and improper use of non‑retail pricing for retail reimbursement is explicitly forbidden — yet practical line‑drawing between pharmacy types will remain contested.
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