New DRUG Act Forces PBMs to Cut Ties to Drug Prices, Mandates Rebate Pass-Through by 2027

The "Delinking Revenue from Unfair Gouging Act"—or the DRUG Act—is a major shake-up targeting Pharmacy Benefit Managers (PBMs), the middlemen who manage prescription drug benefits for most health plans and insurance carriers. Starting January 1, 2027, this bill fundamentally changes how PBMs can make money. Essentially, it cuts off the revenue streams PBMs typically get from third parties, like drug manufacturers, when managing your prescription coverage. The goal is to stop PBMs from profiting based on the price of the drugs they manage, which many argue incentivizes them to favor expensive medications.

The End of Price-Tied Payments

Under current rules, PBMs often receive revenue—like rebates or administrative fees—that are tied directly to the list price of a drug. The DRUG Act says that starting in 2027, PBMs can no longer receive payments based on drug prices, rebates, discounts, or other concessions related to the drugs covered under a plan. Think of it this way: if your PBM was previously getting a percentage of the drug’s cost, that income stream is gone. This provision is designed to remove any financial incentive for PBMs to push higher-cost drugs over cheaper, equally effective alternatives. For you, the employee or individual paying for coverage, this is a big deal because it could translate into lower premiums or reduced out-of-pocket costs at the pharmacy counter.

The 'Flat Fee' Exception: A Bona Fide Service

There is one exception to the payment ban: PBMs can still charge a "bona fide service fee." But this fee has strict rules. It must be a set, flat dollar amount, agreed upon in writing, and itemized for a specific service that the health plan would otherwise have to perform itself. Crucially, this fee cannot be based on the price or volume of the drugs involved. This move pushes PBMs toward a transparent, fee-for-service model. However, regulators will need to watch closely to ensure PBMs don't just disguise their old revenue streams as highly inflated "bona fide" service fees. The bill is a bit vague on what exactly qualifies as an itemized service, leaving room for future regulatory interpretation.

Mandatory Rebate Pass-Through

One of the most impactful provisions for consumers is the mandatory pass-through rule. The bill requires that any rebates, discounts, or price concessions the PBM negotiates must be fully passed along to the group health plan or insurer. The intent is clear: these savings must be used to lower the net cost of prescriptions for members. If you’re currently paying a high deductible or copay, this could eventually mean real relief, as the money saved should trickle down to reduce the overall cost of coverage and your specific drug costs. The law ensures this doesn't interfere with payments for the actual drug ingredients or standard pharmacy dispensing fees.

High Stakes for Non-Compliance

The DRUG Act isn't messing around with penalties. If a PBM violates these new payment rules, they face two major consequences. First, they must “disgorge,” or pay back, all the prohibited payments to the health plan or issuer they took them from. Second, they face a civil penalty of $10,000 for every single day the violation continues. These rules and penalties are being applied across the board, amending the Public Health Service Act, ERISA (which covers most employer-sponsored plans), and the Internal Revenue Code, ensuring enforcement by the Secretaries of Health, Labor, and the Treasury. This joint enforcement signals a serious, coordinated effort to hold PBMs accountable.