PBM Shakeup: New Law Forces Rebates to Lower Patient Drug Costs Starting 2027

This legislation, dubbed the Pharmacists Fight Back in Medicare and Medicaid Act, is a major overhaul of the rules governing Pharmacy Benefit Managers (PBMs) who contract with Medicare Part D and Medicaid plans. Effective January 1, 2027, the bill sets mandatory payment standards for pharmacies, forces PBMs to pass along manufacturer rebates to patients at the counter, and bans a practice called "steering." Essentially, this bill targets the middlemen in the drug supply chain, aiming to stabilize local pharmacies and reduce out-of-pocket costs for millions of Americans on government health plans.

The Rebate Revolution: Lowering the Co-Pay

If you’ve ever paid a high co-pay only to find out later that the PBM received a massive rebate on that drug, this section is for you. The bill mandates a "Rebate Pass-Through Requirement" for Medicare Part D. This means that when you go to the pharmacy, your co-insurance or co-payment must be calculated based on the drug’s cost minus the manufacturer rebate amount. For a patient, this is huge: instead of paying full price and hoping the rebate eventually lowers the plan’s premium (maybe), the savings hit your wallet immediately. PBMs will have to pass the full rebate amount to the plan sponsor, and for low-income subsidy (LIS) patients, the rebate goes directly back to the government.

Guaranteed Paychecks for Your Local Pharmacy

For years, local and independent pharmacies have struggled with PBMs paying them less than the actual cost of the drug, a practice that drives many out of business. This bill sets a mandatory floor for pharmacy reimbursement in both Medicare and Medicaid. PBMs must pay the pharmacy the ingredient cost based on the National Average Drug Acquisition Cost (NADAC)—a government benchmark—plus a small margin (4% of the cost or $50, whichever is less). They also have to pay the state’s full Medicaid dispensing fee. This provision is designed to ensure pharmacies get paid fairly for the drugs they dispense and the work they do, which is critical for keeping pharmacies open, especially in rural areas where they are often the only healthcare access point.

No More Forced Shopping: The Ban on Steering

Have you ever felt pressured by your insurance plan to use a specific pharmacy, often one owned by the PBM itself? This is called "steering," and the bill explicitly bans it. Steering is defined broadly, prohibiting PBMs from directing or requiring patients to use an affiliated pharmacy, designing plans that force patients to use a specific location, or creating tiered networks that give preferential treatment to certain in-network pharmacies. This means if you prefer using the independent pharmacy down the street over the massive chain or the PBM’s mail-order service, the plan can’t penalize you for that choice. Violating this rule, or any other rule in the act, is serious business, carrying potential criminal charges—a felony with up to $1 million in fines and 10 years in prison.

Pulling Back the Curtain on Drug Prices

Section 3 of the bill focuses on transparency in the Medicaid program. Currently, drug pricing data is often limited to retail pharmacies. This bill expands the reporting requirement to nearly all pharmacies that deal with Medicaid drugs—including mail-order, specialty, hospital, and clinic pharmacies. They all must report their net acquisition price (what they actually paid after all discounts and concessions). This data will then be made public by the Secretary of Health and Human Services. However, there’s a key protection for retail pharmacies: the bill prohibits states from using the pricing data collected from non-retail pharmacies (like hospitals or mail-order facilities) to set reimbursement rates for retail community pharmacies. This prevents a state from forcing a small retail shop to match the massive bulk purchasing power of a hospital system.