New Bill Bans Medicaid ‘Spread Pricing’ and Forces Medicare PBMs to Disgorge Hidden Fees Starting 2028

The PBM Price Transparency and Accountability Act is taking aim at Pharmacy Benefit Managers (PBMs), the middlemen who handle prescription drug benefits. This bill rewrites the rules for how PBMs operate in both Medicaid and Medicare Part D, focusing on eliminating non-transparent revenue streams and ensuring pharmacies get paid fairly.

Essentially, this legislation mandates a massive shift toward financial transparency, forcing PBMs to act more like transparent service administrators than opaque financial speculators. For anyone relying on Medicare or Medicaid for prescriptions, this could mean more stable pharmacy access and potentially lower costs down the line, as the financial incentives for PBMs change drastically.

No More Secret Markups: Medicaid’s Spread Pricing Ban

If you’re a taxpayer or rely on Medicaid, Section 2 of this bill tackles one of the most frustrating aspects of drug pricing: “spread pricing.” Here’s how it works now: A PBM charges the state (or the managed care plan) $100 for a prescription, but only pays the local pharmacy $80, pocketing the $20 difference—the “spread.”

This bill bans that practice entirely. Contracts between states and PBMs must now use a transparent pass-through pricing model. This means the PBM can only charge the state the actual cost of the drug plus a fair market value administrative fee. The full cost of the drug ingredient, plus the dispensing fee, must be passed directly to the dispensing pharmacy. This is a huge win for community pharmacies, especially those in underserved areas, who often struggle when PBMs squeeze their margins.

To make sure payments are accurate, the bill also mandates the Secretary of HHS to conduct monthly surveys of retail and non-retail pharmacies to determine the national average drug acquisition cost. If you own a pharmacy that services Medicaid, you must respond to these surveys. Refusing to comply or providing false information can result in steep civil money penalties up to $100,000 per violation. While the goal is accuracy, that’s a heavy compliance burden on small businesses.

Medicare Part D: Restricting PBM Compensation to Flat Fees

The changes coming to Medicare Part D are equally dramatic, kicking in for plan years starting in 2028. Section 3 targets the financial heart of the PBM business model: hidden revenue streams tied to drug prices.

Under the new rules, PBMs are prohibited from deriving any remuneration related to covered drugs, except for “bona fide service fees.” Think of a bona fide service fee as a flat, fair market value payment for an actual service performed, like claims processing. Crucially, this fee cannot be based on the drug’s price or rebates. This means PBMs can no longer profit by keeping a percentage of rebates or discounts they negotiate with manufacturers. Any manufacturer rebates and discounts must be fully passed through to the plan sponsor.

If a PBM is found to have received prohibited compensation, they must disgorge—or return—that money to the plan sponsor. This is a massive shift, forcing PBMs to make their money solely through transparent administrative fees, rather than through complex, price-based financial arrangements.

Protecting Local Pharmacies and Increasing Oversight

For Medicare beneficiaries, the bill addresses pharmacy access. Starting in 2028, Part D plans must accept any pharmacy into their network that meets the plan’s standard contract terms, provided those terms are deemed “reasonable and relevant” by the Secretary of HHS. This is designed to prevent PBMs from arbitrarily excluding independent pharmacies, especially those serving rural or suburban areas.

Furthermore, the bill gives Medicare plan sponsors (the insurance companies) significant new power to hold their PBMs accountable. Sponsors gain the right to audit their PBM at least once a year and PBMs must provide a highly detailed annual report to the plan sponsor and the Secretary. This report must include a drug-by-drug breakdown of costs, rebates, and how much revenue the PBM retained. If the PBM causes the plan sponsor to incur a penalty for a violation, the PBM must reimburse the sponsor.

The Real-World Impact

This bill doesn't just shuffle paperwork; it changes the financial incentives across the drug supply chain. For the everyday person, the goal is stabilization and clarity:

• For the local pharmacy: Eliminating spread pricing in Medicaid and ensuring fair payment in Medicare means a more predictable business model. This helps keep essential retail pharmacies (those serving areas without nearby alternatives) open, which is critical for seniors and those in rural communities.
• For the Medicare patient: While the bill doesn't directly cut your co-pay, restricting PBM profit margins means more of the negotiated discounts flow back to the plan sponsor, which could eventually translate into lower premiums or reduced cost-sharing.

The biggest challenge lies in implementation. The Secretary has until 2027 to define “reasonable and relevant” contract terms and to clarify what exactly constitutes a “bona fide service fee.” Until those standards are set, the industry will be operating in a gray area, trying to figure out how to transition from complex pricing models to flat-fee administration.