CMS Proposed Rule to Implement Section 6224 of the Consolidated Appropriations Act

On October 20, 2026, the Centers for Medicare & Medicaid Services (CMS) published a Proposed Rule (the “Proposed Rule”) to amend regulations pursuant to the mandates of Section 6224 of the Consolidated Appropriations Act of 2026 (CAA), signed into law on February 3, 2026.

Section 6224 adds new and enhanced requirements under the Medicare Part D program aimed at pharmacy benefit managers (PBMs) and their affiliates, addressing issues such as how PBMs are compensated and how much data they must share about their operations.  Procedurally, Section 6224 amends section 1860D–12 of the Social Security Act (42 U.S.C. § 1395w–112) to add these new and enhanced requirements. With its Proposed Rule, CMS is codifying these changes in regulation. 

Background

In providing context for its proposals in the Proposed Rule, CMS outlines a history of federal regulators and academics questioning PBM business practices, their corporate structures and whether those practices and structures contribute to high drug prices. CMS further notes that, in a 2022 Final Rule, CMS mandated transparency for pharmacy price concessions at the point of sale aimed at providing more predictable, transparent payment structures for pharmacies. Within the last month, CMS issued a request for information aimed at providing standards for what are reasonable and relevant contract terms for Part D pharmacy contracts. According to CMS, the Proposed Rule is designed to address these previously identified concerns and build on prior PBM reform efforts. CMS notes specifically that its proposals were informed by comments it received in response to a CMS June 18, 2026, request for information regarding the services and business practices of PBMs and their affiliates.

Core Concepts

In the Proposed Rule, CMS is seeking to codify three core concepts from the CAA with respect to PBMs. First, focusing on remuneration, subject to limited exceptions, the CAA provides that PBMs and their affiliates generally may receive only bona fide service fees for services connected to Part D drugs. Under the statute, such fees must be flat dollar amounts reflecting fair market value for an itemized service, and cannot depend on rebates, drug prices, or formulary placement. The CAA also requires U.S. Department of Health and Human Services (HHS) review of certain PBM arrangements and requires PBMs to disgorge improperly received remuneration.

The second goal is transparency. The CAA requires that PBMs define and apply contract terminology consistently when measuring performance against pricing guarantees or other cost performance measurements. PBMs must also submit annual reports to plan sponsors and HHS beginning no later than July 1, 2028, addressing drug dispensing, affiliate pharmacy information, formulary placement, plan spending, PBM remuneration, and affiliate lists. PBMs must further explain certain manufacturer contracts tied to formulary placement within 30 days of finalization.

Third, focusing on enforcement, under the CAA, contracts must give Part D plan sponsors annual audit rights over their PBMs, and the plan sponsors must be reimbursed for any civil money penalties resulting from PBM noncompliance. Contracts must also subject PBMs to punitive remedies for breach, meaning monetary awards that go beyond compensating an injured party.

Beyond plan sponsor enforcement, the CAA provides CMS with enforcement mechanisms.  Plan sponsors must disgorge to HHS any amounts they recover from PBMs for violations, must not retaliate against parties who report violations, and must certify annual compliance.

In summary, the Proposed Rule aims to promulgate regulations that will 1) ensure PBM accountability; 2) govern PBM and affiliate remuneration tied to Part D drugs; 3) add new data reporting requirements by PBMs to Part D Plan sponsors and to CMS; 4) ensure transparency in price guarantee arrangements between PBMs or their affiliates and Part D plan sponsors; and 5) require disclosure by PBMs to Part D Plan sponsors of certain arrangements between PBMs or their affiliates and pharmaceutical manufacturers. The Proposed Rule also contains potential requirements for the disgorgement of funds from plan sponsors to CMS, punitive remedies for breach of contract between plan sponsors and PBMs; and anti-retaliation/anticoercion provisions.

 We discuss each of the proposals in more detail below.

Definitions  

Proposed Sections 423.2802, 423.2804, and 423.2806 of the regulations define several key terms that are set forth in the CAA and warrant additional clarity to implement the law, including “PBM” and “affiliate.” CMS proposes to define a PBM as a person or entity which has a written contract with a Part D plan sponsor, either directly or through a parent organization; and performs at least one function of a PBM—acting as a price negotiator or group purchaser or managing the prescription drug benefits provided by a Part D Plan sponsor or plan.

CMS proposes to define an “affiliate” of a PBM or Part D plan sponsor as an entity that has an ownership relationship, a control relationship, or another qualifying relationship with it, or that acts as its contractor, principal, or agent and performs PBM functions as a material part of those services. Under the Proposed Rule, ownership means membership in a parent-subsidiary controlled group, while control means either party can materially direct the other party’s decisions regardless of ownership percentage.

Contractual Requirements and Remuneration

Section 423.2808, as proposed, outlines contractual requirements for Part D Plan sponsors. For plan years beginning on or after January 1, 2028, each contract a Part D Plan sponsor enters into with respect to a prescription drug plan must require that any PBM acting for that sponsor has a written agreement with that sponsor. Under that agreement, the PBM and any of its affiliates would be required to assume several groups of obligations: remuneration limits, transparency regarding guarantees and cost-performance evaluations, annual reporting, written explanations of manufacturer agreements, and audit rights, along with compliance and enforcement terms.

Proposed Section 423.2810 addresses remuneration, including specifying fair market value for bona fide service fees and incentive payments to PBMs. As proposed, a PBM or affiliate may not receive any remuneration for services in connection with Part D drugs, other than a bona fide service fee—a flat dollar amount reflecting fair market value for an itemized service actually performed and not tied to drug prices, rebates, coverage decisions, or referrals. Fair market value is proposed to mean the cost of the service plus a reasonable markup, and the PBM may use estimated costs until observed data is available, which CMS would consider to be available no later than one year after the initial fee takes effect. For incentive payments, fair market value is proposed to mean an amount reflecting comparable market transactions under current market conditions.

Data Reporting

Proposed Section 423.2814 would require each PBM to submit an annual report to the Part D plan sponsor and CMS by July 1 of each year, beginning in 2028. The report would include a list of all covered drugs dispensed and 11 data points for each drug, including financial data such as cost, pricing, enrollee spending, rebates, and pharmacy reimbursement. PBMs with affiliated pharmacies would also have to report those pharmacies’ share of prescriptions, cost data designed to show differentials in drug costs dispensed from affiliated versus non-affiliated pharmacies, the difference between the National Average Drug Acquisition Cost (NADAC) and the affiliate’s acquisition cost and a list of drugs subject to a 340B arrangement between the PBM or affiliate and a 340Bcovered entity.

Transparency

Proposed Section 423.2812 would require PBMs to be transparent about how they measure performance under pricing guarantees and other cost measures. As proposed, within the context of guarantees and cost performance valuations, PBMs would be required to define key terms, including “generic drug,” “brand name drug,” “specialty drug,” “rebate,” and “discount,” in a fully transparent and consistent way. They would also be required to identify any drugs, claims, or price concessions excluded from a guarantee or cost performance measure. Moreover, if a guarantee were to use a benchmark other than wholesale acquisition cost, the PBM would have to provide a WAC-based equivalent and disclose the WAC source. Upon the request of the plan sponsor, and at least annually, the PBM would also have to provide the list of drugs for which PBM performance against pricing guarantees or similar cost performance metrics is measured. 

Compliance and Enforcement

Proposed Sections 423.2818 and 423.2820 set out enforcement tools for plan sponsors and CMS. Plan sponsors would have the right to audit PBMs at least annually and the right to select the auditor without limitation, and the PBM would have a broad obligation to make available information requested by the auditor, subject to reasonable restrictions. PBMs would also be subject to punitive remedies for breaching their contract with the plan sponsor.  CMS would have the authority to require disgorgement of improper remuneration received by the plan sponsor from a PBM, and to pass through civil monetary penalties to the PBM where the PBM is the source of the wrongdoing. A wide variety of entities would be authorized to submit confidential complaints to CMS of alleged noncompliance for certain PBM violations, and retaliation would be prohibited.  Sponsors would also be required to certify compliance with these codified provisions of the CAA each year beginning in plan year 2028.

Confidentiality and Use of Information

Proposed Section 423.2822 would protect non-public information that PBMs, affiliates, sponsors, or pharmacies disclose under the Social Security Act’s Part D PBM provisions. Under the Proposed Rule, the HHS Secretary and sponsors may not disclose such information, except for specified oversight and enforcement purposes. Public reports by the HHS Secretary, the Comptroller General, the Congressional Budget Office, and the Medicare Payment Advisory Commission may not identify specific parties or reveal drug-specific contract terms.

Takeaways

Comments on the Proposed Rule are due December 15, 2026. The Proposed Rule provides an opportunity for stakeholders to weigh in on new requirements to be imposed on PBMs in PBM Part D plan sponsor contracts, including topics surrounding PBM remuneration, transparency and enforcement standards against PBMs.  If you have questions, please reach out to the authors.

Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.

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If you have questions, please reach out to the author(s).

The Health Law Advisor blog is currently edited by Emily Chi Fogler.