CAA 2026 Part 1: The PBM Transparency Revolution

The CAA 2026 builds on the transparency framework established in the CAA 2021 and expands it significantly. PBMs are now required to provide plan sponsors with detailed data on drug pricing, spread pricing, rebate flows, and total compensation — including compensation that flows through affiliated entities. This is not a voluntary disclosure. It is a legal requirement, and plan sponsors have the right to demand it.

The law requires PBMs to disclose the difference between what they pay a pharmacy and what they charge the plan — commonly known as spread. It also requires disclosure of all forms of compensation received from drug manufacturers, including rebates, administrative fees, data fees, and any other payments. For employers who have been operating with limited visibility into these arrangements, this is a significant shift.

The PBM industry has operated with significant information asymmetry for decades. Employers sign contracts that guarantee certain discount levels and rebate amounts, but they rarely have visibility into the full economics of the arrangement. A PBM can show strong rebate performance while simultaneously earning substantial spread on generic drugs, charging administrative fees through affiliated entities, and steering utilization toward higher-cost branded medications that generate larger manufacturer payments.

The CAA 2026 transparency requirements are designed to close that information gap. When employers can see the full picture — not just the rebate check — they are in a much better position to evaluate whether their PBM arrangement is actually delivering value.

Spread pricing is one of the most significant sources of hidden PBM revenue. When a PBM processes a generic drug claim, it pays the pharmacy a certain amount and charges the plan a higher amount. The difference — the spread — goes to the PBM. In some cases, spread on a single generic drug can exceed the actual cost of the medication.

For employers on traditional spread pricing arrangements, this has been nearly impossible to detect without detailed claims data. The CAA 2026 requires PBMs to disclose this spread, which means employers will finally be able to quantify how much of their pharmacy spend is going to PBM margin rather than actual drug costs. For many employers, this number will be surprising.

Rebates have been the primary metric employers use to evaluate PBM performance for years. The logic is straightforward: higher rebates mean lower net drug costs. But rebates are only one form of manufacturer compensation, and they are not always the most significant one.

PBMs also receive administrative fees, data licensing fees, and various other payments from drug manufacturers. These payments are often not included in rebate guarantees and may not flow back to the plan at all. The CAA 2026 requires disclosure of all manufacturer compensation, which will allow employers to see the full picture of what their PBM is receiving — and what portion of that is being passed through to the plan.

The CAA 2026 transparency requirements create an opportunity for employers to renegotiate their PBM contracts from a position of better information. Before your next renewal, you should be requesting the full disclosure package your PBM is now required to provide. Review spread pricing data, total manufacturer compensation, and the net cost of your top drugs after all forms of compensation are accounted for.

If your PBM is resistant to providing this data, that resistance is itself informative. A PBM that is confident in the value it delivers should welcome the opportunity to demonstrate it. If the data reveals that the arrangement is not working in your favor, you have the information you need to make a change — or at minimum, to negotiate better terms at renewal.

The CAA 2026 transparency requirements are part of a broader shift in how the employer health plan market is evolving. Employers are increasingly sophisticated buyers, and the regulatory environment is moving in a direction that supports their ability to make informed decisions. The days of accepting PBM performance reports at face value — without the underlying data to verify them — are ending.

For employers who are willing to engage with this data, the opportunity is significant. Better information leads to better contracts, better vendor selection, and ultimately lower pharmacy costs. The employers who take advantage of these new transparency requirements will be better positioned to manage their pharmacy benefit effectively for years to come.