A massive regulatory shift is quickly approaching, and it’s set to impact how hospital and health system HR leaders manage pharmacy benefits for their employees. In early February, Congress passed the Consolidated Appropriations Act of 2026 (CAA 2026), which mandates 100% rebate pass-through and greater pharmacy benefits manager (PBM) disclosure for plans covered by the federal Employee Retirement Income Security Act of 1974 (ERISA) law for plan years beginning on or after August 3, 2028.
This represents a foundational change in how self-funded ERISA plans will administer, price, and evaluate pharmacy benefits going forward.
While 2028 may seem distant, the complexity of pharmacy benefit contracts means hospital HR leaders should start preparing today. This guide explains the accelerating regulatory landscape, details what new federal mandates and a growing number of state regulations entail and outlines the actionable steps you can take now to ensure compliance and optimize your benefits plan.
The Accelerating Regulatory Landscape
The momentum for PBM reform is broad and bipartisan, but the concept of transparency still carries different meanings depending on the jurisdiction.
At the state level, legislative activity is surging. In 2025 alone, lawmakers introduced over 1,500 bills related to pharmacy benefits, enacting 300 of them while carrying approximately 500 into 2026. This year, the focus has expanded into comprehensive disclosure, business practice regulation, and even fiduciary-style expectations for PBMs. So far in 2026, over 1,000 bills have been introduced across the states.
More laws are facing challenges in court, creating a landscape of uncertainty for both plan sponsors and PBMs. Hospital and health system HR leaders should expect significant variability by state, even when a law successfully passes. Understanding the intersection of state laws and the overarching federal ERISA mandates is critical for protecting your hospital’s or health system’s finances and employees’ benefits.
What the 2028 ERISA Mandate Means
The pharmacy benefits industry has often operated behind closed doors. Complex pricing structures, hidden fees, and retained rebates have made it difficult for plan sponsors to understand the true cost of their pharmacy benefits. The CAA federal regulation aims to dismantle this opacity for self-funded ERISA plans.
100% Rebate Pass-Through
PBMs negotiate with drug manufacturers for rebates to lower a drug’s net cost in exchange for favorable placement on a plan’s formulary. Historically, many PBMs have retained a portion of these rebates, not passing all savings through to the plan sponsor.
The new mandate, however, requires that 100% of manufacturer rebates be passed directly to the plan sponsor. This change ensures that the money intended to lower the cost of prescription drugs actually reaches your hospital or health system, allowing you to reinvest those savings into your employee benefits or offset premium increases.
The Push for Greater PBM Disclosure
Rebate pass-through is only one part of the equation; the mandate also introduces stringent PBM disclosure requirements. PBMs will need to provide comprehensive visibility into their operations, pricing models, and financial relationships with drug manufacturers.
You will soon have the legal right to see exactly how your pharmacy benefits are priced. This includes detailed reporting on drug costs, administrative fees, dispensing fees, and any other revenue streams the PBM collects related to your plan. This level of disclosure empowers hospital and health system HR teams to audit plans effectively, ensuring every dollar spent is accounted for and applied to benefit your employees.
Navigating Pharmacy Reimbursement
Hospital and health system HR leaders may also be impacted by changing pharmacy reimbursement dynamics. Independent pharmacists have successfully lobbied state legislatures, arguing that current PBM reimbursement rates are neither fair nor adequate.
As a result, legislators are introducing bills that mandate minimum reimbursement levels for pharmacies. These reimbursements are typically tied to an acquisition cost metric, such as the National Average Drug Acquisition Cost (NADAC). NADAC relies on voluntary survey data collected by the Centers for Medicare & Medicaid Services (CMS) to approximate a pharmacy’s actual acquisition cost.
Under these new proposals, PBMs must reimburse pharmacies at the NADAC rate plus a minimum dispensing fee. Minimum dispensing fees generally match Medicaid rates, which often amount to $10 to $12 or more per claim above standard dispensing fees. For example, a recent bill in Louisiana proposed a $12.00 minimum dispensing fee, while a similar (though recently defeated) bill in Florida proposed a $10.24 fee.
The Impact of PCMA v. Rutledge
Typically, ERISA preempts state laws, meaning state-level mandates would not apply to self-funded ERISA plans. However, a landmark 2020 Supreme Court case, PCMA v. Rutledge, ruled that ERISA does not preempt state laws regulating pharmacy reimbursement rates.
If your hospital has plan members filling claims in a state with a pharmacy reimbursement mandate, those state laws will apply to your ERISA plan. Plan sponsors should not be surprised to see highly variable levels of reimbursement depending on where employees live and access care.
Understanding Pharmacy Network Restrictions
Local pharmacies are also advocating against network exclusions, claiming that PBMs unfairly steer patients toward PBM-owned or affiliated pharmacies. Legislators have responded by advancing “Any Willing Pharmacy” (AWP) networks and anti-steering laws.
AWP laws require PBMs to admit any willing pharmacy into their networks, while anti-steering laws prevent PBMs and plan sponsors from forcing members to use specific retail, mail-order, or PBM-owned specialty pharmacies.
The Protections of PCMA v. Mulready
In contrast to pharmacy reimbursement regulations, the 10th Circuit Court of Appeals recently ruled in PCMA v. Mulready that ERISA does preempt Oklahoma state rules regarding pharmacy network design. This will likely have implications for ERISA in other states.
As it stands now, ERISA plans across most of the country maintain the ability to design their pharmacy networks the way they choose, free from state-level interference. However, non-ERISA plans must evaluate state laws and seek any available exemptions when designing their networks.
Why This Matters for Hospital and Health System HR Leaders
As a healthcare HR leader, your primary goal is to support your staff with excellent benefits while protecting the organization’s bottom line. These federal and state regulations directly impact your fiduciary responsibilities and pharmacy benefits management strategy.
Shifting from Rebates to Lowest Net Cost
The industry has often focused on maximizing rebates as a measure of a successful pharmacy benefits plan. However, a high rebate on a still exorbitantly priced drug is not an effective savings driver.
With 100% of rebates soon passing through to plan sponsors, the focus must shift toward achieving the lowest net cost. The net cost is the final amount your plan pays after all discounts, fees, and rebates are applied. This ERISA mandate incentivizes prioritizing clinically effective, lower-cost therapies—like generics and biosimilars—over high-cost, high-rebate brand-name drugs.
By focusing on the lowest net cost, you ensure that your hospital pays the fairest price for medications. This drives sustainable, long-term savings without compromising member care.
Enhancing Fiduciary Responsibility
Under ERISA, plan sponsors have a strict fiduciary duty to act in the best interests of plan members. When PBM practices lack transparency, fulfilling this duty becomes especially challenging.
The new disclosure requirements ensure you’ll have the data you need to execute your fiduciary duties confidently. You will have the necessary information to benchmark your plan’s performance, identify wasteful spending, and ensure that your PBM’s incentives align with your hospital’s goals. This protects your organization from compliance risks and ensures that your employees’ healthcare dollars are managed effectively.
How to Prepare Your Pharmacy Benefits Plan
Although the federal mandate takes effect on August 3, 2028 (or January 1, 2029, for calendar-year plans), waiting until the last minute is a risky strategy. Decisions you make today will directly impact your readiness for these new regulations.
Evaluate Your Current PBM Contract
Start by thoroughly reviewing your existing PBM contract. Identify how rebates are currently handled and what level of reporting you receive. If your contract relies heavily on a traditional, spread-pricing model or allows the PBM to retain an undisclosed percentage of rebates, you will need to negotiate new terms well before the 2028 deadline.
Look closely at the language regarding administrative fees and clinical program costs. As PBMs lose rebate retention revenue, they will likely attempt to introduce new fees elsewhere in the contract. Understanding your current baseline is the first step in protecting your plan from unexpected cost increases during this transition.
Partner with a Pharmacy Benefits Optimizer (PBO)
Navigating these regulatory changes requires specialized expertise. Partnering with a pharmacy benefits optimizer (PBO) like RxBenefits provides the independent oversight and strategic guidance necessary to thrive under the new rules.
A PBO acts as an independent advocate, separate from the PBM’s traditional revenue streams. They evaluate PBMs, identify gaps in performance, and negotiate contracts that align with client goals for lowest net cost and sustainable success.
Further, a PBO can implement independent clinical management programs, ensuring that members are directed toward the most clinically appropriate and cost-effective therapies from the start.
Take the Next Step Toward Sustainable Pharmacy Benefits
The 2028 ERISA mandate and new state transparency laws represent an opportunity for plan sponsors to contain rising pharmacy costs. However, capitalizing on this opportunity requires proactive planning and a willingness to challenge the status quo.
Hospital and health system HR leaders must lead the charge in demanding better from their pharmacy benefits partners. Start evaluating your contracts today: request detailed data, question misaligned incentives, and prepare your organization to embrace a new era of clarity and control. By shifting your focus to the lowest net cost and partnering with a PBO, you can build a benefits plan that is financially sustainable and supportive of your hardworking medical staff.
