The Consolidated Appropriations Act, 2026 (CAA) (H.R. 7148), passed into law and signed by the president on February 3, 2026, added sweeping reporting mandates to ERISA related to the provision of pharmacy benefit management services for ERISA-covered group health plans. These amendments are set forth in section 6701 of the CAA and in new ERISA section 726, with parallel provisions added to the Public Health Services (PHS) Act and Internal Revenue Code (IRC). The mandates regulate contracting by group health plans, health insurance issuers offering group health insurance coverage, entities providing pharmacy benefit management services on behalf of a plan or issuer, and "applicable entities." Key provisions of this significant addition to ERISA are summarized below.

Section 6702 of the CAA amended ERISA section 408(b)(2) to impose additional requirements for ERISA health plan contracts and arrangements for pharmacy benefit management services to be deemed "reasonable" for purposes of qualifying for a prohibited transaction exemption, including that 100 percent of rebates and other renumeration from "applicable entities" pass through to plans and issuers. These amendments also expand the types of service providers and services covered by the prohibited transaction exemption fee disclosure requirements for health plans added to ERISA in 2020. We will address these amendments in a separate alert.

Key Reporting Requirements

The new statutory language requires an "entity providing pharmacy benefit management services" on behalf of a group health plan or health insurance issuer offering group health insurance coverage in connection with a group health plan to make reports to the group health plan on an array of topics related to the plan's pharmacy benefits coverage. These reports must be made every six months or quarterly upon request. 

In addition, the new provisions state that group health plans, health insurance issuers offering group health insurance coverage, and entities providing pharmacy benefit management services on behalf of a plan or issuer cannot enter into a contract (or an extension or renewal of a contract) with an "applicable entity" unless the latter agrees to provide (and not limit or delay the disclosure of) information necessary for making the newly mandated reports to plans. "Applicable entities" include: group purchasing organizations (GPOs); drug manufacturers; rebate aggregators; subsidiaries, parents, affiliates, or subcontractors of those entities; and subsidiaries, parents, affiliates, or subcontractors of group health plans, health insurance issuers, or entities that provide pharmacy benefit management services on behalf of a plan or issuer. 

Information Reported

Reports to self-funded group health plans offered by large employers (at least 100 employees) or that qualify as large plans (at least 100 participants) must contain more detailed drug-related and other information than what must be reported to self-funded plans that do not qualify as large and to insured plans, although large insured plans can opt into receiving the more detailed reports. 

The information about each drug claim and drug dispensed that must be reported to large self-funded plans, and large insured plans that opt in, includes: 

• Negotiated drug costs and pharmacy reimbursement rates paid
• Drug dosage units and dispensing channels (e.g., retail, mail order, specialty pharmacy)
• Brand or generic classifications and associated costs and pricing 
• Statistics on total number of claims and participants by dispensing channel
• Net pricing (after rebates, discounts, etc.) and participant out-of-pocket spending 
• Total net spending per drug
• Rebates or other renumeration received or expected by the plan, issuer, or entity providing pharmacy benefit management services from applicable entities
• Participant discounts and co-pay assistance from drug manufacturers 

The report must also contain information for each therapeutic class of drug for which a claim was filed, including: 

• Gross (before rebates, discounts, etc.) and net spending 
• Rebates and other renumeration received by an entity providing pharmacy benefit management services from applicable entities
• Average net spending per 30- and 90-day supply for drugs in a class
• Number of participants who filled prescriptions 
• Formulary tiers and utilization mechanisms (e.g., prior authorization, step therapy protocols)
• Total participant out-of-pocket spending

The law imposes additional reporting requirements relating to formularies with respect to drugs that meet certain gross spending thresholds and with respect to prescriptions dispensed at affiliated pharmacies.

In addition, entities providing pharmacy benefit management services must provide all group health plans (self-funded and insured, regardless of size) a summary document (to be specified by the Secretary of Labor through guidance) containing some of the information required in the detailed report to large self-funded plans, as well as: 

• Information regarding total gross and net spending for all drugs
• Total rebates or other renumeration from applicable entities
• Total manufacturer co-pay assistance and discounts paid or applied 
• Amounts paid for referral of plan or issuer business to entities providing pharmacy benefit management services
• An explanation of any benefit design features that encourage the use of affiliated pharmacies 

Disclosures to Participants

An additional summary document must be given to plans and issuers to provide to participants upon request, and written notice must be given annually to participants regarding the reporting requirements under the new law. Participants can also request claims-level information related to the difference between the cost a plan or issuer pays for a drug and amount paid to a pharmacy on a claim. 

Future Rulemaking

The Secretary of Labor must undertake rulemaking within 18 months to specify a standard format for the required reporting and to issue other regulations necessary to implement the new provisions. It is noteworthy that the term "renumeration" used throughout the new statutory provisions will be defined through rulemaking and reevaluated every five years, and the term "entity providing pharmacy benefit management services" is not defined.

Penalties

The Secretary is authorized to assess penalties of $10,000 a day for a violation of the reporting provisions and up to $100,000 for the provision of false information under the new provisions. 

Miller & Chevalier's ERISA team will address future rulemaking, guidance, and implementation of these statutory provisions in alerts and in our weekly employee benefits newsletter, The ERISA Edit. If you have questions or would like more information about these significant new ERISA requirements impacting plan sponsors, fiduciaries, group health plans, and plan service providers, contact Miller & Chevalier Member and ERISA Practice Lead Joanne Roskey.

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