H.R. 10369: Net Effective Cost Transparency and Prescription Drug Affordability Act of 2026

This bill would change how pharmacy benefit managers, or PBMs, operate in Medicare Part D prescription drug plans and in certain commercial health plans. Its main goal is to make PBM pricing and plan decisions more transparent and to tie those decisions more closely to the actual cost of drugs.

Medicare Part D changes

Starting with plan years beginning on or after January 1, 2028, Medicare Part D plan sponsors would have to run a more standardized bidding process before hiring a PBM. In practical terms, that means they would need to:

• Ask multiple PBMs for bids using a uniform format set by the Secretary of Health and Human Services.
• Accept and review all bids that meet the required format, without adding extra participation requirements.
• Provide bidders with certain plan data, such as projected enrollment, historical drug use, and plan design details, so they can submit informed bids.
• Explain and document why they chose a bid if they do not pick the one with the lowest projected “net effective cost,” unless the choice is needed for a significant program goal such as access, continuity of care, network adequacy, fraud prevention, or clinical outcomes.

The bill defines net effective cost as the total cost to the plan sponsor for all covered drugs included in the plan’s formulary for the year. PBM bids would have to include detailed information such as expected fees, rebates, discounts, drug utilization, wholesale acquisition cost, net ingredient cost, average pharmacy payment, and average enrollee cost-sharing.

The Secretary would also have to publish aggregated, deidentified data from these bids each year.

If a PBM bid is not the lowest-cost option, the bill sets a high bar for justifying the decision. The Secretary could only approve a non-lowest bid for a significant programmatic reason if that reason clearly benefits enrollees or advances program goals, cannot reasonably be achieved by choosing the lowest-cost bid, and is worth the added cost. The sponsor would also need documentation for oversight and audit purposes.

The bill also treats a plan sponsor as if it were contracting with a PBM even if the sponsor performs those services itself for another sponsor.

New reporting, audit, and enforcement rules

Medicare Part D sponsors would have to provide more information to the government about how actual costs compare with what was projected in the bid. They would also have to maintain a real-time tool showing the actual drug cost to the sponsor, the Secretary, and enrollees, net of price concessions like rebates and discounts. They would need to keep enough money in escrow to refund enrollees for any amounts incorrectly collected.

The Secretary would have to:

• Audit at least one-third of PDP sponsors each year.
• Compare actual costs to projected costs on a quarterly basis.
• Monitor mid-year formulary changes and cost-sharing changes.
• Investigate large differences between projected and actual net effective cost.
• Look for patterns that could amount to “bait-and-switch” behavior, such as formulary changes that raise enrollee costs or shift utilization toward certain drugs or pharmacies in ways not reflected in the original bid.

The bill authorizes civil penalties for false information, failure to provide required information, and certain large deviations between projected and actual net effective costs. In some cases, the Secretary could require refunds to enrollees if actual costs materially exceed projected costs and retained funds are tied to the mismatch.

PBM contracts would also need to include guarantees that actual net effective costs will not exceed projections by more than a percentage set by the Secretary, with periodic reconciliation. If that limit is exceeded, the PBM could owe a penalty and the sponsor could terminate the contract without penalty. PBMs would also have to share information the sponsor needs for compliance and report failures to meet contract obligations.

Medicare Advantage prescription drug plans

For Medicare Advantage plans that include drug coverage (MA-PD plans), the bill would add a new quality measure focused on prescription drug cost performance. The measure would track how closely actual net effective costs match projected costs, how well corrective actions work, and whether formulary changes increase beneficiary cost-sharing. Plans would receive a 1- to 5-star score based on those results.

That score would count in the overall star rating system used for quality bonus payments. The government would publicly report each plan’s performance, and plans with low scores would have to notify enrollees during open enrollment. A comparable system would also be created for standalone Part D plans.

Commercial health plan transparency

The bill would also amend ERISA rules for certain commercial health plans. Covered service providers would have to include, in a uniform format, a description of the projected net effective cost for each PBM bid they receive on behalf of a plan.

The bill also defines two terms for ERISA purposes:

• Net effective cost: the total annual cost to the plan if a PBM bid were accepted.
• Bona fide service fees: fair-market-value fees for real, itemized services that are not passed through to the plan, even if the PBM never takes possession of the drug.

These ERISA amendments would apply to plan years beginning after calendar year 2027.

Relevant Companies

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