Enforcing PBM Reform in Your Own Benefits Plan

The visibility of pharmacy benefit managers (PBMs) and the need for control and oversight of their policies against patients access to needed care is growing exponentially at both state and national levels. After years of ongoing discussion at the federal level, we are finally seeing movement regarding PBM reform. In the March and July 2026 issues of Oncology Practice Management (OPM), we discussed some of the recent congressional, legislative, and investigative activities that surrounded movement by the Department of Labor (DOL) to publish proposed PBM regulation language for comment.^1,2 On April 15, 2026, the commenting period on that proposed DOL PBM proposed regulation closed with 564 comments. The intention was that the new DOL PBM reform rules would be published and effective July 1, 2026, but there has been no word yet as of mid August. We can’t wait. We need to take charge of our own PBM contract negotiations now, and new tools have just arrived that can help that happen.

PBM Reform Can Start Now With Cancer-Related Employers

Each of us has the ability to implement our own version of PBM reform. Our own employee health benefits usually include some type of contracting with a PBM—directly or indirectly. As contract negotiations begin for the next year, there are now tools that can help employers, including medical practices, health systems, patient advocacy organizations, and especially those in the pharmaceutical industry. It makes no sense to advocate for PBM reform without executing it in our own organizations where we do have direct control over PBM contracting.

Renegotiate PBM Contract Terms NOW

Employers renew or reconsider PBM contracts between now and October. We need to walk into the contracting offices of our own organizations and sit at the table to review very basic PBM contract elements that we should be able to control for new January 1, 2027, effective dates. No PBM vendor will offer these changes willingly. Many will stay silent on terms. Silence will protect PBM profits and hide auditable issues. We need to negotiate and change our own organization’s health benefit contracts piece by piece in a rising tide for PBM reform at the ground level.

It makes no sense to advocate for PBM reform without executing it in our own organizations where we do have direct control over PBM contracting.

“Stop Signing Stupid Contracts”—the New Employer Mantra

If employers just stand up and refuse to “sign stupid contracts,” as leading benefits advisors such as Cristy Gupton of Custom Benefits Solutions and Steve Ditto of Ditto and Associates advise,³ we can implement change before the state and federal authorities get around to defining it.

PBM Contracts Fall Far Short of Fiduciary Regulations

The Consolidated Appropriations Act of 2026 (CAA), and those that preceded it, are the regulations that assign employer plan sponsors with significant fiduciary responsibility to their employees for the transparency, costs, and reasonableness of the health benefit provided to the employees. Failure to comply with the CAA fiduciary responsibilities could ultimately result in employer loss of their self-employed insurance status.

The Nautilus Health Institute (NHI) is a 501c3 nonprofit formed to advance transparency and fiduciary accountability for employer plan sponsors. I have been watching this group (which has no PBM affiliation) and (full disclosure) no affiliation to me. I have learned so much about the tricks and wording games that PBMs play in their contracts but have been waiting for some basic guidelines that the OPM community can use, knowing they are not the primary PBM contract negotiators. In July, the NHI published critical resources that are available at no cost to employers and set standards of PBM contract language that can be used by employers to take back control of their own healthcare benefit plans. Shawn Gremminger, the president of the National Alliance of Healthcare Purchaser Coalitions, wrote in his foreword to the July 2026 CAA Readiness Report this candid explanation of the importance of this resource for self-insured employers:

Failure to comply with the CAA fiduciary responsibilities could ultimately result in employer loss of their self-employed insurance status.

This standard converts fiduciary duty from a legal abstraction into a standard an employer can apply directly. ERISA requires plan sponsors to act solely in the interest of participants and to see that the plan’s costs are reasonable. That obligation extends fully to the pharmacy benefit, and it is not satisfied by accepting a vendor’s representations at face value. It is satisfied by confirming, in the contract itself, that plan assets remain plan assets and that the sponsor retains the ability to verify this on an ongoing basis. The stakes involved are real and meaningful. Every dollar a PBM is permitted to retain through a spread, an undisclosed fee, or a rebate excluded by contract definition is a dollar unavailable for the medication a participant requires at a price the plan can sustain. A deficient contract does more than increase cost. It limits the plan’s capacity to direct employees and their families toward the appropriate medication at the lowest reasonable cost, which remains the fundamental purpose of offering a pharmacy benefit. We encourage purchasers to take two actions in response to this resource. First, determine where their own contract currently stands. Second, treat terms such as “transparent,” “pass-through,” and “fiduciary aligned” as commitments to be verified rather than claims to be assumed.⁴

PBM Contracts Fail Readiness for Required Employer Fiduciary Responsibility

In July 2026, the CAA 2026 Readiness Report released from the NHI scored the standard contracts of 27 PBMs and 37 benefit plan sponsor contracts against 10 key fiduciary language provisions. Scores range from 0 to 100 and fall into 5 tiers: Excellent, 90-100; Good, 75-89; Fair, 60-74; Concern, 45-59; and Red Flag, below 45. Nine PBMs submitted their standard contract for independent scoring by the Nautilus Contract X-Ray review, received a provision-level analysis showing exactly where the language fell short, rewrote it, and were scored again. Six PBMs went through 4 or more rounds of this provisional review and rescoring. Fewer than 1 in 7 PBM contracts meet fiduciary standards.

The statistics from the CAA 2026 Readiness Report¹ were staggering, but not surprising. Most PBM contracts fell short of making a Fair score, even at their best. Just 9 cleared an Excellent score. The 5 key findings that stood out were:

1. Not 1 of the 37 plan sponsor contracts shared even made it past Fair. Seventy percent scored at the Red Flag tier. At the Red Flag tier, an employer can’t audit what the PBM charged, can’t shift a drug category to a cheaper vendor, and can’t exit without paying a penalty. The employer plan sponsor is extremely restricted, and the PBM has locked the door on any options.
2. A contract that protects the employer plan sponsor already exists. The 9 PBM standard contracts that achieved Excellent on fiduciary alignment after remediation now form the first named CAA 2026 Ready Cohort for ranked PBMs.
3. How a PBM makes money predicts its score. High-scoring transparent pass-through contracts average 92. Unfavorable spread-priced contracts average a score of 32. That gap comes from the contract’s own pricing mechanic language. The contract terms are undeniable and very telling. An employer plan sponsor could confirm that gap from claims data.
4. The biggest risks for employer plan sponsors come from conflicts of interest. Vertical integration is rampant with PBMs. A PBM that owns the preferred pharmacy, steers prescriptions to channels it owns, routes dollars through nonauditable offshore entities like group purchasing organizations, and buys from affiliate suppliers, have many incentives and opportunities to extract untraceable money from employer health plans. Conflict of interest language in the PBM contracts created a red flag in roughly 7 of the 10 lowest-scoring PBM contracts.
5. No PBM can call the standard comparative language impractical or unachievable. One PBM that was evaluated has language scoring 95 or higher on all 10 reviewed provisions. All 9 PBMs now ranked in the Excellent tier started below the standards and improved their scores by on average 39 points by contract language improvement. One improved their overall score from 21 to the Excellent range. The difference was the willingness of those PBMs to support the fiduciary obligations of the employer plan sponsors and codify that support in explicit contract language commitments.

What Can Self-Insured Employers Like Medical Practices and Industry Do?

To take action in our own organizations, we must start thinking like the employer plan sponsors and the PBM. We have to understand the contracting language so that we can expose the gaps and assumptions that lead to PBM manipulation of our patients. To do that, we need to look at how contracting works in those circles.

NHI (www.nautilushealth.org/pbm) has a free PBM contract review (www.contractxray.com) available on its website and will send a private report back to your organization. This report will provide a fast read on whether the PBM contract being proposed to you warrants a deeper look. It will review 10 key known contract issues and rate them as Good, of Concern, or needing Red Flag warnings. This review runs the contract language against the CAA 2026.

There are more in-depth contract reviews available at this site for a fee, but it would be an incredible first start to have every employer do the initial review before proceeding with PBM contracting without being aware of priority concerns that should be raised. Consider the first review as more of a triage—comparing the language in the proposed PBM contract to fiduciary-aligned standards covering fiduciary acknowledgment, pricing transparency, audit rights, and data ownership.

It would be an incredible first start to have every employer do the initial review before proceeding with PBM contracting without being aware of priority concerns that should be raised.

What Nautilus’ Contract X-Ray on PBM Contracts Actually Measures

The PBM contracts are reviewed not for the questions that PBMs can dance around under regulations and legislation with convoluted language but to explore the actual wording in the contract for 10 key provisions under 3 domains.¹ The contract comparisons are made solely against the actual language in the contract and creates value by building a body of knowledge across multiple actual PBM contracts, whether submitted by the PBM itself or by the PBMs target client.

Domain 1: Fiduciary Conduct. Does the PBM act in the plan’s interest?

1. Fiduciary Loyalty. Whether the contract commits the PBM to act in the plan’s interest, not its own.
2. Conflicts of Interest and Neutrality. Whether the PBM can steer to its own pharmacies or affiliates.
3. Lowest Net Cost and Clinical Integrity. Whether the formulary is built for the lowest total cost of the right drug, not the highest rebate.

Domain 2: Financial Integrity. Does the plan’s money stay the plans?

4. Pass-Through Pricing. Whether the plan pays the pharmacy’s actual cost, with no retained spread or postadjudication clawback.
5. Rebate and Manufacturer Revenue. Whether every manufacturer dollar reaches the plan.
6. Administrative Fee Transparency. Whether every fee the PBM earns is named and disclosed.

Domain 3: Oversight and Control. Can the plan sponsor see and enforce the deal?

7. Data Ownership. Whether the plan owns its claims and pricing data and can leave with it.
8. Audit Rights. Whether the plan can independently verify the numbers.
9. Carve-Out and Vendor Rights. Whether the plan can adopt a better point solution without penalty.
10. Termination and Clean Exit. Whether the plan can leave, and at what cost.

Nautilus has published 28 open-source examples of CAA 2026 Ready model contract language—available for employer plan sponsors and even PBMs to use at no cost.

CAA 2026 Ready Model Contract Clauses

Nautilus has published 28 open-source examples of CAA 2026 Ready model contract language⁵—available for employer plan sponsors and even PBMs to use at no cost. These should be provided to those in your own organization as examples for improved PBM contract language that will protect your organization and your employees from the most common PBM contract language abuses. The link to those model contract clauses is found in the CAA 2026 Readiness Report and shared here: https://raw.githubusercontent.com/nautilus-health/resources/main/pbm-model-contract-clauses.pdf

Now self-insured employers have ready access to the actual contractual language at no cost to accomplish their own PBM reform internally before their next contract is renewed. This type of grassroots reform is our best option for immediate action while waiting for state and national PBM reform.

Next Steps for Our Own Organizations

• Take control of PBM reform in your own organization. Before your next PBM contract renewal, run the PBM contract that directly affects you as an employer with fiduciary responsibilities and the health benefits of your employees through a detailed fiduciary contract review. Nautilus’ PBM Contract X-Ray is one option for such a review
• Request your broker or health plan advisor and PBM to adopt the CAA 2026 Ready Model Contract Clauses referenced above or require a CAA 2026 Ready contract as a condition to bid on your next contract
• Spread the word to other local employers about the risks of PBM contracting for fiduciary responsible employer health plans and options for protecting the organizations and their employee’s health benefits access
• Comment on and address federal and state legislation and policy that may have a positive or adverse impact on the impact of patient care, coverage, and policies

Share your thoughts and experiences with me at This email address is being protected from spambots. You need JavaScript enabled to view it.. I would be interested in hearing what you have found, done, or what more you want to know. I can provide additional resources on this topic if you wish.

References

1. Holcombe D. Major PBM reform in play? Shell games require action. Oncology Practice Management. March 2026. www.oncpracticemanagement.com/issues/2026/march-2026-vol-16-no-2/major-pbm-reform-in-play-shell-games-require-action
2. Holcombe D. Putting patients first, not profits, should drive Department of Labor PBM reform. Oncology Practice Management. July 2026. www.oncpracticemanagement.com/issues/2026/july-2026-vol-16-no-4/putting-patients-first-not-profits-should-drive-department-of-labor-pbm-reform
3. Ditto S. Stop Signing Stupid Contracts. Ditto and Associates Employer Benefits Newsletter, Issue 88. August 10, 2026. https://dittoandassociates.com/stop-signing-stupid-contracts-welcome-to-issue-88/
4. Nautilus Health Institute. CAA 2026 Readiness Report. July 29, 2026. https://resources.contractxray.com/readiness-report.pdf
5. Nautilus Health Institute. PBM Model Contract Clauses. July 28, 2026. https://raw.githubusercontent.com/nautilus-health/resources/main/pbm-model-contract-clauses.pdf