Over the next several weeks, I will be providing a plain-language walkthrough of sections of the “Bill” relating to healthcare. In Part I, below, I analyze Section 44305 (“PBMs: flat fees and full transparency”)

Imagine you are organizing a neighborhood block party. You put one friend in charge of buying all the food and drinks at wholesale prices. That friend, however, does not tell anyone what the items cost; instead, they keep whatever discounts they can wrangle from the grocery store and pass along only a final bill that folds their mark-ups into the price of the hot dogs and sodas. Pharmacy benefit managers (PBMs) play a similar middle-person role in America’s prescription-drug market, negotiating with drug manufacturers and pharmacies on behalf of health plans—including Medicare drug plans—while often pocketing hidden payments that patients and even insurers are unaware of. Section 44305 of the “Bill Beautiful” tries to end that practice, at least inside Medicare, by establishing two big rules:

1. Beginning in 2028, PBMs may earn only a flat, “bona fide” service fee for the work they do; they cannot keep rebates, price concessions, or other side payments.
2. PBMs must submit a detailed annual ledger to Medicare, revealing every drug dispensed and every dollar exchanged.

A PBM is essentially a purchasing agent hired by a health insurance plan to manage its pharmacy benefits. For Medicare, these agents work for two types of plans: traditional Part D prescription drug plans (PDPs) and Medicare Advantage plans that include drug coverage. PBMs negotiate prices with drug companies, determine which drugs are included on the plan’s formulary (its list of covered drugs), and establish payment terms for local pharmacies. In theory, PBMs lower costs by leveraging the collective buying power of millions of beneficiaries. In practice, critics say they can inflate costs through opaque rebate deals, “spread-pricing” (charging plans more than they reimburse pharmacies), and steering patients toward affiliated pharmacies.

Section 44305 does more than cap PBM earnings; it shines a light on every transaction. For the previous calendar year, the PBM must list each drug dispensed to Medicare beneficiaries. For each drug, the PBM must report (a) what pharmacies were paid, (b) any rebates or price concessions obtained from manufacturers, (c) the final net cost after all discounts, and (d) the PBM’s service fee.

What does this mean for patients and taxpayers? Because rebates flow past the PBM and back to Medicare, those dollars can be used to cut plan bids and beneficiary premiums or to slow the rate at which the catastrophic-coverage threshold rises. Independent pharmacies have long argued that PBM-owned chains get preferential treatment. Mandatory disclosure of affiliated pharmacies lets CMS police anticompetitive steering. A flat fee severes the link between a drug’s list price and PBM income, reducing the temptation to favor high-price, high-rebate drugs over lower-cost options. When seniors see that every discount negotiated on their behalf truly benefits Medicare—and when Congress can verify the numbers with real data—confidence in the drug benefit should improve.