CMS Issues Proposed Rule to Implement CAA Medicare Provisions

On October 16, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule (Proposed Rule) to implement Medicare reforms enacted in the Consolidated Appropriations Act of 2026 (CAA). If finalized, the rule will be effective for plan years starting January 1, 2028.

The Proposed Rule would:

1. define bona fide service fees (BFSFs) as allowable Medicare Prescription Drug Benefit (Part D) PBM compensation and establish reporting, transparency, audit, and enforcement requirements to implement Section 6224 of the CAA;
2. implement new Medicare Advantage (MA) provider directory verification and maintenance standards, annual accuracy analysis and reporting, and cost sharing protection for enrollees who rely on inaccurate directory information to implement Section 6220 of the CAA; and
3. eliminate the generic drug copayment for low-income full-benefit dual eligible Part D enrollees to implement Section 6219 of the CAA.

CAA Section 6224: Modernizing and Ensuring Pharmacy Benefit Manager Accountability Act

PBM Remuneration Limited to Bona Fide Service Fees

Under the CAA, PBMs and their affiliates are prohibited from receiving remuneration related to the utilization of covered Part D drugs unless such amounts are in the form of BFSFs. In the Proposed Rule, CMS seeks to define BFSFs as compensation for legitimate, itemized services that are “actually performed” and paid at a flat-dollar amount consistent with fair market value. The Proposed Rule defines “fair market value” using a cost-plus methodology, under which permissible BFSFs would be limited to the PBM's cost of providing an itemized service plus a reasonable markup. BFSFs cannot vary based on drug prices, rebates, formulary placement, or the volume or value of referrals or business generated. Additionally, the rule prohibits certain methodologies for calculating BFSFs.

Full Pass-Through Requirement

The CAA provides that manufacturer rebates, discounts, and other price concessions attributable to covered Part D drugs do not violate the BFSF requirement if the PBM and its affiliates fully pass through the value to the Part D plan sponsor and the PBM complies with all Part D regulatory requirements for direct and indirect remuneration. The Proposed Rule defines “fully passed through” as “the Part D plan sponsor receives 100 percent of the gross economic value of each manufacturer rebate, discount, or other price concession attributable to Part D drug utilization.” CMS also proposes that the standard is not met “if a PBM or PBM affiliate reduces, offsets, nets, holds back, retains, reclassifies, or otherwise diminishes the value passed through to the Part D plan sponsor, including through administrative fees, data fees, aggregation fees, reconciliation charges, or other deductions.”

Through the Proposed Rule, CMS proposes that the written agreement between each Part D plan sponsor and PBM include provisions that require disgorgement of funds from the PBM if the PBM is found to have violated the pass-through requirement. 

PBM Transparency in Part D Agreements 

The Proposed Rule includes provisions that would operationalize the CAA requirement that PBM agreements must “define, interpret, and apply terms in a fully transparent and consistent manner for purposes of calculating or otherwise evaluating PBM performance against pricing guarantees or similar cost performance measurements.” Both the CAA and the Proposed Rule require a PBM’s performance under an agreement with a Part D plan sponsor to be evaluated using consistent definitions for generic drug, brand name drug, specialty drug, rebate, and discount. The Proposed Rule would require the written agreement between a PBM and Part D plan sponsor to define “brand name drug” and “generic drug” in a manner consistent with their definitions in the Part D regulations. Both terms have relatively vague definitions in the Part D regulations. It would also require the PBM to provide lists of drugs included in each category upon request of the Part D plan sponsor, not less than annually. The Proposed Rule further requires the PBM to provide any drugs, claims, or price concessions excluded from any pricing guarantee or other cost performance measure upon request of the Part D plan sponsor, not less than annually.

PBM Annual Report

The CAA requires PBMs to submit annual reports to both CMS and Part D plan sponsors with information from the previous plan year. The Proposed Rule provides a process for submitting the reports and would require information on dispensed drugs covered by the plan, affiliate pharmacies, cost-sharing and formulary placement for reference listed drugs and reference products compared to their generic or biosimilar biological products, plan spending, PBM remuneration, benefit design parameters, brokers and consultants, and a list of affiliates. 

Following the annual report, the Proposed Rule proposes a detailed two-part process for CMS to collect the information necessary to review whether the remuneration a PBM receives under any given arrangement is consistent with fair market value. 

Additionally, the Proposed Rule would allow CMS to utilize the information from the annual report to enforce the CAA requirement for PBMs to disgorge to Part D plan sponsors any remuneration paid to such PBM or an affiliate in violation of the CAA’s remuneration requirements. 

CAA Section 6220: The REAL Health Providers Act

Directory Verification and Maintenance Requirements

The Proposed Rule would require MA plans to maintain accurate online provider directories with certain information. The directory would include common ownership and control information to indicate whether a network provider, provider group, facility, or supplier is owned or controlled, in whole or in part, directly or indirectly, by the MA organization, its parent organization, subsidiary, or affiliate, or by any entity under common control or ownership with the MA organization. The directory would also include more standard information MA members may need to access covered benefits from the provider (i.e., specialty, address, contact information, whether the provider is accepting new patients, etc.).

The Proposed Rule also adopts specific directory verification and maintenance standards. For example, MA organizations must use one of the listed verification methodologies to verify provider information at least once every 90 days, except for inpatient and surgery provider information which must be verified annually. If information needs to be changed, the directory must be updated within five business days. If the MA organization cannot verify the information, it must add a clear disclaimer to the directory indicating that the information may be out of date.

Annual Accuracy Analysis and Publication of Performance Scores

The Proposed Rule would require MA organizations to conduct an annual provider directory accuracy analysis in accordance with extensive sampling and data analysis requirements described in the Proposed Rule and report the results to CMS. Starting in plan year 2029, CMS would convert scores into letter grades, publish the scores, and MA plans would prominently display the scores on their provider directory.

MA Provider Contract Requirement

The Proposed Rule requires MA plans to include a term in their provider contracts obligating the provider to maintain current and accurate provider directory information.

Cost Sharing Protections for Enrollees Who Rely on Inaccurate Provider Directory Information

The Proposed Rule would create certain direct reimbursement and claims administration protections for beneficiaries who rely on inaccurate directory information and receive out-of-network services. The MA organization would provide the protections to an enrollee if the organization knows, or reasonably should know, that they apply to the enrollee.

CAA Section 6219: Part D Cost-Sharing Reduction for Generic Drugs

Starting in plan year 2028, the Proposed Rule would eliminate the $1 (adjusted annually for inflation) generic drug copayment and replace it with a $0 copayment, with no inflation adjustment, for full-benefit dual eligible Part D beneficiaries at or below 100% of the federal poverty level.

The Proposed Rule comment period ends on December 15, 2026. Mintz will continue to monitor developments related to the Proposed Rule and the broader implementation of the CAA.

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