DOL Proposes Rule for PBMs to Disclose Fees to Fiduciaries

The Department of Labor proposed a rule requiring pharmacy benefit managers to disclose to health plan fiduciaries the fees and compensation the PBMs receive.

PBMs are third-party administrators that manage prescription drug benefits for health insurers, employers and government programs. Acting as intermediaries between drug manufacturers and insurers, PBMs negotiate drug prices, process claims and manage formularies—lists of covered medications. While intended to control prescription drug spending, PBMs have faced regulatory scrutiny for allegedly squeezing pharmacies and inflating drug costs. Their decisions directly influence which medications are available to patients covered by health plans.

The proposal, released Friday, would require PBMs—and affiliated brokers and consultants—to disclose detailed information about their direct and indirect compensation to fiduciaries overseeing self-insured employer health plans. The goal, according to the DOL, is to give plan sponsors the information necessary to judge whether PBM contracts are reasonable, whether conflicts of interest exist, and whether the deals being struck actually serve workers and plan participants—rather than the intermediaries themselves.

The rule, issued by the Employee Benefits Security Administration, would apply to self-insured group health plans governed by the Employee Retirement Income Security Act. These plans rely heavily on PBMs to design drug formularies, negotiate rebates with manufacturers, set pharmacy reimbursement rates and process claims. In return, PBMs collect revenue from a web of sources—administrative fees, rebates, spread pricing and payments from manufacturers and pharmacies—that critics say is nearly impossible for employers to fully track.

Under the proposal, PBMs would have to spell out those revenue streams in plain terms, including compensation received by affiliates, agents and subcontractors. Disclosures would be required before a contract is signed or renewed, and they would need to be updated on a regular basis. The rule would also strengthen audit rights, giving plan fiduciaries the ability to verify whether PBMs’ disclosures match the reality of their revenue drivers.

The DOL framed the proposal as a response to long-standing concerns that hidden compensation can distort decisionmaking, encouraging PBMs to favor higher-priced drugs or affiliated pharmacies even when cheaper alternatives are available. By shining light on those incentives, officials say, employers will be better positioned to negotiate tougher contracts and rein in prescription drug spending.

The proposal follows an executive order directing federal agencies to pursue greater transparency in the prescription drug supply chain and arrives amid growing bipartisan scrutiny of PBM practices.

Public comments on the proposed rule are due by March 31.