How Will Fee-Disclosure Rules Impact PBMs?

Pharmacy benefit managers could be headed for a new era of federal oversight after Congress baked PBM transparency and a mandatory “rebate pass-through” requirement into the recent federal budget law, Groom Law Group attorneys said in a webinar on Wednesday.

The Department of Labor proposed a parallel rule that would force PBM service providers to disclose a wide range of compensation and pricing practices directly to ERISA plan fiduciaries, which could further alter federal oversight.

The combined push seeks to address how PBMs get paid and how those incentives may affect what plans and workers ultimately spend for drugs. The new regulations ushered in by the passage of the budget law requires semiannual PBM reporting and give participants access to plan-level and claim-specific information, backed by civil monetary penalties of up to $10,000 per day for violations. And unlike earlier transparency efforts, the new law also requires PBMs to remit 100% of rebates and other remuneration they receive to plans or issuers—a change the panel said could force employers to reopen PBM contracts and reassess how PBMs replace revenue lost from remitted rebates.

Transparency And a Structural Hit to PBM Revenue Models

Ryan Temme, a principal at Groom who counsels health insurers and plan sponsors, described the new law’s reporting provisions as more than a generic transparency mandate.

 “The disclosure rules adopted by Congress require semiannual, detailed reporting from PBMs to employers related to the specific drug spend of each individual plan,” and he stressed that the data “are all required to be disclosed to participants, as well.”

”The penalty structure is designed to force compliance at scale. Temme warned that when PBMs do not provide required reporting “across the book of business, those become very, very large numbers very quickly,” pointing to the statute’s civil monetary penalty of up to $10,000 per violation, per day.

But the new rules that passed in the budget law’s most disruptive piece may be the one that does not merely require disclosure. The law would amend ERISA’s service-provider exemption to require PBMs to remit “100 percent of rebates, fees, alternative discounts, and other remuneration” to plans or issuers, with remittances required quarterly. It also gives plan sponsors an audit right over rebates remitted. That requirement becomes effective for contracts entered into or renewed 30 months after enactment, in August 2028, according to Groom.

DOL’s Proposed Rule

Amber Rivers, a Groom principal and a former DOL official, said the DOL proposal on PBMs grew out of an April 2025 presidential executive order directing the agency to increase PBM transparency. She said the proposal takes a functional approach that mandates any provider that expects at least a threshold amount of compensation connected to PBM services (including through affiliates or subcontractors), it can be pulled into the rule’s disclosure framework.

The mechanics are designed to give fiduciaries both a forecast and a running ledger. Rivers explained that the proposal would require an initial disclosure “reasonably in advance” of contracting, plus semiannual updates that report actual compensation and flag material overages. The proposal would also give self-insured plans an annual audit right and require providers to include information held by affiliates, agents, or subcontractors. If finalized, the proposal would apply to plan years beginning on or after July 1, 2026.

Rivers suggested the overlap between statute and proposed regulation leaves DOL with a strategic choice rather than a dead end. “They are largely overlapping. In a perfect world, it would be great for the Departments to pause and implement everything in a coordinated manner.  However, given that the proposal is out I also wouldn’t be shocked if some version of [the DOL’s rule] moves forward,” potentially with a longer runway to line up with the statute’s timing.

A Litigation Warning

Michael Kreps, co-chair of Groom’s fiduciary practice, urged employers not to treat the PBM rules as a paperwork exercise. He argued that the government has long used ERISA’s prohibited transaction framework to drive transparency where Congress did not originally write a standalone disclosure regime.

And he cautioned that disclosures can change litigation dynamics. While he said it is hard to prove direct causation, he noted that retirement-plan fee disclosure “certainly accelerated” ERISA class action activity, because it “raises the profile of the issue and then provides a lot more data” for plaintiffs to spot targets.

Temme echoed Kreps comments in regard to the risk for health plans, noting that new unit-level drug and compensation data could make it easier for challengers to “benchmark” PBM arrangements—even if employers still argue fiduciary prudence should be judged on the arrangement “as a whole,” not by cherry-picked drug comparisons.