Congress Passes PBM Price Disclosure Measures

Employer health plan fiduciaries face mounting pressure to scrutinize pharmacy benefit manager arrangements as Congress passed a set of PBM accountability measures in the latest package of spending bills following a Department of Labor proposed regulation.

The recently passed appropriations package, which ended a brief and partial government shutdown, eliminates spread pricing and forces PBMs to disclose how they price prescription drug benefits. The new law is scheduled to take effect in 2028.

The law creates a mandatory reporting regime requiring PBMs to deliver reports to group health plans at minimum semi-annually, with quarterly reporting available on request. Reports must be provided in both plain language and machine-readable formats. The reports are required to disclose prices, rebates, fees, alternative discounts, spread pricing arrangements, and information on why higher-cost drugs receive preferential formulary placement over cheaper alternatives.

The law includes penalties of $10,000 per day for failing to report, and up to $100,000 per false item submitted.

Congress also mandates complete rebate pass-through from drug manufacturers to plan sponsors. PBMs can still charge administrative fees but can no longer engage in spread pricing—the practice of billing plans more than they reimburse pharmacies and pocketing the difference. The change targets a key revenue stream PBMs have used to extract profits from payers while leveraging their market dominance.

These provisions take effect 30 months after enactment, landing in August 2028. For most plans, the changes will kick in during 2029.

The recently proposed rule from the Department of Labor’s Employee Benefits Security Administration would similarly require PBMs and certain affiliated service providers to disclose detailed information about their compensation to fiduciaries of self-insured employer health plans. ERISA attorneys say the proposal, combined with recent legislative action, reflects a clear policy direction toward greater transparency and tighter oversight of PBMs’ role in drug pricing.

“The real takeaway is that this isn’t happening in isolation,” says Sage Fattahian, a partner at Morgan Lewis who leads the firm’s health and welfare practice. “There’s been a history of trying to regulate PBMs at the federal level, and there’s bipartisan support for it. Plan sponsors are going to have to keep track of both regulatory and legislative developments and figure out what they need to do moving forward.”

Contacting a PBM

As the regulations increase, one immediate challenge for employers, attorneys say, is identifying which entity is responsible for making disclosures.

“Some large self-insured plans contract directly with the PBM,” says Lisa Carrasco, a partner in the executive compensation and employee benefits practice of Smith, Gambrell & Russell, LLP. “But lots of employers don’t have that direct contract. They might have a contract through an intermediary, like a third-party administrator, a consulting firm or even their medical [insurance] provider.”

Under EBSA’s proposal, Carrasco says, that distinction does not limit disclosure obligations. “Any entity that has a contract with the self-insured group health plan is considered a covered service provider,” she says. “In either case, the plan still has the right to all of the disclosures.”

Plan sponsors should not assume information will arrive automatically, she adds. “They should be prepared to formally request the required PBM disclosures in writing. Don’t just expect it to come to them.”

From Formulas to Dollars

Carrasco says one of the most consequential aspects of the EBSA proposal is its insistence on clearer numbers.

“One of the parts of the rule says the amounts are supposed to be [provided to plan sponsors] in actual dollar figures, even if estimated, rather than the formulas that they currently give you that are so convoluted you can’t really understand them,” she says.

But receiving disclosures is only the first step. “It’s not enough to just get it and sit on it,” Carrasco says. “As fiduciaries, they need a process to review that information — to see if it’s complete, to see if it’s reasonable, and to understand what type of compensation they’ve actually been paying.”

Broader Shift

Fattahian says the proposal reflects a regulatory posture that goes beyond transparency as a general principle.

“This really highlights that transparency is being turned into a concrete obligation,” she says. “The administration is essentially telling PBMs what they expect out of them in order for a contract to be considered reasonable.”

Lindsay Goodman, a Morgan Lewis partner in the firm’s employee benefits practice, says the proposal fits with longer-running efforts to push PBMs themselves to accept fiduciary accountability.

“Historically, we’ve had many disagreements with PBM vendors where they take the position that they’re not fiduciaries, even when they’re adjudicating claims,” Goodman says. “One of the benefits of this broader push is that PBMs will now have to take accountability when they’re acting with discretion.”

That shift does not eliminate a plan sponsor’s fiduciary duties, she adds. “It doesn’t relinquish the fiduciary responsibility of the plan sponsor, but it does require PBMs to accept that when they’re acting in a fiduciary capacity, they have to act like fiduciaries.”