Paying for prescription drugs remains a financial challenge for many Americans, with an average price increase of over 3% predicted for the upcoming year. While some point fingers at drug manufacturers or health insurance companies, the U.S. Department of Labor (DOL) has a different target in sight: the middleman.
Improving Transparency into Pharmacy Benefit Manager Fee Disclosure (ITPBMFD), the final rule issued by the DOL’s Employee Benefits Security Administration (EBSA), is scheduled for publication in the Federal Register on November 2, 2026. Effective July 1, 2027, the rule requires pharmacy benefit managers (PBMs) that contract with large self-insured group health plans subject to ERISA to disclose the direct and indirect compensation they receive for their services. It’s intended to work in concert with other PBM reforms contained in the Consolidated Appropriations Act of 2026 (CAA 2026).
The DOL expects that PBM transparency through semiannual disclosures will help drive down prescription drug costs for members of large self-insured group health plans.
With providers of pharmacy benefit management services facing stiff sanctions for failing to disclose and violating prohibited transaction rules, the ITPBMFD (clearly, no consideration was given to coming up with an anagram that’s less of a mouthful) may help make affording necessary medicine less of an overwhelming burden.
Pay No Attention to That PBM Behind the Curtain!
If you’ve had a prescription filled through your healthcare provider at any point during the past 60 years or so, you’ve likely had the cost affected by a PBM. As part of the prescription drug supply chain, PBMs interact with insurance companies, pharmacies, and drug manufacturers.
PBMs wear a lot of hats to fulfill their role. Under PBM contracts, their responsibilities include:
- Assembling retail pharmacy networks
- Conducting utilization management (e.g., prior authorization, step therapy) with plan fiduciaries
- Designing drug benefits
- Managing drug formularies
- Negotiating rebates and discounts with drug manufacturers
- Processing and adjudicating pharmacy claims
Given that PBMs interact with all prongs of the prescription drug fork, concerns about potential conflicts of interest have long existed. Insurance companies contract with PBMs to administer benefits. PBMs also receive drug manufacturer payments (rebates) to keep their products on providers’ formulary (a tiered list of generic and brand-name prescription medications covered by a health insurance plan). They also extract copay clawbacks and/or fees from pharmacies. These expenses often show up as higher costs for consumers, either through rising drug prices or higher insurance premiums.
The lack of PBM transparency has also been cited as a driving factor behind high pharmaceutical prices. Some of the largest PBMs are owned by healthcare conglomerates. An American Medical Association study showed that in 2024, the four largest PBMs collectively held 75% of the national PBM market, which can stifle competition that could lead to lower prices. While the CAA 2026 addressed PBM issues by limiting Medicare Part D PBM compensation to bona fide service fees and requiring full rebate pass-throughs for employer group health plans, the DOL says its new disclosure rule complements those reforms.
I Can See Everything From Here
Under the final rule, PBMs and their affiliated brokers and consultants (covered service providers) are required to disclose their compensation to fiduciaries and health plan sponsors. This includes price protection arrangements, clawback payments, spread pricing (the difference between what the plan pays and what the pharmacy gets), and formulary placement incentives and payments from drug manufacturers.
Before entering, renewing, or extending a contract, PBMs must provide an initial disclosure to the appropriate fiduciaries. Once that requirement is met, the PBM must submit semiannual disclosures of its actual compensation. This can be increased to quarterly. The rule also grants audit rights for the reported compensation disclosed at least once a year.
If a PBM fails to provide the required disclosures, the people responsible for overseeing the health plan may be able to avoid liability by taking steps to address the problem, including notifying the DOL if it remains unresolved. Failure to follow the disclosure rules can also make the arrangement unlawful under ERISA, potentially exposing those responsible to enforcement action and financial penalties.
Okay, but Will Any of This Really Save You Money on Your Prescriptions?
The PBM disclosure rules imposed by the ITPBMFD appear to operate on the premise that exposing the hidden fees and rebate arrangements will spur more competition and negotiation. Given how fiercely the PBMs have fought against the final rule's provisions over the past year or so, that may well be true. The increased oversight will allow employers and health insurance fiduciaries to better police what PBMs are charging, which in turn can drive prices down.
With regulators estimating savings of approximately $22 billion over the next decade from this new final rule, somebody will benefit from the anticipated reduction in PBM fees. Whether that translates into consumers paying less for critical medicine or insurance companies and drug manufacturers saving the money remains to be seen.
