Improving Transparency Into Pharmacy Benefit Manager Fee Disclosure
Key claim: Pharmacy benefit managers and affiliated brokers and consultants must now disclose their direct and indirect compensation to fiduciaries of large self-insured employer health plans so those plans can judge whether PBM fees are reasonable.
Abstract
(Rule · Labor Department, Employee Benefits Security Administration) The Department is issuing a final regulation that will require providers of pharmacy benefit management services and affiliated providers of brokerage and consulting services to disclose information about their compensation to fiduciaries of large, self-insured group health plans subject to the Employee Retirement Income Security Act (ERISA). Pharmacy spending is a major driver of overall healthcare costs for employers and is growing faster than medical and surgical spending. These disclosure requirements apply for purposes of ERISA’s statutory prohibited transaction exemption for service arrangements under section 408(b)(2). These disclosures are needed so that fiduciaries can assess the reasonableness of contracts or arrangements with these service providers, including the reasonableness of the service providers’ compensation. As directed in section 12 of President Trump’s Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First, the Department is issuing this rule to improve employer health plan transparency into the direct and indirect compensation received by pharmacy benefit managers. This final rule will affect sponsors and other fiduciaries of large, self-insured group health plans and certain service providers to such plans.
Why this matters
Large self-insured employer plans cover a significant share of Americans but have long had limited visibility into how PBMs are paid, including rebates and spread pricing. A final DOL disclosure rule tightens fiduciary leverage over PBM contracts in this segment, which can indirectly influence drug costs for covered workers even though it leaves Medicare, Medicaid, and fully insured markets untouched.