PBM Disclosure Rule Proposed by Department of Labor

On January 29, 2026, the Department of Labor (DOL) issued the proposed rule Improving Transparency into Pharmacy Benefit Manager Fee Disclosure (Proposed Rule) that would require pharmacy benefit managers (PBMs) and affiliated consultants and brokers to disclose information about their compensation and referral fees to the fiduciaries of self-insured group health plans subject to the Employee Retirement Income Security Act (ERISA). If finalized, these new disclosure obligations could provide meaningful new insights for plans into the broad scope of PBM activities and sources of revenue, including with respect to PBM arrangements with pharmaceutical manufacturers, pharmacies, brokers, and other entities.

The Proposed Rule is part of a broader push by the Trump Administration and Congress to increase transparency in PBM reporting. For example, the Proposed Rule implements part of President Trump’s April 2025 executive order Lowering Drug Prices by Once Again Putting Americans First which called for the Secretary of Labor “to improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers” (see our client alert here). In addition, the Consolidated Appropriations Act of 2026—which President Trump signed into law on February 3—included provisions to “delink” PBM compensation from Medicare Part D list prices and rebates and shift compensation for these PBMs to flat administrative fees.

This client alert provides background on the relationship between PBMs and health plans and a summary of the Proposed Rule’s key disclosure provisions with respect to ERISA-covered self-insured group health plans. Comments on the Proposed Rule are due by March 31, 2026.

Background

ERISA-covered self-insured group health plans are employer-sponsored health plans where the employer assumes the financial risk for its covered employees’ claims rather than paying premiums to an insurer. These plans are covered by (and subject to) ERISA and must comply with the law’s fiduciary, reporting, disclosure, and claims-procedure requirements. In exchange, ERISA-covered self-insured plans are generally exempt from state insurance laws.

ERISA-covered self-insured group health plans hire PBMs to perform a range of services, such as organizing pharmacy networks, negotiating pharmacy reimbursement amounts and drug rebates, establishing drug formularies, and processing claims. These plans also frequently rely on brokers or consultants—some of which are affiliated with or have financial relationship with PBMs—to help identify which PBM to partner with, negotiate the arrangement with the PBM, provide oversight of the PBM, and audit the PBM.

The manner in which PBMs, consulting firms, and brokerages are compensated for their services can create challenges for plan management and oversight by the plan fiduciary. PBMs are typically compensated by plans through a mixture of administrative fees and other arrangements, such as “spread pricing” where the PBM retains the difference between reimbursement paid to the pharmacy for a product and the plan’s negotiated rate paid by the plan sponsor. In the Proposed Rule, the DOL expresses concern that spread pricing “may be less transparent to responsible plan fiduciaries if there are no disclosures of the differences between the amounts the PBM paid to pharmacies and the amounts charged to the self-insured group health plan, or if pricing guarantees are verified only in the aggregate.”

PBMs also receive compensation for their services from drug manufacturers—in the form of rebates to ensure favorable placement on a formulary—and from pharmacies—in the form of fees or “claw-backs” if a plan participant’s copay for a drug is higher than the reimbursement amount.

Consulting firms and brokerages may receive payment either in the form of payments on a per‑prescription or per‑covered‑employee basis, or they may share the rebates earned by the PBMs. In some cases, PBMs may provide indirect remuneration to consulting firms and brokerages as well. The DOL notes that this kind of remuneration “may create a conflict of interest with respect to their self-insured group health plan customers.”

ERISA-covered self-insured group health plan fiduciaries are required to ensure that any service provider arrangements comply with ERISA’s prohibited transaction rules. These rules generally prohibit plans from receiving services from a “party in interest” to the plan—defined as a person providing services to the self-insured group health plan. Such transactions are only permitted if a relevant exemption applies. The most common exemption relied upon is Section 408(b)(2) of ERISA (29 U.S.C. § 1108(b)(2)), which permits certain transactions for service contracts or arrangements between a plan and a party in interest if the contract or arrangement is (1) reasonable, (2) the services are necessary for the establishment or operation of the plan, and (3) no more than reasonable compensation is paid for the services.

The Proposed Rule would establish guidelines to provide plan fiduciaries with information to determine whether remuneration to PBMs, consultants, and brokers meets the requirements of the Section 408(b)(2) exemption. In 2012, DOL amended its regulations under Section 408(b)(2) to require additional disclosures from service providers of pension plans to the plan’s fiduciary to ensure that the service is reasonable, necessary, and reasonably compensated. See Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure; Final Rule, 77 Fed. Reg. 5632 (Feb. 3, 2012). At the time, DOL had not issued parallel guidance for health plans. As a result, various stakeholders, such as the ERISA Advisory Council, expressed concerns about the opaque and potentially conflicting compensation structures in PBM arrangements and the barriers that prevent plan fiduciaries from evaluating PBM practices and ensuring reasonable compensation under Section 408(b)(2). The Proposed Rule is meant to address this perceived gap. In addition, the Proposed Rule is also intended to supplement amendments to Section 408(b)(2) implemented by the Consolidated Appropriations Act, 2021, which require brokers and consultants serving group health plans to disclose information about their services, fiduciary status, and direct and indirect compensation.

Overview of Key Disclosure Provisions

The Proposed Rule would require a series of disclosures by a specified service provider—defined in the Proposed Rule to be a provider of pharmacy benefit management services or advice, recommendations, or referrals regarding pharmacy benefit management services—along with its affiliates, agents, and subcontractors (together, the “Covered Service Provider”) expecting to receive at least $1,000 in direct or indirect compensation to the plan fiduciary. Absent this disclosure, a service contract with a self-insured group health plan would not be “reasonable” under Section 408(b)(2) of ERISA . Specifically, a Covered Service Provider would be required to disclose:

1. Description of Services: A description of each PBM service or of the advice, recommendations, or referrals regarding PBM services to be provided to the plan.
2. Direct Compensation from Plan: The amount of all direct compensation (defined as “compensation received directly from a covered plan or from the plan sponsor on behalf of the plan”), both in the aggregate and by service, that the Covered Service Provider reasonably expects to receive in connection with its PBM management services under the contract or arrangement.
3. Payments from Drug Manufacturers: The amount, in dollars, of payments from drug manufacturers or rebate aggregators—both in aggregate and for each drug on the formulary—that the Covered Service Provider reasonably expects to receive. The Covered Service Provider must specify both the amount of the payment that it will pass on to the plan and the amount that it will retain.
4. Spread Compensation: The quarterly aggregate and per-drug spread compensation, broken down by pharmacy channel.
5. Copay Claw-Backs: The total dollar amount and number of copay claw-back transactions.
6. Price Protection Agreements: Disclosure of the existence of any inflation protection or price protection agreements that the Covered Service Provider has entered into with any drug manufacturer or other party regarding prescription drugs dispensed under the service contract or arrangement. The Covered Service Provider must disclose the amount it reasonably expects to retain under each arrangement.
7. Compensation for Termination of the Contract or Arrangement: Any compensation that the Covered Service Provider expects to receive in the event of a contract termination and how any prepaid amounts will be calculated and refunded upon such termination.
8. Other Compensation: The source, purpose, and arrangement under which the Covered Service Provider may obtain other compensation not captured in the categories above. One example cited is compensation by a PBM to a consultant or broker who is a Covered Service Provider.
9. Formulary Placement Incentives: Descriptions of formulary placement incentive arrangements between PBMs and drug manufacturers, including (a) any manufacturer-based incentives and how they align with plan interests, (b) reasonably available therapeutically equivalent alternatives for each drug on the formulary and reasons for their exclusion from the formulary, and (c) the PBM’s authority to modify the formulary with advance notice for changes materially affecting compensation (i.e., a change affecting five percent or more of the quarterly aggregate compensation disclosed).
10. Drug Pricing Methodology: The net cost of each formulary drug by pharmacy channel or, if the exact cost cannot be determined, the methodology used under the contract or agreement to determine the cost the plan will pay for each drug on the formulary, for each pharmacy channel, along with an objective means to verify the accuracy of the disclosure.
11. Statement of Fiduciary Status: If applicable, a statement that the Covered Service Provider will provide, or reasonably expects to provide, services directly to the covered plan as a fiduciary. The Covered Service Provider must also disclose any activity or policy that could create a conflict of interest (e.g., if a Covered Service Provider will benefit from a drug substitution).
12. Statement of Audit Right: A statement outlining the plan’s right to audit the Covered Service Provider. Under the Proposed Rule, the plan has a right to audit their Covered Service Providers at least once per year to verify the accuracy of these disclosures.

Under the Proposed Rule, this information must be provided to the plan fiduciary “not later than the date that is reasonably in advance of the date on which the service contract or arrangement is entered, and extended or renewed.” For renewals or extensions, the Proposed Rule deems 30 days to be a reasonable time period. The Proposed Rule would also require that a Covered Service Provider disclose the following information on a semiannual basis “no later than 30 calendar days after the end of each six-month period beginning on the date the service contract or arrangement is entered” for the previous six-month period: direct compensation, manufacturer payments, spread compensation, copay claw-backs, price protection agreements, other compensation, and a statement of audit rights. In addition, if any of these categories of compensation materially exceeds the earlier estimate provided by the Covered Service Provider—defined as a change greater than five percent—it must identify the amount of the overage and the reason for the overage. Finally, upon written request of the plan fiduciary, the Covered Service Provider must provide any other information relating to the contract or arrangement that is required for the plan to comply with its reporting and disclosure obligations.

All required disclosures must be “clear and concise, free of misrepresentation, and contain sufficient specificity to permit evaluation of the reasonableness of the contract or arrangement.” Compensation amounts must also be expressed as a monetary amount and “contain sufficient information and specificity to permit evaluation of the reasonableness of the compensation received” by the Covered Service Provider. Lastly, the Proposed Rule would prevent Covered Service Providers from imposing “restrictions on the plan’s use” of required disclosures. Covered Service Providers would be permitted, however, to require any third parties that are provided information by the plan to sign “reasonable confidentiality agreements” to prevent the redisclosure of such information.

Next Steps

If finalized, this Proposed Rule could have implications for pharmaceutical manufacturers as PBMs may be required to report to plan fiduciaries certain terms of their agreements with drug manufacturers, including (1) payments from manufacturers to PBMs, (2) the terms of formulary placement incentives, and (3) drug pricing methodology potentially including the net price of each drug on the formulary. DOL is soliciting comments on the Proposed Rule from the public. Comments are due by March 31, 2026.

If you are interested in learning more about the Proposed Rule or discussing the implications for your organization, please contact the authors of this alert.