The Trump administration has finalized a rule requiring greater transparency from pharmacy benefit managers (PBMs) — a regulation that will give employers greater visibility into PBM fees and compensation and more leverage to negotiate contracts and oversee prescription drug spending.
The rule, finalized by the U.S. Department of Labor’s Employee Benefits Security Administration Oct. 29, requires PBMs and affiliated brokers and consultants to disclose compensation and financial incentives to covered self-insured employer health plans, helping plan fiduciaries assess whether PBM arrangements and fees are reasonable. The rule, the agency said, will help employers “see how much drug manufacturers, pharmacies, and others pay pharmacy benefit managers for the first time. “Employers can use that information to negotiate contracts and seek lower prescription drug costs for workers and their families," according to the agency’s news release.
The rule will take effect July 2027. PBMs who don’t comply may be subject to financial penalties and potential invalidation of their contract.
“The rule gives employers the tools they’ve been denied for far too long,” said Assistant Secretary for the Employee Benefits Security Administration Daniel Aronowitz. “When employers can finally see what PBMs are really being paid, they can negotiate harder, cut out the waste, and pass real savings on to their workers.”
The final rule is projected to lower prescription drug costs for health plans and participants by as much as $22 billion over a decade.
The rule covers arrangements involving at least $1,000 in expected compensation. For single-employer plans, coverage generally requires an employer averaging at least 100 employees during the preceding calendar year. For multiemployer and other covered multiple-employer plans, the threshold generally is an average of 100 participants during the preceding plan year. Fully insured plans and certain plans sponsored by pharmaceutical supply-chain businesses or their affiliates are excluded from these detailed requirements, although broader statutory disclosure obligations remain relevant.
Employer Support
Many in the industry say the new rule is a win for employers — especially at a time when drug costs are a major contributor to employers’ soaring healthcare costs.
“Large employers pay for their workers’ prescriptions, but many can’t see how much of that money their PBM and any affiliated entity keeps,” James Gelfand, the president and CEO of the ERISA Industry Committee, said in a statement. “This rule changes that. Employers will be able to check the numbers, ask hard questions, and hold their vendors accountable to the contract.”
When the rule was proposed earlier this year, Matt Collier, senior consultant, pharmacy benefit and self-funded strategy, at IMA Financial Group, a Denver-based insurance and brokerage firm, said that transparency in the drug industry was “desperately needed.” Historically, he said, many fees have been silent and generally not disclosed to employers, such as how fees and commissions are disclosed on a Form 5500.
“PBMs have used these practices in their model to earn their fees by pricing them into various areas of the plan which were silent and undisclosed to the employer, thus never truly understanding the real cost of their pharmacy program,” Collier said.
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