The federal government recently delivered back-to-back measures forcing pharmacy benefit managers (PBMs) to be more transparent about their business models. However, with this heightened transparency comes a host of new fiduciary obligations for sponsors of health and welfare benefit plans.
New Requirements
Reforming the PBM industry has been a frequent talking point for the past decade. State legislatures were the first to take concrete steps toward PBM industry regulation, with states like Arkansas and Florida passing statutes demanding pass-through rebate payments, an end to spread pricing, and more expansive access to independent pharmacies, measures that have raised significant Employee Retirement Income Security Act of 1974 (ERISA) preemption issues.
On a federal level, federal agencies issued transparency regulations in 2020, but the requirements applicable to prescription drugs in those regulations were put on hold. In 2023, the House of Representatives approved, by an overwhelming majority, a bill titled the Lower Cost, More Transparency Act. This bill would have imposed substantial disclosure requirements on PBMs, but it never advanced through the Senate.
Last year, the Trump administration announced its intent to enact PBM reforms. In an executive order titled “Lowering Drug Prices By Once Again Putting Americans First,” the administration solicited input from federal agencies for recommendations “on how best to promote a more competitive, efficient, transparent, and resilient pharmaceutical value chain that delivers lower drug prices for Americans.”
On January 30, 2026, the Department of Labor (DOL) published proposed regulations imposing substantial transparency requirements at the federal level. The regulations amend ERISA’s prohibited transaction rules to require PBMs to provide periodic disclosures of certain key elements of their fee structure, including all direct and indirect revenues they (and certain related entities) may receive, including revenues from manufacturer rebates and spread pricing. The regulations also grant sponsors the right to audit their PBMs to ensure compliance with these requirements. This right to audit must be free of various restrictions that PBMs often seek to place on the choice of auditors or the information available for review.
Less than a week later, Congress passed the Consolidated Appropriations Act, 2026 (CAA, 2026), which includes Section 6701, “Oversight of Pharmacy Benefit Management Service.” Section 6701 amends ERISA, the Internal Revenue Code, and the Public Health Service Act to prohibit group health plans from entering into service agreements that do not include certain mandatory reporting from PBMs. Like the proposed DOL regulations, Section 6701 requires PBMs to issue periodic reports to plan sponsors that disclose key aspects of their compensation structure.
Further, Section 6701 requires PBMs to provide a document that summarizes significant information about the PBM’s compensation, design, and operations that plans must make available to plan participants and beneficiaries on request.
The CAA, 2026 (in Section 6702) also amends ERISA’s prohibited transaction rules to require PBMs to pass through 100 percent of rebates, fees, and other forms of manufacturer payments, including amounts received by any relevant group purchasing organization or rebate aggregator.
Effective Dates of the New Federal Requirements
The proposed DOL regulations appear to be on a fast track. Comments are due by March 31, 2026, and the regulations will become effective 60 days after they are finalized. Once finalized, they are to apply to plans in plan years beginning on or after July 1, 2026.
For calendar year plans, this means that a new or extended contract that goes into effect on January 1, 2029, will need to comply with the new rules. Regulations under CAA, 2026 are due by August 3, 2027.
Next Steps for Plan Sponsors
While the new federal guidelines are aimed at reforming the PBM industry, they include significant new obligations for sponsors of employee benefit plans. On a basic level, plans need to consider the basic measures that they must take to comply with the new requirements, including amending PBM Agreements and requesting appropriate disclosures. More deeply, plan sponsors must reckon with the significant volume of data being provided by their PBMs. For example, plan sponsors will need to take the PBM’s compensation disclosures into account when negotiating their PBM service agreements. Plans will also receive significant data about amounts that PBMs pay to brokers and consultants and should consider this information with regard to any broker or consultant that they engage to assist with the selection and contracting with a PBM.
Plans subject to ERISA should work now to review their internal practices to ensure that they have a prudent process in place to obtain and handle these new disclosures from the PBMs. The plans should consider their fiduciary obligations in this process, as well as its business implications. For example, if they have not done so already, plans should consider creating health and welfare committees to monitor their PBM’s compliance and to analyze the disclosures they provide from a fiduciary perspective, as well as its cost and other implications for the plan sponsor. Properly implemented, this practice may help shield plans from class action litigation, which has already targeted certain plans in their engagement of PBMs.
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