Labor Department rule ushers in a new era of PBM transparency for self-insured employers

Federal regulation of pharmacy benefit managers (PBMs) entered a new era today with the final version of a Department of Labor rule that requires PBMs to disclose the rebates, discounts, price protections and formulary placement incentives they receive from drugmakers to their self-insured employer clients.

The sweeping rule also gives self-insured employers new disclosure and audit rights, including a right to quarterly disclosures of direct and indirect compensation that their PBMs have received and the freedom to pick an auditor to audit compensation. PBMs are also required to report spreading pricing amounts — the difference between what they are paid by employer health plans and what they pay pharmacies for prescriptions — and “claw-backs” — retrospective adjustments to what they pharmacies.

The rule that came out today was issued under the Employee Retirement Income Security Act, commonly known by its initials, ERISA, and pertains only to self-insured employers with 100 employers or self-insured groups with 100 more participants. Approximately two-thirds of employees with employer-based health insurance are now in self-insured plans, so the rule will have a broad effect on pharmacy benefits in the employer-based health insurance market. There are additional federal regulations in the works that are likely to come out midway next year that will govern PBM disclosures and audits for employers who contract for healthcare coverage that is fully insured by the health insurer.

The 350-page rule was heralded by employer groups and a group representing smaller PBMs that have positioned themselves as transparent alternatives to the “big 3” PBMs that are part of large, publicly traded healthcare companies — CVS Caremark, which is part of CVS Health; Optum Rx, which is part of UnitedHealth Group; and Express Scripts, which is part of Cigna.

Positive reactions to the rule

‘This rule is a significant step toward a more transparent and competitive pharmacy benefits market, and we look forward to capitalizing on this progress,” Elizabeth Mitchell, president and CEO of Purchaser Business Group on Health, a group that represents the healthcare purchasing interests of several major employers, said in an emailed statement to Managed Healthcare Executive.

Jenny Goins, M.S., interim CEO of the National Alliance of Healthcare Purchaser Coalitions (National Alliance), a group that represents self-insured employers, said in an email that employers “are responsible for their health plans, but for years they’ve had very little visibility into how PBMs get paid. This gives them a much clearer view.”

Joseph Shields, J.D., CEO of Transparency Rising, a group that represents smaller PBMs, singled out the enforcement provision for praise: “Disclosure only matters if it’s enforced.” Shields said in an interview that the rule’s disclosure requirements go beyond the PBM transparency provisions that were part of the Consolidated Appropriations Act, 2026, with rules that encompass financial dealings with brokers and consultants, specialty pharmacies and the group purchasing organizations that the big 3 have created.

The rule “is leveling the playing field,” Robyn Crosson, J.D., vice president of government relations for Navitus Health Solution, by giving employers the opportunity to make apples-to-apples comparisons among PBMs and their pricing because they will have a fuller picture of PBMs’ dealings, including the rebates and discounts they receive. Crosson said that employer health plans have been moving toward doing business with PBMs such as Navitus that have positioned themselves as transparent alternatives to the big 3. The National Alliance’s 2026 survey of employers found that the proportion of the employers who use the big 3 slipped from 64% in 2025 to 54% this year.

A dissenting view

The Pharmaceutical Care Management Association, the trade group that represents the big 3 and some midsize PBMs, including Navitus, was a dissenting voice amid plaudits. David Marin, the group’s CEO and president, issued a statement that said that the Department of Labor rule was unnecessary and redundant with existing transparency rules and would be “extraordinarily burdensome,” particularly for smaller PBMs. Marin also said his group is concerned that the rule’s requirement will lead to higher costs and less competition because the smaller PBMs will face “excessive reporting

demands.” Crosson said the reporting requirement will add administrative costs, but she noted the rule’s requirements may satisfy some state-level regulators and lead to harmonization between federal and state regulation that will reduce the burden.

The Consolidated Appropriations Act (CAA,2026), which President Donald Trump signed into law in February 2026, had important PBM reform and transparency provisions, including rules about governing services, delinking PBM compensation from drug prices, and prohibitions on PBMs favoring pharmacies they own or are affiliated with. But today’s rule was originally proposed several days before CAA,2026, passed, and stems from an executive order that Trump signed in April 2025 about lowering drug prices, which, among other things, directed the Labor Department to “improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers.” From the outset, it was more narrowly targeted at self-insured employers.

The disclosure and audit requirements

A Labor Department fact sheet about the rule says the rule applies to PBM and PBM-affiliated consultants and brokers that expect to receive more than $1,000 in compensation for services provided directly or indirectly.

The fact sheet breaks the rule’s requirement into three categories: initial disclosures, ongoing disclosures and audits. Here is a summary of some of the main points in the factsheet.

Initial disclosures

PBMs must provide written initial disclosures to employers’ health plans “reasonably ahead” of entering, extending or renewing contracts. The disclosure must cover services that the PBM will provide to the self-insured employer’s health, direction compensation from the plan, and indirect compensation. Listed under indirect compensation are rebates, fees and discounts paid by drugmakers or related entities; money made from spread pricing with pharmacies; clawbacks from pharmacies; and any termination fees or inflation or price protection contracts for drugmakers. The initial disclosure requirements also require PBMs to disclose incentives or arrangements with drugmakers that affect a drug’s formulary placement and, in some cases, a list of the alternative drugs omitted from the formulary. The rule says that PBMs must disclose the net price paid for drugs after rebates and fees, or the methodology used to determine that net price if a monetary amount cannot be identified, according to the fact sheet.

Ongoing disclosures

The ongoing disclosure requirements cover the same direct and indirect compensation items included in the initial disclosure requirements, the factsheet says. PBMs must provide them on a semiannual basis and, if the employer health plan asks for it, on a quarterly basis. In the words of the factsheet, the ongoing requirement allows the fiduciary — which in a self-insured situation is the employer — to “compare actual compensation with the amounts originally disclosed and monitor the contract or arrangement over time.” Ongoing requirements also require PBMs to provide an explanation if compensation exceeds the initial disclosure by 5%. In apparent acknowledgment that PBM terminology can be used to obfuscate, the ongoing disclosure requirement also says the disclosures should avoid jargon and technical legal language unless the terms are defined and express compensation in monetary amounts.

Audit rights

Self-insured employer health plans can audit PBMs annually to verify the accuracy of the disclosures they have received on an ongoing basis. They are free to pick the auditor and the timing and information needed for the audit. The PBM must acknowledge the audit request within 10 business days and provide the necessary information within 60 calendar days. The health plan must pay for the audit, but the PBM must shoulder the cost of providing the requested information.