New Labor Rule Forces Pharmacy Benefit Managers to Disclose Fees

A new rule from the U.S. Department of Labor mandates that pharmacy benefit managers and their affiliates reveal compensation details to large self-insured employer health plans, thereby empowering plan fiduciaries to make informed contract evaluations.

“More transparency means more competition, and more competition means lower health care costs,” said Centers for Medicare & Medicaid Services Administrator Dr. Mehmet Oz in a statement. The rule is part of a broader effort to make healthcare costs more predictable for consumers.

What the rule covers

The rule applies to plans with at least 100 participants or those offered by employers with at least 100 employees. It mandates the disclosure of compensation paid directly by the plan, expected payments from other sources, and spread compensation—the difference between what a plan pays for a prescription and what the pharmacy receives.

Service providers to smaller and fully insured plans must still meet separate disclosure requirements under the Employee Retirement Income Security Act. The new rule takes effect 60 days after publication in the Federal Register, with requirements applying to plan years beginning on or after July 1, 2027.

Impact and enforcement

Pharmacy benefit managers and their covered affiliates must provide initial disclosures before contracts are entered into, renewed, or extended. They must then report compensation actually received every six months, or quarterly if the plan requests it. Plan fiduciaries can audit the disclosed information at least annually, with the plan covering the cost of the review.

The rule also provides relief for fiduciaries if a service provider fails to comply, as long as they take specified steps, including notifying the Department of Labor. Secretary of Labor Keith Sonderling stated, “This is a win for every American worker who has ever paid too much at the pharmacy counter.”

Broader context

This rule builds on the Department of Labor’s January proposal to require compensation disclosures and give self-insured plans audit rights. It was described as the most significant federal reform of prescription drug middlemen in decades. The push for transparency also extends to Medicare, with proposed requirements for PBM compensation to reflect fair market value rather than drug prices.

The Centers for Medicare & Medicaid Services has proposed similar requirements, set to begin in 2028. These efforts reflect a growing focus on making healthcare costs more transparent and competitive, potentially leading to lower costs for consumers.