Legislative lowdown: DOL proposes rule requiring pharmacy benefit manager transparency

The middlemen that work between health plans, drug manufacturers, and pharmacies to negotiate prices are being pressed to become more transparent in a new rule issued by the Department of Labor’s Employee Benefits Security Administration.

The proposed rule, issued on Jan. 29, would require pharmacy benefit managers (PBMs) to disclose information about rebates and other forms of compensation they receive from the pharmaceutical industry.

Requiring PBMs to be more transparent “will allow employers to see the full extent of the fees charged by pharmacy benefit managers, enabling them to negotiate a better deal for themselves and American workers,” Deputy Labor Secretary Keith Sonderling said in a statement.

What the rule would require. The regulation would apply to PBMs working with self-insured group health plans that are subject to the Employee Retirement Income Security Act (ERISA), as well as any brokers or consultants affiliated with them. Covered parties would have to disclose the following information to health plan fiduciaries before a contract is finalized, per the DOL statement:

• “Rebates and other payments from drug manufacturers.
• Compensation received when the price paid by the plan for a prescription drug exceeds the amount reimbursed to the pharmacy.
• Payments recouped from pharmacies in connection with prescription drugs dispensed to the plan.”

Under the rule, fiduciaries would be able to audit these disclosures to ensure they’re accurate, as well as seek assistance in the event that a PBM doesn’t meet these requirements.

The PBM problem. Historically the way PBMs do business has been opaque, even for the employers that use their services. PBMs typically receive kick-backs from manufacturers to include their drugs on a “formulary,” or a list of drugs that insurers cover. But details about these rebates aren’t publicly available, as they’re considered trade secrets, Healthcare Brew reported in 2022.

Because plan sponsors don’t have the full picture of how rebates and other fees factor into PBM negotiations, they may struggle to answer employees’ questions about why certain drugs are priced at certain levels, an issue that has remained pertinent for benefits leaders since HR Brew reported on it 2023.

Irrational drug pricing has spurred employees at companies like Johnson & Johnson and Wells Fargo to take legal action. In March of last year, JPMorgan employees filed a lawsuit alleging the company mismanaged its health plan benefit funds, constituting ERISA violations. The plaintiffs cited an example of a multiple sclerosis drug that was priced at $6,229 for a 30-day prescription under JPMorgan’s plan, which was negotiated with CVS Caremark, one of the three major PBMs. The same drug was priced as low as $29 through ShopRite Pharmacy.

In proposing this rule, the DOL is seeking to address some of the challenges employers face upholding their fiduciary responsibilities when negotiating with PBMs. The agency estimates the regulation could save employers between $108.8 million and $1.1 billion annually by lowering prescription drug prices.

The DOL is accepting public comments on the proposal through March 31.