HR will soon know more about how PBMs are paid

The Department of Labor recently issued a final rule that will require pharmacy benefit managers (PBMs), as well as the brokers and consultants they work with, to disclose fees and compensation to large employers’ self-insured group health plans.

PBMs have been scrutinized in recent years over opaque financial practices that can result in higher prescription drug spending. Drug prices are one of the top drivers of health costs today, and are thus top-of-mind for benefits leaders as they seek to contain costs.

“For years, PBMs have operated in the shadows, pocketing hidden fees while workers and employers were left in the dark,” Labor Secretary Keith Sonderling said in a statement. “Today, President Trump is delivering the transparency Americans deserve—and putting American workers first.”

The rule could reshape how benefits leaders and health plans approach PBM negotiations going forward, sources told HR Brew. Whether the Trump administration can deliver on this policy’s promise depends in part on how the PBM industry reacts to it, they added.

What the rule requires. Under the rule, PBMs will have to disclose the following information to health plans for the first time, per the DOL:

• “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 plan participants.”

Such disclosures will give health plan sponsors access to information that they “historically have just not had access to, or had very opaque access to,” Sage Fattahian, a partner in law firm Morgan Lewis’s employee benefits practice group, said.

The goal of the rule, she added, “is to try to empower plan sponsors with information on exactly how PBMs are being compensated outside of the fee that they’re receiving, because it’s always been such a black box.”

How PBM negotiations could change. The new information that comes from this plan could represent a learning curve for HR professionals, Fattahian said.

While employers will now have access to tools that could help them drive down health costs, they might need assistance interpreting a machine-readable Rx file, for example, which includes details about all the fees plan sponsors pay to the PBMs.

Benefits teams will need to try to understand “all of these different revenue streams that now are required to be disclosed, and then how do they look at the overall economics of their prescription drug plan and try to drive down costs,” Fattahian said. In order to get up to speed on what this new information means for their healthcare strategy, they might lean on third-party consultants with firms like WTW or Aon. Fattahian also noted that new vendors are starting to market services to plans that can take this granular data and “synthesize it in understandable format,” she noted.

The rule applies to health plans beginning on or after July 1, 2027. As such, fiduciaries whose plans renew mid-year should start thinking about these strategies now, Fattahian added.

Lingering questions. This rule should make it easier for health plans to comply with their fiduciary requirements under the Employee Retirement Income Security Act (ERISA), which mandates that fiduciaries act in the best interest of plan participants, act with prudence, and “defray the reasonable expense” of administering the health plan, among others.

“From a practical standpoint, better understanding the extent to which, and the sources from which, PBMs are being reimbursed gives plan sponsor representatives much more of an ability to negotiate fair and reasonable agreements with the PBMs,” Jonathan Swichar, chair of Duane Morris’s pharmacy litigation group, said.

That doesn’t mean employers will be immune from employee lawsuits taking aim at their PBM practices under ERISA. The rule does, however, allow plan sponsors the opportunity to report PBMs to the DOL if they don’t comply with the new transparency requirements, which could help rein them in and better support ERISA compliance, Swichar added.

Whether employers ultimately see their health spending go down as a result of this rule depends in part on how the PBM industry reacts to it, Fattahian said.

While the regulation requires transparency, it doesn’t demand that the market negotiates with health plans. It remains to be seen whether “they will be willing to come more to the table and negotiate down prices, or if they’re somehow going to reallocate that cost by increasing administrative fees,” she said.

“I’m not really sure how they are going to respond, but that obviously is going to be a key component, because the rule by itself does not drive down costs,” she added.