Understanding the PBM FAIR Act: Enhancing Transparency in Health Plans

Lawmakers have introduced significant legislation that seeks to enhance regulatory compliance for pharmacy benefit managers (PBMs) managing employer health plans under the Employee Retirement Income Security Act (ERISA). Known as the PBM Fiduciary, Accountability, Integrity and Reform Act (PBM FAIR Act), the bill aims to amend ERISA section 3(21), imposing fiduciary duties on PBMs. Under this proposed law, PBMs and third-party administrators would need to offer comprehensive compensation disclosures to plan sponsors or responsible fiduciaries, ensuring greater transparency and regulatory adherence.

Legislative Support and Implications

Sen. Roger Marshall, R-Kan., introduced the bill in the Senate, with bipartisan backing from Sen. Chuck Grassley, R-Iowa, Sen. Tim Kaine, D-Va., and Sen. Maggie Hassan, D-N.H. In the House, Rep. Jack Auchincloss, D-Mass., and Rep. Ryan Mackenzie, R-Pa., presented a companion bill. As the ERISA Industry Committee stands with the initiative, stakeholders anticipate that granting fiduciary status to PBMs will mitigate conflicts of interest by disallowing preferential pricing arrangements that prioritize higher-priced drugs. Such measures would align PBM practices with broader industry and regulatory compliance standards.

Debate and Market Dynamics

The ongoing debate highlights PBMs defending their role in curbing U.S. generic drug prices, setting the stage for further scrutiny and regulatory challenges. While some employers advocate for state-level regulatory compliance due to non-transparent PBM operations, the ERISA Industry Committee calls for a unified federal regulatory framework. This legislative activity emerges amid efforts to recalibrate healthcare affordability and the potential extension of expiring Affordable Care Act subsidies, reflecting the intricate balance between regulatory oversight and evolving market dynamics in the pharmacy benefit sector.