Regulatory Actions on Pharmacy Benefit Managers: Significant Changes Ahead
In early 2026, significant regulatory actions concerning pharmacy benefit managers (PBMs) were introduced, following years of reform discussions. These developments include the Consolidated Appropriations Act (CAA), a proposed rule from the Department of Labor (DOL), and a Federal Trade Commission (FTC) settlement, all aimed at addressing transparency and cost concerns within PBM operations.
The CAA, identified as H.R. 7148, focuses on enhancing PBM transparency by addressing rebates and compensation, ensuring broader pharmacy participation, and establishing enforcement mechanisms. Although these regulations take effect January 1, 2029, employers should proactively evaluate existing PBM contracts to ensure compliance with new standards, thus avoiding prohibited transactions.
The DOL's proposed rule seeks to enhance transparency in PBM compensation, offering an exemption under ERISA’s prohibited transaction rule provided PBMs disclose necessary information to plan fiduciaries of self-insured health plans. Public commentary could alter these requirements before finalization.
The FTC settled a lawsuit with Express Scripts, targeting alleged price inflation for insulin medications through rebate management. The settlement requires changes to Express Scripts’ services by January 1, 2027. Meanwhile, Caremark Rx and OptumRx have yet to reach a settlement with the FTC.
Key Reform Facets
Transparency and Reporting: Group health plans, insurance issuers, and PBM service providers must adhere to new reporting obligations for compliance. Large employers (100 or more employees) need to report at the drug level, while all employers must receive insights into drug pricing and financials at the plan level.
Rebate Pass-Through: PBMs must fully transfer rebates to ERISA plans quarterly. This broad definition of rebates includes fees and discounts related to drug utilization and spending, enhancing transparency and cost control.
Compensation and Pricing Structure: The FTC settlement mandates Express Scripts to end practices like spread pricing and improve transparency in formulary and compensation arrangements. These measures aim to prevent adverse pricing strategies and benefit health plan participants with lower drug costs.
Audit Rights: ERISA plans may conduct annual audits of PBM agreements with manufacturers and rebate aggregators. PBMs must communicate these rights to verify the accuracy of their disclosures.
Penalties and compliance stipulations underscore enforcement, with fines for non-disclosure or false reporting. However, plan fiduciaries may receive exemptions if they acted in good faith and attempted to resolve compliance issues. The phased regulatory timelines allow for gradual implementation, marking a shift toward oversight and transparency in PBM activities, with significant implications for employers and plan sponsors in the insurance sector.