Proposed Regulation for PBMs: Enhancing Transparency in Self-Insured Plans
The U.S. Department of Labor has introduced a proposed regulation to increase transparency for pharmacy benefits managers (PBMs) interacting with self-insured group health plans. This rule compels PBMs to disclose detailed compensation data to the fiduciary overseeing the plan. Additionally, the Consolidated Appropriations Act of 2026, enacted in February, enforces further transparency and compensation practice standards for PBMs, thereby intensifying oversight, especially in states like Arkansas with stringent existing regulations.
PBMs are integral to managing prescription drug benefits for health plans, functioning as intermediaries between drug manufacturers, health plans, and pharmacies. Their role in negotiating rebates and managing drug formularies has drawn significant attention from federal and state regulators, stimulating calls for greater regulatory compliance and transparency.
State laws primarily govern health insurance plans offered by carriers, yet self-insured employer plans fall under the jurisdiction of the federal Employee Retirement Income Security Act (ERISA). ERISA limits state regulatory power over these plans. PBMs typically work with self-insured plans, leading to conflicts between state regulations on PBMs and federal law preemption.
Arkansas has actively regulated PBMs with laws targeting pricing, transparency, and licensing standards. Despite legal battles regarding ERISA preemption, as seen with Act 900 and Rule 128, Arkansas maintains regulatory frameworks applicable to all PBMs working with health benefit plans within the state.
The Labor Department's proposal mandates PBMs to disclose compensation details, like manufacturer rebates and drug pricing strategies, to the fiduciaries of self-insured plans, also allowing fiduciaries to conduct audits. This federal rule is not in direct conflict with Arkansas' regulations, which focus on PBM reimbursement practices and data submissions mandated by the Arkansas Insurance Department.
The Consolidated Appropriations Act adds further provisions affecting PBM interactions with health plans, imposing mandatory transparency and limiting specific compensation practices. These rules extend to PBMs under Medicare starting January 1, 2028, with expansion to all PBM contracts from August 3, 2028. This act requires PBMs to disclose compensation terms to plan fiduciaries, classified as "covered service providers" under ERISA, aiding fiduciaries in evaluating compensation fairness and identifying conflicts of interest.
If implemented, the Department of Labor's rule would align with these statutory changes by enhancing federal transparency mandates for PBMs dealing with self-insured plans. While fulfilling distinct roles, both federal and state disclosure requirements aim to elevate transparency within an industry often criticized for a lack of openness.