Impact of Regulatory Developments on Workers' Compensation Pharmacy
Several significant regulatory developments have recently impacted the workers' compensation (WC) pharmacy and pharmacy benefit manager (PBM) landscape. Industry experts overseeing these programs must pay attention, as two recent changes are already influencing operations, while a third is gradually reshaping competitive dynamics.
Federal PBM Regulatory Developments
Recent federal actions have introduced unprecedented regulations in the pharmacy benefits sector, particularly affecting PBM operations. The industry, including workers' compensation, should anticipate these federal changes. The Department of Labor's proposed regulations on PBM fee disclosures under Executive Order 14273, although not directly for WC pharmacy programs, could significantly impact transparency in PBM compensation.
The Consolidated Appropriations Act of 2026 demands new requirements for ERISA plans, including 100% rebate pass-through, audit rights, and delinking PBM fees from drug prices. The Federal Trade Commission's agreement with Express Scripts necessitates changes to formulary designs and price disclosures. While these do not directly govern WC PBMs, organizations operating in both WC and group health realms, like Optum and Express Scripts, must navigate these shifts as they affect WC compensation models.
State-Level Regulatory Shifts
On the state front, Massachusetts has set a precedent by incorporating workers' compensation into PBM licensing through regulation 211 CMR 157.00. PBMs in Massachusetts now need licenses, must disclose WC carrier relationships, report spread pricing, and correct network issues. Meanwhile, California's SB 41 imposes fiduciary responsibilities on PBMs, indirectly influencing WC-related activities.
Adjustments to Fee Schedules
Recent modifications to California's Division of Workers' Compensation's Official Medical Fee Schedule require updates from PBMs, payers, and TPAs to align with the new payment rates. This stresses the need for operators in multi-state regions, such as California and Oregon, to adjust compliance with updated cost-to-charge ratios and payment standards.
Broader Market Implications
As federal and state regulations evolve, so do market dynamics. Ongoing Federal Trade Commission scrutiny of major PBMs like Caremark and OptumRx suggests a potential shift in nationwide PBM compensation models. As the pivotal role of PBMs in managing WC costs and care continues, organizations that proactively adjust to these regulatory shifts will find themselves well-positioned.