Last month the Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) proposed new regulations governing pharmacy benefit managers (PBMs) to provide more transparency to group health plans. The regulation, which applies to PBM services to self-funded ERISA group health plans, derives from ERISA 408(b) welfare benefit plan authority.
If finalized, the regulations would become effective 60 days after publication of the final rule, with an applicability date for plan years beginning on or after July 1, 2026—i.e., in mid-April.
The proposed regulation broadly defines which service providers will have to comply with the requirements—the rules are not limited to entities that call themselves PBMs. They require three kinds of disclosure: (1) a comprehensive initial disclosure requirement, (2) updated financial disclosures of the information in the initial disclosure to be made twice a year, and (3) upon request by the plan sponsor to meet reporting obligations of the plan sponsor.
The initial disclosure must be provided to the plan in writing, reasonably in advance of entering, extending, or renewing a service contract or arrangement. For extensions and renewals, 30 calendar days’ advance notice is deemed reasonable unless the parties agree to a longer timeframe. Information that must be disclosed includes a description of the PBM’s services, expected compensation, and audit rights.
The proposed regulation also provides protection for fiduciaries when a PBM fails to comply with these rules. The proposal includes an administrative class exemption for responsible plan fiduciaries where the fiduciary did not know of the PBM’s failure to comply and reasonably believed the requirements had been satisfied.
If finalized, the 408(b) rules would require new disclosures from PBMs and related service providers in order for plan sponsors to meet their ERISA fiduciary obligations. Detailed financial and other information would be required to be shared with plan sponsors, and plan sponsors would have express audit rights to verify the accuracy of the information that is disclosed.
Prospects: PBM reform is alive issue on Capitol Hill. There is wide bipartisan support for imposing new, cost-saving rules on PBMs. If there is new PBM reform law enacted, these proposed regulations will have to be revised to reflect the new law.
NAIFA Staff Contact: Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.