For years, employers have paid pharmacy benefit managers to hold down prescription drug costs without being able to see how much those PBMs were earning along the way. A new federal rule is meant to change that. The Department of Labor’s Employee Benefits Security Administration released a final regulation on October 29, 2026, and published it in the Federal Register on November 2. It requires PBMs, along with brokers and consultants affiliated with them, to disclose in dollars the rebates, fees, markups and other compensation they collect when serving large self-insured employer health plans. Whether the rule actually lowers drug spending will depend on what employers do with that information.
Why did PBMs become a lightning rod. PBMs sit in the middle of the prescription drug supply chain. They negotiate rebates from drug manufacturers, build formularies, set up pharmacy networks and process claims for health plans. According to the Labor Department, the self-insured employer plans they serve cover about 90 million Americans. The industry is highly concentrated: CVS Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx handle roughly 80 percent of U.S. prescriptions. Each is also part of a company that owns insurers and pharmacies.
Critics say those arrangements produce conflicts of interest. When a PBM’s revenue rises with the size of the rebates it negotiates, it may prefer drugs with high list prices and big rebates over cheaper alternatives. “Spread pricing” lets a PBM bill a plan more for a drug than it pays the pharmacy and keep the difference. PBMs can also steer patients to pharmacies they own. A January 2025 Federal Trade Commission staff report found that pharmacies affiliated with the three largest PBMs earned more than $7.3 billion above estimated acquisition costs on specialty generic drugs from 2017 through 2022. Those drugs included medications for cancer and HIV. The PBM industry rejects these criticisms and maintains that its negotiating power lowers net drug costs for plans and patients.
What has been done so far. Reform has moved slowly. Congressional packages stalled repeatedly, including a bipartisan deal stripped from a year-end spending bill in December 2024. In the meantime, states passed their own laws, but federal courts have often blocked them. Arkansas’s first-in-the-nation ban on PBMs owning pharmacies was put on hold in Express Scripts, Inc. v. Richmond (E.D. Ark. July 28, 2025), No. 4:25-cv-00520. The district court found the law likely violates the Commerce Clause and is likely preempted by federal law governing TRICARE. Arkansas appealed, and the Eighth Circuit heard argument on September 22, 2026. A ruling is still pending. Separately, in Flowers v. Caremark PCS Health (8th Cir. June 29, 2026), No. 25-3068, the Eighth Circuit held that ERISA preempts Arkansas’s requirements for how close network pharmacies must be to patients. That decision narrows how far states can regulate PBMs that serve employer plans.
At the federal level, the pace finally picked up this year. In April 2025, President Trump signed an executive order directing the Labor Department to write PBM disclosure rules, and the department proposed them in January 2026. On February 3, 2026, Congress enacted PBM reforms in the Consolidated Appropriations Act, 2026. Beginning in 2028, the law ties PBM pay in Medicare Part D to flat service fees rather than drug prices or rebates. For employer plans, it confirms that PBMs must disclose their compensation under ERISA. It also requires PBMs to pass 100 percent of rebates and similar payments through to ERISA plans for plan years beginning on or after August 3, 2028. Meanwhile, the FTC’s 2024 lawsuit accusing the three largest PBMs of inflating insulin prices has largely ended in settlements. Express Scripts settled in February and Caremark in July, and a proposed settlement with Optum Rx is under review. All three PBMs denied the FTC’s allegations.
Much of this is still on paper. The major federal changes do not take effect until 2027 through 2029, so employers and patients have not yet felt most of the effects.
What the new rule requires.The final rule is built on ERISA section 408(b)(2). That provision lets a plan pay a service provider only if the arrangement is reasonable and the compensation is no more than reasonable. It applies to self-insured plans of employers that averaged at least 100 employees in the prior year, and to similarly sized multiemployer plans, where a PBM expects at least $1,000 in compensation. According to an analysis by Mayer Brown, fully insured plans are excluded from the detailed requirements. So are plans sponsored by drug manufacturers, wholesalers or PBMs.
Before a contract is signed or renewed, a PBM must disclose its direct fees and the manufacturer rebates it expects, broken out drug by drug and showing how much it keeps versus passes through. It must also disclose spread compensation by drug and dispensing channel, money clawed back from pharmacies, formulary incentives, payments due on termination and the net price per fill. After that, it must report what it actually received every six months, or quarterly if the plan asks, within 30 days after each period ends. Any category that exceeds the estimate by 5 percent or more must be explained. Plans also get an annual audit right using an auditor of their choosing. The PBM must produce the data within 60 days, at its own expense.
The consequences fall on both sides. If a PBM fails to comply, the arrangement becomes a prohibited transaction under ERISA. The PBM faces civil penalties, and the plan’s fiduciaries are protected only if they follow the rule’s steps for requesting the missing information, reporting the failure to the Labor Department and deciding whether to keep the PBM. The rule takes effect January 4, 2027, and applies to plan years beginning on or after July 1, 2027. For calendar-year plans, that means January 1, 2028.
What difference it might make. The Labor Department estimates the rule could lower drug costs for plans and participants by as much as $22 billion over 10 years. Labor Secretary Keith Sonderling called it “a win for every American worker.” Community pharmacists, through the National Community Pharmacists Association, applauded the rule. A bipartisan group of 45 state attorneys general had backed the proposal. The industry sees it differently. The Pharmaceutical Care Management Association, which represents PBMs, argued that the rule duplicates the 2026 law and will burden smaller PBMs. PCMA President David Marin said detailed “pharmacy-by-pharmacy transparency is already law.” In its comments on the proposal, the group pointed to the Supreme Court’s 2024 decision limiting deference to agency interpretations, which suggests a court challenge is possible.
The rule’s limits are significant. It does not set drug prices, cap PBM fees or by itself require PBMs to pass savings through; that pass-through comes from the 2026 law in 2028. Small employers and fully insured plans fall outside its detailed requirements. Because the rule applies only to ERISA group health plans, it does not reach workers’ compensation pharmacy costs, which are governed by state law.
For covered employers, the rule offers leverage and creates new duties. Plan sponsors will be able to compare PBM bids on actual dollars instead of advertised rebate guarantees. They will also be expected to review the disclosures, follow up when information is missing and document their conclusions. Benefits attorneys are already advising clients to build at least 90 days into renewals to receive the initial disclosures, and to negotiate audit and termination rights now. The rule gives employers the information. Whether costs come down depends on whether they use it.