Department of Labor Finalizes PBM Transparency Rule Expanding Compensation Disclosure Requirements

Key Takeaways: 

• The US Department of Labor has finalized a rule requiring pharmacy benefit managers (PBMs) and certain affiliated brokers and consultants to disclose detailed compensation information to fiduciaries of large, self-insured employer health plans.¹
• The requirements address manufacturer rebates, spread pricing, pharmacy-related payments, and other compensation arrangements while establishing new disclosure and audit obligations under the Employee Retirement Income Security Act.¹,²
• Although employer groups support the changes as a means of strengthening oversight, PBM representatives have raised concerns about duplicative reporting requirements, compliance costs, and potential effects on competition.³

The US Department of Labor (DOL) has finalized new transparency requirements for pharmacy benefit managers (PBMs), expanding federal oversight of the financial arrangements underlying prescription drug benefits for employer-sponsored health plans.

Announced October 29, 2026, the final rule, Improving Transparency Into Pharmacy Benefit Manager Fee Disclosure, requires PBMs and certain affiliated service providers to disclose direct and indirect compensation to fiduciaries of large, self-insured group health plans. The requirements are intended to help plan sponsors evaluate PBM contracts, identify potential conflicts of interest, and assess whether compensation arrangements comply with federal law.¹,²

The regulation takes effect January 4, 2027, with compliance requirements generally applying to plan years beginning on or after July 1, 2027.¹

Rule Expands PBM Compensation Disclosure Requirements

The final rule was issued by the DOL's Employee Benefits Security Administration under Section 408(b)(2) of the Employee Retirement Income Security Act (ERISA), which governs exemptions for certain service arrangements involving employee benefit plans.¹

Under the regulation, covered PBMs must disclose compensation received directly or indirectly through their relationships with pharmaceutical manufacturers, pharmacies, and other entities involved in prescription drug benefit administration.

The required disclosures include:

• Manufacturer rebates and other payments associated with prescription drug arrangements.
• Spread pricing revenue, including amounts retained when a health plan pays more for a prescription than the PBM reimburses the dispensing pharmacy.
• Payments recouped from pharmacies in connection with prescriptions dispensed to plan participants.
• Compensation arrangements involving affiliated brokers, consultants, and other service providers.¹,²

These disclosures are intended to provide plan fiduciaries with information necessary to assess the reasonableness of PBM compensation and determine whether service arrangements satisfy ERISA requirements.

The DOL estimates that the rule could reduce prescription drug costs by as much as $22 billion over 10 years, although actual savings will depend on how plan sponsors use the additional information in contracting and oversight decisions.²

Requirements Apply to Large Self-Insured Employer Plans

The regulation primarily applies to PBMs and affiliated brokers and consultants serving large, self-insured group health plans.

Covered plans generally include self-insured plans with at least 100 participants or plans offered by employers with at least 100 employees. Covered service providers generally must expect to receive at least $1,000 in compensation from the relevant service arrangements.¹

The requirements extend beyond companies formally identifying themselves as PBMs. Entities providing services necessary to administer prescription drug benefits, including formulary management, rebate negotiations, pharmacy network administration, utilization review, and claims processing, may fall within the rule's scope.

This approach reflects the DOL's effort to address compensation arrangements across multiple entities involved in pharmacy benefit administration rather than limiting oversight to traditional PBM contracts.

New Reporting and Audit Obligations Strengthen Plan Oversight

In addition to identifying the types of compensation that must be disclosed, the rule establishes ongoing reporting obligations.

According to Healthcare Dive, PBMs must provide compensation information when negotiating or renewing covered contracts and update those disclosures every 6 months.³

The regulation also permits plan fiduciaries to audit PBM compensation disclosures at least annually to verify their accuracy.¹

These requirements may provide employers with additional tools to evaluate whether their PBMs are retaining revenue through rebates, spread pricing, or other arrangements that are not readily apparent in existing contracts.

For plan fiduciaries, access to more detailed compensation information could support the evaluation of service provider arrangements and the fulfillment of fiduciary responsibilities under ERISA.

Failure to satisfy applicable disclosure requirements may also affect whether a service arrangement qualifies for ERISA's prohibited transaction exemption.

The regulation establishes procedures that may provide relief to plan fiduciaries when a service provider fails to disclose required information, provided specified corrective steps are taken.¹

PBM Industry Raises Concerns About Regulatory Burden

Although employer groups have generally supported increased transparency, PBM representatives have questioned whether the new requirements are necessary in light of other federal reforms.

The Pharmaceutical Care Management Association (PCMA), which represents PBMs, has argued that the rule overlaps with transparency provisions enacted under the Consolidated Appropriations Act, 2026.

According to Healthcare Dive, PCMA President and Chief Executive Officer David Marin expressed concern that the requirements could increase administrative expenses, particularly for smaller PBMs, and potentially contribute to greater market concentration.³

The association also questioned whether the DOL exceeded its statutory authority by imposing additional reporting obligations beyond those established by Congress.

Employer representatives have offered a different perspective. The ERISA Industry Committee, which represents large employers, welcomed the regulation, arguing that greater visibility into PBM compensation would help plan sponsors evaluate contracts and identify opportunities to reduce prescription drug spending.³

The competing positions highlight an ongoing policy debate over whether expanded financial transparency will strengthen competition and accountability or create additional costs that could affect PBM operations and benefit administration.

Rule Builds on Broader Federal PBM Reform Efforts

The final rule follows federal legislation enacted earlier in 2026 that established additional transparency requirements for PBMs and other entities involved in prescription drug benefit administration.

In the final regulation, the DOL acknowledged overlap with the Consolidated Appropriations Act, 2026, but distinguished the purposes of the two disclosure frameworks.

While the statutory requirements focus on retrospective reporting of prescription drug spending and utilization, the DOL rule emphasizes compensation disclosures that allow plan fiduciaries to evaluate service arrangements before entering into or renewing contracts.¹,³

The agency also made adjustments to align terminology, reporting timelines, and applicability with the legislation, aiming to reduce unnecessary duplication.

Nevertheless, questions remain about how PBMs will integrate the requirements into existing reporting systems and whether the regulation could face legal challenges.⁴

Compliance Implications for PBMs and Health Plan Fiduciaries

The final rule introduces several operational and legal considerations for PBMs, employer-sponsored health plans, and affiliated service providers.

For PBMs, compliance preparations may involve reviewing existing contracts, identifying compensation received through affiliated entities, and developing systems capable of tracking and reporting direct and indirect payments.

Plan fiduciaries may also need to update their oversight procedures to evaluate newly disclosed compensation information and determine whether PBM arrangements satisfy ERISA's reasonableness requirements.

Key compliance considerations include:

• Reviewing PBM contracts for compensation arrangements that may require additional disclosure.
• Establishing processes to identify manufacturer rebates, spread pricing revenue, and pharmacy-related payments.
• Evaluating relationships with affiliated brokers, consultants, and other service providers.
• Developing procedures for responding to plan sponsor audits.
• Coordinating reporting obligations under the final rule and other federal PBM transparency requirements.

The regulation does not prohibit PBMs from receiving rebates or using spread pricing arrangements. Instead, it establishes disclosure requirements intended to give plan fiduciaries greater visibility into those practices.

Looking Ahead

The DOL's final rule represents a significant expansion of federal oversight of PBM compensation arrangements, with implementation beginning in 2027.

Although the agency projects substantial potential savings, the regulation's financial and operational effects will depend on implementation, employer contracting decisions, and the costs associated with compliance.

For PBMs, plan sponsors, and compliance professionals, the rule establishes new expectations for documenting and disclosing compensation arrangements while reinforcing the role of ERISA fiduciary oversight in prescription drug benefit administration.

As the compliance deadline approaches, stakeholders will need to evaluate how the requirements interact with existing contracts, federal reporting obligations, and evolving PBM business models.

References

1. US Department of Labor, Employee Benefits Security Administration. Improving transparency into pharmacy benefit manager fee disclosure. Fed Regist. 2026;91:69092-69196. Published November 2, 2026. Accessed November 4, 2026. https://www.govinfo.gov/content/pkg/FR-2026-11-02/pdf/2026-22306.pdf
2. US Department of Labor. US Department of Labor finalizes pharmacy benefit manager transparency rule, delivering big win for American workers, families. News release. Published October 29, 2026. Accessed November 4, 2026. https://www.dol.gov/index.php/newsroom/releases/ebsa/ebsa20261029
3. Pifer Parduhn R. Labor Department finalizes sweeping PBM disclosure rule. Healthcare Dive. Published October 29, 2026. Accessed November 4, 2026. https://www.healthcaredive.com/news/pbm-transparency-final-rule-labor-department-employer/873089/
4. Herman B. New federal rule will require prescription drug middlemen to share secret payments data. STAT. Published October 29, 2026. Accessed November 4, 2026. https://www.statnews.com/2026/10/29/prescription-drug-price-reform-pbm-disclosure-rules-face-challenge/