The Department of Labor’s Employee Benefits Security Administration issued a final rule requiring providers of pharmacy benefit management services, and affiliated brokers and consultants, to disclose their compensation to fiduciaries of large, self-insured group health plans. Those fiduciaries are the officials responsible for selecting and monitoring service providers for plans covered by the Employee Retirement Income Security Act.
The disclosures are needed so plan fiduciaries can judge whether contracts with these firms are reasonable, including whether the firms’ pay is reasonable, the department said. Pharmacy spending is a major driver of overall healthcare costs for employers and is growing faster than medical and surgical spending, according to the department. About 136 million Americans receive health coverage through their employers, or family members’ employers, in group health plans covered by the law.
The requirements apply to an exemption that lets plans hire service providers even though deals between a plan and a firm serving it are otherwise barred. To use the exemption, the contract must be reasonable, the services must be necessary to set up or run the plan, and the plan may pay no more than reasonable compensation. If those conditions are not met, responsible plan fiduciaries and the service providers may face enforcement action and a civil penalty, the department said.
Under the final rule, the service providers must give responsible plan fiduciaries detailed disclosures describing their compensation and advance disclosure of compensation they reasonably expect to receive. The rule also includes audit provisions so fiduciaries can verify that the disclosures are accurate. Fiduciaries will be able to use the information when selecting a pharmacy benefit manager, engaging an affiliated broker or consultant, and monitoring the providers.
Trump directed the department to propose the regulations in an executive order titled “Lowering Drug Prices by Once Again Putting Americans First.” The department said it issued the rule to improve employer health plan transparency into the direct and indirect compensation received by pharmacy benefit managers.
Pharmacy benefit managers have acquired significant influence over prescription drug costs in recent years, the rule says. For self-insured plans, they organize pharmacy networks, negotiate pharmacy reimbursement and drug rebates, set formularies, process claims, and manage how drugs are used. A formulary is a list of drugs covered by a plan, and a rebate is a manufacturer discount given for preferred placement on that list.
The firms receive compensation from the plans and from other sources in the pharmaceutical supply chain, the department said. Brokers and consultants who advise plans on pharmacy benefits may be affiliated with a pharmacy benefit manager and may also be paid by sources other than the plans. The department said concerns have existed for many years that these firms are not fully disclosing their compensation to the officials responsible for the plans.
Retail prescription drug spending in the United States amounted to nearly $495 billion in 2024 and is projected to grow seven percent in 2025, but to grow more slowly from 2026 to 2033, according to Centers for Medicare & Medicaid Services figures cited in the rule. Employers anticipate an 11 to 12 percent increase in pharmacy costs in 2025 into 2026, according to a Business Group on Health survey cited in the rule.
The regulation is effective Jan. 4, 2027. It applies to plan years beginning on or after July 1, 2027.
The rule carries out a change Congress made in the Consolidated Appropriations Act, 2026, requiring specified disclosures from a broad group of service providers to group health plans, including pharmacy benefit managers. Separately, Congress provided that pharmacy benefit managers must pass rebates, fees, alternative discounts, and other pay from drug manufacturers and other entities through to the plans they serve, or to health insurers acting for the plans, effective for plan years beginning on or after Aug. 3, 2028. A further provision will require additional disclosures looking back at drug spending and drug use, effective for plan years beginning on or after the same date.