Labor Department Orders Pharmacy Benefit Managers to Disclose All Compensation to Employers

The Department of Labor will require pharmacy benefit managers, together with their affiliated brokers and consultants, to disclose all direct and indirect compensation to the fiduciaries of large, self-insured health plans, under a final rule published in the Federal Register on 2 November 2026. The regulation, issued through the department’s Employee Benefits Security Administration, is effective 4 January 2027 and applies to plan years beginning on or after 1 July 2027. It is codified at 29 CFR 2550.408b–22 and carries the identifiers FR Doc. 2026–22306 and RIN 1210–AB37.

The rule implements section 408(b)(2)(B) of ERISA as amended by the Consolidated Appropriations Act, 2026, and follows Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First, which directed the department to propose rules improving employer transparency into PBM compensation. In the preamble, the department describes PBMs as the “middlemen” of the pharmaceutical supply chain and states that the disclosures are needed so that fiduciaries can judge whether contracts and compensation are reasonable, a condition of ERISA’s prohibited transaction exemption. The rule was signed by Daniel Aronowitz, Assistant Secretary for Employee Benefits Security, and was filed for public inspection on 30 October 2026.

What must be disclosed

Covered service providers must give the plan’s responsible fiduciary, reasonably in advance of entering, extending or renewing a contract, a written description covering:

• the services to be provided and all direct and indirect compensation, expressed as monetary amounts;
• how compensation is allocated among the provider, its affiliates, agents and subcontractors;
• any formulary placement incentives and arrangements agreed with drug manufacturers, including tiering, exclusion of competitors’ drugs and coverage of drugs made by the PBM or an affiliate;
• rebates, price protection, spread pricing, administrative and network fees, and payments received from pharmacies, including claw-backs of copay amounts above the pharmacy’s reimbursement;
• compensation from float, from PBM-affiliated pharmacies, and from drugs reimbursed under the medical benefit;
• the department’s catch-all “other compensation” category, which it retained after commenters asked for named categories such as copay maximizer and alternative funding programmes.

Audit rights and a route to the regulator

Plans gain a statutory-style right to audit the provider at least once a year on written request, and the fiduciary — not the PBM — selects the auditor. The provider must acknowledge the request within ten business days, and may not restrict the audit’s period, location or the number of records. The plan bears the cost of engaging the auditor; the provider bears the cost of producing the information.

A new administrative class exemption protects a fiduciary that did not know, and reasonably believed, the provider had complied. If the provider fails to correct the breach within 90 calendar days of a written request, the fiduciary must notify the department within 30 calendar days of a refusal, or 90 days after the request. Until the applicability date, the department will not treat providers or fiduciaries acting in good faith under the amended statute as having failed their obligations.

Who is covered and what it costs

The rule reaches only self-insured plans of “specified large employers” — generally 100 or more employees — and “specified large plans” with 100 or more participants. It excludes plans sponsored by employers in the drug supply chain, such as manufacturers, wholesalers, rebate aggregators and PBM-affiliated pharmacies. Disclosure obligations attach where a provider, affiliate, agent or subcontractor may reasonably expect $1,000 or more in compensation in a year, with anything valued at $250 or less during the contract term excluded from the definition of compensation.

The department estimates the rule covers 131,102 self-insured ERISA plans, including 113,226 with 100 to 999 participants and 17,876 with 1,000 or more, and affects 205 third-party administrators and 373 issuers in the group market. It quantifies benefits of up to $293.0 million a year from the value patients place on additional prescriptions filled at lower prices, based on roughly 52.9 million participants and $81.8 billion in annual drug spending in large self-insured plans, and estimates that a one-hour reduction in legal preparation time alone would save about $7.1 million across 39,331 plans negotiating contracts each year. The Office of Management and Budget has designated the rule economically significant.

The disclosure regime shifts the burden of proof onto the intermediaries that negotiate drug prices: employers sponsoring self-insured plans will see, for the first time in the contract itself, how much their PBM and its affiliates earn from rebates, spreads and pharmacy arrangements. For workers and their families, the department’s stated aim is that those figures translate into cheaper prescriptions and premiums.

Source: Federal Register, Vol. 91, No. 210, 2 November 2026, Rules and Regulations, p. 69092 (official reference: FR Doc. 2026–22306; RIN 1210–AB37).