DOL PBM Proposed Regulations: Summary and Impacted Stakeholders

President Trump issued the April 15, 2025, Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First, (“EO”) which directed the DOL to issue ERISA section 408(8)(b)(2) regulations pertaining to PBMs in furtherance of the Administration’s efforts to reduce drug prices. Per the EO’s directive, the DOL published a set of Proposed Regulations on January 29, 2026. The stated purpose of the Proposed Regulations is to ensure greater transparency into PBM contracts and services and any affiliated brokers and consultants.

In providing greater transparency, plan fiduciaries are expected to be better equipped to determine whether their PBM contract terms are reasonable. By requiring transparent pricing as part of the PBM contract negotiations, the Proposed Regulations expect to create a more competitive prescription drug market.

Comments on the Proposed Regulations are due by March 31, 2026.

When do the Proposed Regulations go into effect?

If finalized, the Proposed Regulations shall apply to plan years beginning on or after July 1, 2026.

What are the expectations of the Proposed Regulations?

By attaching the Proposed Regulations to ERISA’s existing statutory requirements, the DOL is able to quickly implement a wide range of compensation reporting duties intended to produce clearer explanations of the compensation for pharmacy benefit management services along with the per unit costs for covered drugs. This in turn will provide plan fiduciaries with greater insight into both the cumulative costs and the costs at the basic prescription drug level for each drug covered on their plan’s formulary.

Which employers, plans, and service providers will be impacted?

Employers with a self-insured group health plan that contracts (directly or indirectly) with a PBM are impacted.

All ERISA group health plans except fully insured group health plans are impacted.

Any service provider that enters into a contract (directly or indirectly) with a covered plan and that provider is expected to receive $1,000 or more in direct or indirect compensation in exchange for providing the plan with pharmacy benefit management services, advice, recommendations, or referrals concerning pharmacy benefit management services are impacted.

What Does an Employer / Plan Sponsor Need to Do?

Employers / Plan Sponsors of a fully-insured plan have no required actions to take under the Proposed Regulations.

Employers / Plans Sponsors of a self-funded plan need to be aware that there are requirements to be adhered to for their plans. While the PBM is required to provide the data and documentation to comply with the Proposed Regulations, the employers / plan sponsors should review this material when agreeing to or renewing PBM contract.

Additionally, the employers / plan sponsors are required to follow the Innocent Fiduciary Exemption procedures to avoid liability if a service provider failed to meet its obligations under the Proposed Regulations. (See Innocent Fiduciary Exemption section below)

How are pharmacy benefit management services defined under the Proposed Regulations?

Pharmacy benefit management services will be defined as all necessary services for the management or administration of a covered plan’s prescription drug benefits including the coverage services through a plan’s medical benefit. To assist in understanding this definition, DOL included some examples of pharmacy benefit management services. The examples include:

• acting as a negotiator or aggregator of rebates, fees, discounts, and other price concessions for prescription drugs;
• establishing or maintaining pharmacy networks;
• processing and payment of claims for prescription drugs;
• performing utilization review and management;
• resolving appeals or grievances related to the plan’s prescription drug benefit;
• recordkeeping related to the plan’s prescription drug benefits; and
• performing regulatory compliance for the plan’s prescription drug benefit, in conjunction with any of the other enumerated services.

What information shall be regulated for disclosure requirements?

Initial Disclosure

The service providers are required to make an initial disclosure within a reasonable amount of time prior to the date that the service contract is entered, extended, or renewed. This disclosure shall identify the compensation that the service provider reasonably expects to receive under the contract.

Initial disclosures shall include the following data:

• Description of services which details each pharmacy benefit management service, advice, recommendations, or referrals relating to the pharmacy benefit management services provided to the plan pursuant to the contract or arrangement.
• Direct compensation details all direct aggregate compensation and any compensation for services that are reasonably expected on a quarterly basis.
• Manufacturer payments which detail aggregate payments and all prescription drug payments covered under the formulary that are reasonably expected to be paid on a quarterly basis by the manufacturer or an aggregator. The service provider shall detail the specific amounts passed on and amounts retained.
• Spread compensation which details the quarterly amount of spread compensation to be reasonably expected by the service provider. The spread compensation is defined as the difference between the negotiated reasonably expected rate to be paid by the plan and the negotiated reasonably expected rate to be paid by the service provider to the pharmacy for dispensing drugs in total as well as for each covered drug as per the formulary.
• Copay claw-backs which details quarterly copay claw-back compensation that a service provider’s pharmacy expects to recoup. The copay claw-back compensation is defined as the dollar amount difference between a copayment or coinsurance amount paid to the pharmacy under the plan and the reimbursement to the pharmacy that the service provider recoups.
• Price protection agreements which detail any inflation protection or price protection agreements between the service provider and any drug manufacturer or other party in connection with prescription drugs dispensed under the service contract or arrangement.
• Compensation for termination of service contract or arrangement which details a service provider’s compensation that is reasonably expected due to a contract termination.
• Description of other compensation which details additional compensation not already disclosed under the other categories in the initial disclosure.
• Description of formulary placement incentives which details any formulary placement incentives and arrangements between the service provider and a drug manufacturer.
• Drug pricing methodology which details the net cost to the covered plan for each drug on the formulary and each pharmacy channel.
• Statement of fiduciary status which is a declaration as to whether the service provider is acting as a fiduciary and whether any activity or policy of the service provider may create a conflict of interest.
• Statement of audit right is a declaration that the regulations authorize the plan to conduct an audit. The plan will abide by the procedures’ approved method to request and conduct the audit.

Semiannual Disclosure

The service providers shall also provide semiannual disclosures after the initial disclosure is issued. The semiannual disclosures shall detail the actual compensation received under the contract and provide an explanation for when the actual compensation “materially” exceeded the prior disclosure compensation estimates. The term “materially” is defined as a five percent or more difference. However, the use of a lower percentage or dollar amount is permissible if agreed upon by the contract parties.

The semiannual disclosure shall be due no later than 30 days after the end of each six-month period.

Additional key provisions

Audit rights for self-insured plans

As noted, the Proposed Regulations authorize self-insured plans to conduct annual audits of the service provider to determine the accuracy of any disclosure made in compliance with the Proposed Regulations. The plan fiduciary is authorized to choose its own auditor but shall also be responsible for the cost of the auditor. The service provider shall be responsible for the cost of providing the information requested under the audit and shall provide the auditor with any information that is owned or maintained by an affiliate, agent, or subcontractor of the service provider.

Innocent fiduciary exemption

Responsible plan fiduciaries shall be exempt from liability when they had no knowledge that the service provider failed or would fail to make the disclosures and reasonably believed the regulations’ requirements were met. Should a failure be discovered, the exemption obligates the responsible plan fiduciary to request in writing for the service provider to correct the failure. If the service provider does not comply within 90 days of the written request, the plan fiduciary shall notify the DOL of the failure. The Proposed Regulations will not require the plan fiduciary to terminate the contract but shall require that the plan fiduciaries analyze whether they should continue the contract or arrangement.

Additional instructions

The required Proposed Regulations’ disclosures shall be completed in a clear and concise manner to assist in providing a sufficient analysis of the reasonableness of the service contract or arrangement.

Disclosures of compensation shall be detailed as a monetary amount and will permit the use of estimates if the actual amount cannot be reasonably calculated.

The Proposed Regulations allow plan fiduciaries to request the disclosure in a machine-readable file format.

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DISCLAIMER

The information provided by The Fedeli Group’s Compliance Alert is not intended to be, nor should it be, interpreted as conferring legal advice to the reader of the Compliance Alert. The Fedeli Group Compliance Alerts are designed specifically and solely for informational purposes. Should the reader have any legal questions or concerns after reading this Compliance Alert, it is recommended that the reader seek counsel for a formal opinion.