The Destructive Influence Of Pharmacy Benefit Managers By Dan Savickas - July 10, 2024
The basic laws of economics would suggest any overpriced product or service cannot sustain in the free market if there exists sufficient reasonably priced competition. Unfortunately, that is not how the American health care system currently operates. Due to the outsized influence of pharmacy benefit managers (PBMs), the prescription drugs that save both money and lives are not the same ones that get into the hands of patients. A new study focusing on the drug Humira displays this sad reality.
The analysis, provided by IQVIA (a corporation specializing in biopharmaceutical research and development) generated the stunning findings. The study showed that PBMs safeguarded $2 billion worth of profits by suppressing patient access to lower-cost alternatives to Humira, an immunosuppressive drug used to treat arthritis, Crohn’s disease, and other autoimmune conditions. PBMs’ actions in the case of Humira cost employers and health plans an estimated $6 billion in excess costs. Patients directly paid an extra $800 million in co-pays.
The current system incentivizes PBMs to show preferential treatment to more expensive prescription drugs. In fact, PBMs have a number of avenues to artificially drive up costs. The first way is through rebates. PBMs can negotiate discounts off the list price of a particular drug in the form of a rebate paid to them from the pharmaceutical company. However, PBMs are not required to disclose how much revenue they get in the form of rebates, nor are they required to pass any of those savings on to employers or patients. Thus, they will typically favor drugs with higher list prices, as their makers can afford to provide a larger rebate.
Another way is through what’s known as “spread pricing.” This is where PBMs have contracts based on the largely fictional “average wholesale price” (AWP) of a drug. The AWP is much like a list price on a car. It’s not really what’s paid in the end and those who do are generally regarded as fools. The national average drug acquisition cost (NADAC) is a more accurate figure, but because PBM contracts are based around the hyper-inflated AWP, PBMs and pharmacies can pocket the difference between the negotiated rate and NADAC, leaving employers and patients to pay the excess.
Roughly a year ago, many lower cost biosimilars entered the market to compete with Humira. Biosimilars are drugs deemed highly similar to those already approved by the Food and Drug Administration (FDA). Once a brand-name drug’s patent has expired, biosimilar and generic alternatives can come to market, typically driving prices down. For the average drug formulation, 11 months after biosimilars gain market access, they account for about 22% of the market share. However, 11 months after Humira’s biosimilar competitors came to market, they only accounted for 1% of prescriptions.
This slow uptake is especially disappointing, given that these biosimilars – on average – offer an 80% reduction in costs compared to Humira itself. The choice would seem clear in any market. However, there are reports AbbVie, Humira’s manufacturer, threatened rebates on its other products if health plans started recommending lower cost alternatives. Further, PBMs convinced AbbVie to boost its rebates for Humira to as much as 60% of the drug’s list price. This increasingly creates incentives for PBMs and plans to give preference to Humira, despite the exceedingly high costs for patients – and for plans themselves.
In July 2023, Yusmiry (a Humira biosimilar) launched with a list price of $995 for a two-syringe carton. Conversely, a similar package of Humira would cost $6,600. The IQVIA study showed if plans moved toward biosimilars, health plan costs on just this formulation would drop from the status quo of $10.6 billion per year to $4.5 billion. Further, the cumulative co-pay costs for patients would drop from $1.1 billion to only about $300 million.
Such a move would not be without precedent. Countries such as the United Kingdom, Denmark, and Poland have migrated roughly 90% of their patients to Humira biosimilars since they were allowed to come to market back in 2018. In the U.S., Kaiser Permanente – a health care provider covering 12 million Americans across eight states – made a similar transition this year and experienced $300 million in savings. Kaiser Permanente is able to do so, as it operates its own PBM – separate from the “big three” of CVS Caremark, OptumRx, and Express Scripts – and has aligned incentives.
In just one year, with one drug, PBMs have cost American health plans and patients more than $6 billion by suppressing lower cost alternatives. With Americans feeling the crushing weight of inflation, policymakers ought to be doing what they can to provide relief. PBMs, and the distortionary effect they have on the American health care market, have been allowed to fly under the radar for too long. The consequences are too real for too many families to continue to do nothing.
The two correspondents are reporting on the practices of pharmacy benefit managers and drug pricing for aseries of articles.
July 9, 2024
The Federal Trade Commission on Tuesday sharply criticizedpharmacy benefit managers, saying in a scathing71-page reportthat “these powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.”
The regulator’s study signals a significant ramping up of its scrutiny of benefit managers under the agency’s chair, Lina Khan. It represents a remarkable turnabout for an agency that has long taken a hands-off approach to policing these companies.
The F.T.C. has so far stopped short of bringing a lawsuit or other enforcement action against a benefit manager. But the industry fears that the report could lead to a formal investigation into its practices or to a lawsuit accusing benefit managers of anticompetitive conduct. The agency’s findings could also fuel legislative efforts in Congress and in the states to impose limits on the industry.
The three largest benefit managers — CVS Health’s Caremark, Cigna’s Express Scripts and UnitedHealth Group’s Optum Rx — collectively process roughly80 percentof prescriptions in the United States. Hired by employers and government health insurance programs like Medicare, benefit managers are responsible for negotiating prices with drug makers, paying pharmacies and helping decide which drugs are available and at what cost to patients.
Benefit managers are supposed to save everyone money. But in recent years, the industry has grown more consolidated and has taken more control over how patients get their medicines, in a shift that critics say contributes to driving up drug costs.
In a statement on Tuesday, Ms. Khan said the agency’s inquiry had shown “how dominant pharmacy benefit managers can hike the cost of drugs — including overcharging patients for cancer drugs.” She went on to say that the agency found evidence of “how P.B.M.s can squeeze independent pharmacies that many Americans — especially those in rural communities — depend on for essential care.”
The industry strongly disputed the F.T.C.’s findings. “These biased conclusions will do nothing to address the rising prices of prescription medications driven by the pharmaceutical industry,” said Justine Sessions, a spokeswoman for Express Scripts.
The benefit managers defended their business practices, saying they save money for employers, governments and patients. They say that their scale gives them crucial leverage to take on thepharmaceutical companies. And they say they are being frugal with their clients’ money when reimbursing outside pharmacies at low rates for buying and dispensing medications.
An investigation by The New York Times published last month found that the benefit managers often act in their own interests, at the expense of patients, employers and taxpayers.
The F.T.C.’s report cited The Times’s findings, detailing an array of ways that benefit managers appeared to be inflating the cost of prescription drugs. The agency’s study characterized the benefit managers in blistering language, saying they “wield enormous power and influence” and that their practices “can have dire consequences for Americans.”
For example, the report pointed to an important line of business — the companies’ affiliated pharmacies, including warehouse-based operations that send prescriptions through the mail to patients. The agency examined two generic cancer drugs and found that benefit managers often paid their own pharmacies much more than it would cost to buy those drugs from a wholesaler. The practice translated into nearly $1.6 billion in revenue over less than three years for the biggest three conglomerates, according to the report.
The agency also zeroed in on the benefit managers’ role in deals intended to block competition in favor of a single product. These are arrangements in which a drug maker pays a large discount, handled by the benefit manager and passed back to the employer, in exchange for restrictions that push the drug company’s product to patients, while discouraging similar and potentially cheaper products. The report suggested that this practice may be illegal because it thwarts competition.
The commission voted 4-1 to issue Tuesday’s report. The two Republican commissionersissued statementsexpressing concern with elements of the report, saying it relied too much on weak evidence.
David Whitrap, a CVS Caremark spokesman, said that policies that would limit the P.B.M.s’ ability to negotiate “would instead reward the pharmaceutical industry, leaving American businesses and patients at the mercy of the prices drugmakers set.”
The F.T.C. has historically given these intermediaries the benefit of the doubt, because it viewed their mission of lowering drug prices as good for consumers. The agency waved through a series of mergers, sayingin 2012that there was robust competition.
The benefit managers have “done a very skillful job in avoiding regulation,” said David Balto, an antitrust lawyer in Washington who worked at the commission during the Clinton administration and is a sharp critic of the benefit managers.
Over the past decade, the top three benefit managers steadily gained more market share. By the end of 2018, each had become part of the same company as a giant insurer. Critics said that corporate structure created an uneven playing field that squeezed out smaller competitors. The Trump and Biden administrations each became more skeptical about whether patients were benefiting.
Under the leadership of Ms. Khan, who became chair in 2021, the F.T.C. made clear that it was looking closely at benefit managers and other big corporations.
With a more expansive view of anticompetitive harm than her predecessors, Ms. Khan has been aggressive in taking on big business across industries including tech, supermarkets and pharma. Her efforts to block corporate mergers have generated mixed results and criticism that she is overstepping her authority.
In a statement on Tuesday with her two fellow Democratic commissioners, Ms. Khan said the agency’s report reflected an outpouring of concern from patients and pharmacists about the benefit managers. “Given the stakes, there is enormous urgency in understanding P.B.M.s’ practices,” they wrote.
Justin Leventhal at The American Consumer Institute promotes direct-to-consumer (DTC) pharmaceutical sales as an antidote to the current pharmacy benefit manager price fixing:
How DTC Drug Sales Undermine the PBM Rebate Machine By Justin Leventhal - February 04, 2026
If you wanted to design a health insurance system to keep drug prices high, you’d build exactly what the United States has today: a marketplace where patients never see real prices, can’t compare options, and are steered toward expensive drugs because pharmacy benefit managers (PBMs) profit the most from them. Instead of competition disciplining prices, backroom negotiations determine what medicines people take and how much they pay—and consumers bear the cost.
Drug prices can be inflated by various factors, but the most important today is that most medicines are disconnected from the market forces that would drive prices down. The medicines patients routinely take—and what those medicines cost—are determined not only by doctors, but also by PBMs and pharmaceutical manufacturers behind closed doors. Patients are cut out, often leaving them purchasing more expensive drugs that generate larger rebates for PBMs instead of less expensive generic alternatives. This disconnect prevents consumers from choosing lower-cost medicines.
The reason PBMs favor higher-cost drugs is the rebates manufacturers offer—which PBMs are not required to pass on to patients. If a PBM can facilitate the purchase of a $5 generic or a $50 brand-name that includes a $30 rebate, the PBM has a clear financial incentive to push the latter even though it is not aligned with patients’ best interests. In the first case, the PBM charges a patient’s insurer $5. In the second, it can charge $50 and keep the $30 rebate. When PBMs charge insurers, it increases their costs leading insurers to raise premiums to pay for it.
Obscuring the true price of medicines behind opaque negotiations, insurance cost-sharing, and copays severs consumers from prices and prevents competition from driving costs down. Most prescriptions Americans buy are routine, repeated transactions—the exact type of purchases where markets are most effective at lowering prices. When patients can see that the brand-name drug costs ten times more than an equivalent generic costs and choose accordingly, brand-name manufacturers are pressured to reduce prices, and generics are pressured to compete with each other. The result is competitive prices instead of negotiated high ones.
While it may sound fanciful that patients would shop around for prescriptions, it is exactly what happens in the over-the-counter medicine market all the time, and there is no reason to think it couldn’t work for routinely taken prescriptions. In fact, direct-to-consumer (DTC) pharmaceutical sales are already doing just that. Companies like Eli Lilly, Pfizer, and more have already begun selling some medicines directly online, but the number of drugs offered must grow for DTC to become a viable alternative for more consumers and to encourage insurers to design plans that incorporate it.
Health insurance has taken over so much of routine care that it isn’t real insurance; it is a prepayment system for predictable care and medicines. By moving routine purchasing decisions back into patients’ hands, PBMs lose much of their ability to inflate drug prices, insurers face lower costs, and competitive pressure pushes premiums down. With downward pressure on both drug and insurance prices, patients keep more of their money while still receiving the medicines they need.
Even for those who stay within the current insurance system, the patients who choose lower-cost plans paired with cash purchases of pharmaceuticals help create real prices—benchmarks patients can use hold insurers accountable, and insurers can use to hold PBMs accountable. As in other industries, PBMs will need to justify charging more than a drug’s retail price based on the services they provide. Instead of hiding true prices, PBMs will be forced to operate in a market where everyone knows what a drug should cost, exposing artificial markups.
The rapid expansion of DTC pharmaceutical sales shows that competitive drug pricing emerges when PBMs are removed from the equation. Their central role is not a necessity; it is a consequence of an insurance system stretched far beyond its proper function. As more patients purchase medicines directly—and more insurers redesign plans around transparent, upfront pricing—the PBM model will collapse under its own inefficiencies. Empowering consumers and restoring real market forces is the surest way to lower drug prices and end the rebate-driven distortions that have plagued the system for decades.
The Department of Labor's (DoL) Employee Benefits Security Administration (EBSA) has proposed a Pharmacy Benefit Manager Fee Disclosure Rule. The proposed rule has a comment period which ends on March 31st. The rule is quite involved, but here is the front matter:
Improving Transparency Into Pharmacy Benefit Manager Fee Disclosure A Proposed Rule by the Employee Benefits Security Administration on 01/30/2026
AGENCY:
Employee Benefits Security Administration, Department of Labor.
ACTION:
Proposed rule.
SUMMARY:
The Department is proposing a regulation that would require providers of pharmacy benefit management services and affiliated providers of brokerage and consulting services to disclose information about their compensation to fiduciaries of self-insured group health plans subject to the Employee Retirement Income Security Act (ERISA). These disclosures are needed so that fiduciaries can assess the reasonableness of the contracts or arrangements with these service providers, including the reasonableness of the service providers' compensation. These disclosure requirements would apply for purposes of ERISA's statutory prohibited transaction exemption for services arrangements.
This proposal implements section 12 of President Trump's Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First, which instructs the Department to propose regulations to improve employer health plan transparency into the direct and indirect compensation received by pharmacy benefit managers. If finalized, this regulation would affect sponsors and other fiduciaries of self-insured group health plans and certain service providers to such plans.
DATES:
Comments are due on or before March 31, 2026.
ADDRESSES:
You may submit comments, identified by RIN 1210-AB37, by one of the following methods:
Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210.
Instructions:
All submissions received must include the agency name and Regulation Identifier Number (RIN) for this rulemaking. Comments received, including any personal information provided, will be posted without change to
and made available for public inspection at the Public Disclosure Room, N-1513, Employee Benefits Security Administration, 200 Constitution Avenue NW, Washington, DC 20210. Persons submitting comments electronically are encouraged not to submit paper copies.
We encourage commenters to include supporting facts, research, and evidence in their comments. When doing so, commenters are encouraged to provide citations to the published materials referenced, including active hyperlinks. Likewise, commenters who reference materials which have not been published are encouraged to upload relevant data collection instruments, data sets, and detailed findings as a part of their comment. Providing such citations and documentation will assist us in analyzing the comments.
Warning:
Do not include any personally identifiable or confidential business information that you do not want publicly disclosed. Comments are public records posted on the internet as received and can be retrieved by most internet search engines.
for access to the rulemaking docket, including the plain-language summary of the proposed rule of not more than 100 words in length required by the Providing Accountability Through Transparency Act of 2023.
FOR FURTHER INFORMATION CONTACT:
Stephen Sklenar or Saliha Moore, Office of Regulations and Interpretations, Employee Benefits Security Administration, Department of Labor, at 202-693-8513. This is not a toll-free number.
Customer service information:
Individuals interested in obtaining general information from the Department of Labor concerning Title I of ERISA may call the EBSA Toll-Free Hotline at 1-866-444-EBSA (3272) or visit the Department's website (
www.dol.gov/agencies/ebsa).
SUPPLEMENTARY INFORMATION:
A. Executive Summary
In Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First, President Trump instructed the Department to propose regulations to improve employer health plan transparency into the direct and indirect compensation received by pharmacy benefit managers.[1]
Businesses that provide pharmacy benefit management services (hereinafter “PBMs” unless otherwise specified) to ERISA-covered self-insured group health plans have acquired significant influence over prescription drug costs in recent years. By addressing the influence of PBMs and promoting transparent pricing, President Trump's
Executive Order aims to create a fairer and more competitive prescription drug market that lowers costs and ensures accountability across the health-care system.[2]
This proposed rule responding to those directives is only one component of the Trump Administration's larger initiative to address rising health-care costs for Americans.[3]
PBMs are described as the “middlemen” in the pharmaceutical supply chain.[4]
For ERISA-covered self-insured group health plans, PBMs perform a wide range of services including, but not limited to, organizing pharmacy networks, negotiating pharmacy reimbursement amounts and drug rebates, establishing drug formularies,[5]
and processing claims. In connection with these services, PBMs receive compensation from self-insured group health plans as well as other sources in the pharmaceutical supply chain. Self-insured group health plan sponsors and other fiduciaries who are responsible for prudently selecting and monitoring service providers (referred to herein as “responsible plan fiduciaries”) also commonly rely on brokers or consultants to help them with advice, recommendations, and referrals regarding pharmacy benefit management services.[6]
The brokers or consultants may, in some cases, be affiliated with a PBM, and they also may receive compensation from sources other than self-insured group health plans.
Concerns have existed for many years that PBMs, including in their capacities as brokers and consultants with respect to pharmacy benefit management services, are not fully disclosing their compensation to the responsible plan fiduciaries. These concerns prompted the ERISA Advisory Council to recommend that the Department consider extending its service provider disclosure regulation to require specific disclosures by PBMs.[7]
In addition, in 2020, Congress amended ERISA's statutory service provider exemption to add a provision addressing disclosure by brokers and consultants to group health plans' responsible plan fiduciaries.[8]
The Department's proposed regulation is intended to provide much needed transparency into contracts and arrangements with PBMs and affiliated brokers and consultants so that the responsible plan fiduciaries of ERISA-covered self-insured group health plans can better fulfill their statutorily mandated role to determine that the service contracts or arrangements are reasonable. Under the Department's proposed regulation, these service providers would be required to provide robust disclosures to responsible plan fiduciaries of self-insured group health plans regarding their compensation for such services, including the advance disclosure of compensation they reasonably expect to receive. The proposed regulation also includes audit provisions designed to ensure that the responsible plan fiduciaries of self-insured group health plans can verify the accuracy of the disclosures. The responsible plan fiduciaries would be able to use the disclosures in their process of selecting a provider of pharmacy benefit management services, engaging an affiliated broker or consultant, monitoring these service providers' operations and compliance with contractual obligations, and also in analyzing the drivers of prescription drug costs.
B. Background
1. Group Health Plan Prescription Drug Coverage
Approximately 136 million Americans receive health coverage through their employers (or their family members' employers) in group health plans covered by ERISA.[9]
Group health plans provide healthcare benefits such as hospitalization, sickness, prescription drugs, vision, and dental. Group health plans provide these benefits by purchasing insurance or by self-funding benefits from the employer's general assets or using a funded trust.
Retail prescription drug spending in the U.S. is expected to have amounted to nearly $495 billion in 2024 and is projected to grow 7 percent in 2025, but grow more slowly from 2026 to 2033.[10]
In employer-sponsored group health plans, the cost of prescription drugs is usually shared between the group health plan and the individual participant, where the participant pays a fixed amount (copayment) or a percentage of the drug's cost (coinsurance). The group health plan's drug formulary identifies the drugs that are covered and organizes the drugs into tiers with different cost-sharing requirements imposed on participants. The tiers often distinguish between generic drugs and brand-name drugs, and may have a separate tier for “specialty drugs.” [11]
Managing a group health plan's prescription drug coverage is exceedingly complex for a number of reasons, including, but not limited to, the vast number of drugs available on the market and the large number of drug manufacturers and pharmacies. Further, the pharmaceutical supply chain involves multiple entities—including drug manufacturers, drug wholesalers, pharmacies, PBMs, payors (e.g., group health plans), and participants—that interact with each other in arrangements that can be quite opaque.[12]
Due to the complexity of the pharmaceutical supply chain and the multitude of players involved, responsible plan fiduciaries of group health plans often outsource pharmacy benefit management services among other types of services. When group health plan benefits are obtained through insurance, pharmacy benefit management services are often integrated with the insurance contract. When group health plans are self-insured, however, the responsible plan fiduciaries may engage a PBM directly or they may obtain pharmacy benefit management services through a third-party administrator (TPA) or other entity.......
Go to the Federal Register for the remaining pages of the entire proposed rule.
The U.S. Department of Labor released a proposal under the Employee Retirement Income Security Act (ERISA) to improve transparency in fees and compensation received by pharmacy benefit managers (PBMs) and their affiliates, including affiliated providers of brokerage and consulting services. The proposed rule would require providers of pharmacy benefit management services to make detailed disclosures to fiduciaries of employer-sponsored self-insured group health plans to satisfy ERISA's statutory prohibited transaction exemption for service arrangements.
The proposal carries out President Trump's directive to the Department in Executive Order 14273. It is one component of the administration's broader initiative focused on healthcare price transparency and drug pricing reform.
Background
President Trump's Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First, instructed the Department to propose regulations to improve transparency into the direct and indirect compensation received by PBMs. Prescription drug spending is a significant component of employer-sponsored healthcare costs, and EO 14273 aims to create a fairer and more competitive prescription drug market, lower costs, and ensure accountability across the healthcare system.
PBMs play a central role in managing prescription drug benefits by developing drug formularies, negotiating rebates and fees with drug manufacturers, establishing pharmacy networks, and processing prescription drug claims. While PBMs provide valuable services, their compensation arrangements are often complex, opaque, and difficult for plan fiduciaries to evaluate because compensation might not only come from the group health plan. Compensation might also come from arrangements with drug manufacturers, pharmacies, rebate aggregators, and others in ways that are not fully disclosed. This proposed rule would give plan fiduciaries an invaluable tool to address rising drug costs for American workers and businesses.
To implement EO 14273, the Department has proposed a regulation under ERISA section 408(b)(2) that would require providers of pharmacy benefit management services to provide specific initial and semiannual disclosures to plan fiduciaries of employer-sponsored self-insured group health plans. The proposal would also require PBMs to allow plan fiduciaries to audit the disclosures to verify their accuracy. Finally, relief is proposed for plan fiduciaries in the event their PBM fails to meet its obligations under the regulation.
ERISA Section 408(b)(2)
ERISA generally prohibits transactions between employer-sponsored self-insured group health plans and "parties in interest," which includes service providers. ERISA section 408(b)(2) provides an important exemption that allows plans to enter into service contracts only if the services are necessary, the contract or arrangement is reasonable, and no more than reasonable compensation is paid.
In 2012, the Department finalized regulations under ERISA section 408(b)(2) requiring certain service providers to pension plans to make advance disclosures about services to be provided, fiduciary status of the covered service provider or its affiliates (if applicable), and reasonably expected direct and indirect compensation. The rule established specific disclosure obligations to ensure that responsible plan fiduciaries have the information they need to make better decisions when selecting and monitoring their plans' service providers.
In 2021, Congress amended ERISA section 408(b)(2) to add paragraph (B), which details the disclosures that certain brokerage and consulting service providers must make to group health plans. Paragraph (B) closely tracks the Department's regulation for pension plan arrangements.
The Department's proposed PBM fee disclosure rule follows a similar structure to the pension rule and the statutory provision in ERISA section 408(b)(2)(B). However, the proposal appropriately tailors the PBM disclosure requirements to give fiduciaries of self-insured group health plans the information that is necessary to evaluate PBM compensation arrangements, which pose unique complexities due to the structure of the pharmaceutical supply chain. The goal of this proposed rule is to ensure plan fiduciaries have access to clear information that helps them understand PBM compensation flows, identify conflicts of interest, and determine whether PBM contracts or arrangements are reasonable under ERISA section 408(b)(2).
Overview of the Proposed Regulation
The proposed regulation would require providers of pharmacy benefit management services as well as certain PBM-affiliated brokers and consultants ("covered service providers") to make specific disclosures to self-insured group health plans. Covered service providers are the entities that enter into contracts or arrangements with the self-insured group health plans to provide pharmacy benefit management services, regardless of whether the services will be performed directly or through affiliates, agents, or subcontractors.
Covered service providers would be required to provide initial disclosures to the plan fiduciary reasonably in advance of entering into, renewing, or extending a contract or arrangement. The initial disclosures would include a description of the pharmacy benefit management services as well as information on the direct compensation from the self-insured group health plan and compensation reasonably expected to be received from other arrangements, including:
payments from drug manufacturers,
spread compensation (i.e., when the price that the plan paid for a prescription drug exceeds the amount that is reimbursed to the pharmacy),
payments recouped from pharmacies in connection with prescription drugs dispensed to the plan ("claw-backs"),
price protection arrangements, and
others.
The proposed rule would also require covered service providers to provide semiannual disclosures of the same compensation categories based on amounts actually received. This ongoing disclosure requirement is intended to support continued monitoring of service provider arrangements throughout the life of the contract or arrangement.
Finally, the proposed rule would require the covered service provider to permit the plan fiduciary to audit the disclosed information's accuracy.
Proposed Administrative Exemption for Plan Fiduciaries
The Department recognizes that there might be circumstances when a covered service provider fails to comply with its obligations under the regulation. In that case, the statutory exemption provided by ERISA section 408(b)(2) would not be available for the plan fiduciary.
For that reason, the proposal includes an additional proposed administrative exemption for plan fiduciaries who take certain steps when a covered service provider fails to comply, including notifying the Department if the covered service provider does not correct the failure.
Public Comment Period
The comment period runs for 60 days after publication in the Federal Register. The proposal includes instructions on submitting comments through www.regulations.gov. Commenters are free to express views not only on the proposal's provisions, but also on any issues relevant to the proposal's subject matter.
Contact Information
For questions about the proposed rulemaking, contact EBSA's Office of Regulations and Interpretations at (202) 693-8500.
For questions about the proposed administrative exemption, contact EBSA's Office of Exemption Determinations at (202) 693-8540.
Regulators are going to regulate, and legislators in an election year will do the big dramatic thing.
Katy Talento, a large-employer benefits expert who worked in the first Trump Administration, is over the moon with the new rule. She has posted a new blog article, and this is her summary, clipped from LinkedIn:
Congress just made most PBM schemes illegal. Not proposed. Not under consideration. Signed into law. Effective mid-2028. DOL's new rule forces PBMs to confess everything. Every kickback. Every spread. Every termination penalty. All of it. Effective July 2026. Here's a list of what PBMs will have to disclose: → Spread pricing (charge plan $X, pay pharmacy $Y, pocket the difference) → Pharma kickbacks (100% must pass through to employers) → Copay clawbacks (collect $30 on $8 generic, keep $22) → Termination penalties (fire us, we keep your rebates) → Formulary steering to PBM-owned pharmacies (20-40x markup) → Whatever else the employer demands → Full audit rights with no restrictions → Semi-annual updates PBMs that lie on these disclosures can face federal prison. Employers who look the other way can too.
I, on the other hand, can recall the consumer market already black-listing PBMs (deservedly so) two+ years ago, entirely without added rules. Patients I know were seeking out independent pharmacies, just to avoid PBMs and of course, higher prices.
As Mr. Leventhal stated in the 3rd comment of this thread.
While it may sound fanciful that patients would shop around for prescriptions, it is exactly what happens in the over-the-counter medicine market all the time, and there is no reason to think it couldn’t work for routinely taken prescriptions. In fact, direct-to-consumer (DTC) pharmaceutical sales are already doing just that. Companies like Eli Lilly, Pfizer, and more have already begun selling some medicines directly online, but the number of drugs offered must grow for DTC to become a viable alternative for more consumers and to encourage insurers to design plans that incorporate it.
A little patience, and a sharp eye to avoid restoring their reputation, and PBMs would have either faded away or shaped up their act.
BUT NO.
Michigan legislators passed a big, complex regulatory regime, signaling to the public, "We saved you. PBMs are now fine."
And now Congress, which has been making PBM-regulation noises for years, has finally made its move with the same end result.
Healthcare consumers have a tough time finding real allies these days.
Landmark Victory for AMAC Action & Seniors as President Trump Signs PBM Reform into Law
AMAC Action | February 4, 2026
Yesterday marked a decisive victory for AMAC members and millions of seniors nationwide. President Donald Trump signed meaningful pharmacy benefit manager (PBM) reform into law, validating a years-long effort led by AMAC Action and powered by tens of thousands of AMAC members who refused to accept a broken system that drives up prescription drug costs for seniors.
The reforms were enacted as part of legislation funding the Department of Health and Human Services, and they strike directly at the opaque and abusive PBM practices that have distorted drug costs for years. For seniors standing at the pharmacy counter and wondering why their prescriptions keep getting more expensive, this law delivers real accountability, long-overdue transparency, and meaningful relief.
At its core, the new law restores oversight to a Medicare Part D system that has operated in the shadows for far too long. It requires the Centers for Medicare & Medicaid Services (CMS) to clearly define and enforce “reasonable and relevant” contract terms in Medicare Part D, ending the era of vague, one-sided agreements that PBMs have used to squeeze pharmacies and undermine patient access.
Just as importantly, CMS is also now granted enforcement authority to ensure those protections are real and enforceable, not just words on paper.
The law also sheds light on PBM business practices by allowing CMS to track pharmacy payment trends and monitor which pharmacies are included – or excluded – from PBM networks. That transparency is critical for protecting seniors’ access to trusted community pharmacies, particularly in rural and underserved areas where independent pharmacies are often the only source of care.
Perhaps most significantly, the legislation prohibits PBM compensation from being tied to a drug’s list price, a practice commonly referred to as “delinking.” By breaking the link between PBM profits and inflated list prices, the law removes a powerful incentive to favor higher-priced drugs and will help lower costs for Medicare beneficiaries while saving taxpayer dollars.
This victory did not happen overnight. AMAC Action entered the fight against PBM middlemen in 2018, long before PBM reform became a popular idea in Washington. Since then, AMAC Action has launched countless grassroots campaigns, held numerous meetings on Capitol Hill, worked closely with physician and patient advocates, produced in-depth educational content, and activated tens of thousands of AMAC members to demand reform. Yesterday’s signing is the direct result of that sustained pressure.
PBMs were originally created to negotiate lower drug prices, and in their early years, they helped make Medicare Part D one of the most successful public-private partnerships in modern health policy. Today, however, the PBM industry bears little resemblance to that model. Most PBMs are now owned by massive insurance conglomerates and function as profit-generating middlemen embedded throughout the pharmaceutical supply chain. A single insurer-owned PBM can act as a benefit designer, wholesaler, mail-order pharmacy, specialty pharmacy, and more – giving it end-to-end control and end-to-end profit long before a medication ever reaches a patient.
That consolidation has had real consequences for seniors. While brand-name drug prices have risen modestly in recent years, seniors’ out-of-pocket costs have skyrocketed. That gap is no accident. It reflects how PBMs and their affiliates decide which drugs patients can access, how cost-sharing is structured, and how little of a manufacturer’s discount actually reaches the consumer. Premiums rise, formularies narrow, benefits shrink, and seniors are left paying more, often at the very moment they can least afford it.
AMAC members have been instrumental in exposing those abuses. In 2022, AMAC members helped spark a Federal Trade Commission investigation into PBM practices by submitting an overwhelming number of public comments. Of the roughly 24,000 comments the FTC received, 17,000 came from AMAC members. Subsequent FTC interim reports confirmed what AMAC Action had been warning for years: the dominant PBMs marked up specialty generic drugs by hundreds or even thousands of percent, generated billions through spread pricing, and steered highly profitable prescriptions to their own affiliated pharmacies while independent pharmacies were driven out of business. Those costs, inevitably, were passed on to patients.
AMAC Action Senior Vice President Andy Mangione said the reforms signed into law represent a long-overdue turning point for seniors and patients. “For years, PBMs have exploited a lack of transparency and accountability in Medicare Part D to pad their profits while seniors paid more at the pharmacy counter,” Mangione said. “By requiring CMS to define and enforce reasonable contract terms, granting real enforcement authority, shining a light on payment and network practices, and delinking PBM compensation from drug list prices, Congress has finally taken meaningful steps to put patients first. This law will lower costs, protect access to community pharmacies, and deliver long-overdue savings to millions of Medicare beneficiaries, including countless AMAC members who fought tirelessly to make this happen.”
While this law represents a major milestone, the work is not finished. These reforms focus on Medicare Part D, and AMAC Action is already turning its attention to PBM business practices in the private insurance market, where many of the same tactics continue to harm patients and families. Still, yesterday’s signing stands as a powerful reminder of what sustained grassroots advocacy can achieve. When AMAC members speak, Washington listens – and seniors across America are better off because of it.
Warren, Hawley introducing legislation to break up ‘Big Medicine’ By Max Rego - February 10, 2026
Sens. Elizabeth Warren (D-Mass.) and Josh Hawley (R-Mo.) are teaming up to “break up big medicine.”
The lawmakers introduced legislation to crack down on health care conglomerates that own multiple parts of the industry — including pharmacy benefit managers (PBMs), which act as a conduit between insurers and drug manufacturers, and pharmacies themselves.
Warren and Hawley’s “Break Up Big Medicine Act” proposes prohibiting parent companies from owning a medical provider or management services organization and a PBM or insurer. It also proposes prohibiting parent companies of prescription drug or medical device wholesalers from owning a medical provider or management services organization.
CBS News was first to report on the legislation earlier Tuesday.
Three PBMs, CVS Caremark, Express Scripts and OptumRX, manage 79 percent of prescription drug claims for roughly 270 million people in the U.S., according to a 2024 report from the Federal Trade Commission (FTC). Those three companies are owned by insurance giants CVS Health, Cigna and UnitedHealth Group, respectively.
A report from the American Medical Association last year said that this vertical integration reduces competition, crowds out smaller insurers and results in higher prices for consumers.
“There’s no question that massive health care companies have created layers of complexity to jack up the price of everything from prescription drugs to a visit to the doctor. The only way to make health care more affordable is to break up these health care conglomerates,” Warren said in a release.
“Our bill would be a monumental step towards ending the stranglehold that corporate giants have on our broken health care system,” she added.
“Americans are paying more and more for healthcare while the quality of care gets worse and worse,” said Hawley, a member of the Senate Health, Education, Labor and Pensions Committee. “In their quest to put profits over people, Big Pharma and the insurance companies continue to gobble up every independent healthcare provider and pharmacy they can find.
“Working Americans deserve better. This bipartisan legislation is a massive step towards making healthcare affordable for every American.”
The legislation also requires that companies in violation come into compliance within one year and empowers the FTC, Department of Health and Human Services, Department of Justice (DOJ), state attorney generals and private citizens to file suit against violators.
Under the law, the FTC and the assistant attorney general for the DOJ’s Antitrust Division — currently Abigail Slater — may also file suit to block “any action that would harm competition to the detriment of the public interest with respect to the conflicts of interest” that are prohibited.
The American Economic Liberties Project applauded the legislation in a release, drawing parallels to the 1932 Glass-Steagall Act, which effectively separated commercial banking from investment banking.
“For decades, policymakers in both parties have incentivized vertical consolidation in health care, resulting in Big Medicine behemoths that exploit conflicts of interest to drive costs up, quality down, and independent providers out of business,” said Emma Freer, senior policy analyst for health care at the anti-monopolist think tank.
“This is why we launched the Break Up Big Medicine initiative last year, and we are proud to support the Break Up Big Medicine Act, which will eliminate these conflicts of interest while restoring power over our healthcare system to patients and the providers who care for them.”
