Labor Department Finalizes Pharmacy Benefit Manager Disclosure Rule

The Big Picture

Since December 2021, when disclosure requirements under the Consolidated Appropriations Act, 2021 (CAA, 2021) took effect, EBSA had maintained a temporary enforcement policy allowing parties to develop compliance mechanisms. Following additional statutory disclosure requirements enacted through the Consolidated Appropriations Act, 2026 (CAA, 2026), EBSA established a new temporary enforcement policy covering the period beginning Feb. 3, when those amendments took effect, through the applicability date of the final rule. During that period, covered service providers and plan fiduciaries may rely on good-faith interpretations of their statutory obligations. The final rule's detailed disclosure requirements apply to plan years beginning on or after July 1, 2027.

The rule is limited to large, self-insured plans, those sponsored by an employer with an average of at least 100 employees or plans with an average of at least 100 participants, and explicitly excludes fully insured plans, which EBSA reserved for future rulemaking. The broader statutory disclosure requirements under ERISA continue to apply beyond the narrower group covered by this regulation.

EBSA states the disclosures are needed because "plan sponsors uniformly testified about the difficulties in obtaining the disclosure of PBM compensation," citing a 2014 ERISA Advisory Council finding.

What PBMs Must Disclose

Before signing or renewing a contract, covered service providers must provide written disclosures to the responsible plan fiduciary. Required items include:

• All direct compensation, in aggregate and by service, with estimates presented on a semiannual or quarterly basis.
• Manufacturer payments — rebates, fees, alternative discounts and other remuneration — broken out by drug and reporting period, specifying amounts passed to the plan versus amounts retained.
• Spread compensation: the contracted plan-side price versus the pharmacy-side price by National Drug Code and pharmacy channel.
• Pharmacy recoupments: copay clawbacks and retroactive adjustments, including transaction counts.
• Formulary placement incentives and drug pricing methodology.
• A statement of fiduciary status and information about audit rights.

After the contract begins, covered service providers must disclose actual compensation received or reasonably expected to be received within 30 calendar days after each six-month reporting period, or quarterly at the plan's request. They must also explain material increases of 5% or more over previously disclosed compensation estimates, subject to any lower threshold agreed upon in the contract.

At written request, generally no more than once per year, a plan may require an audit. The covered service provider must provide relevant records, claims and transaction-level data, and contracts with pharmacies, drug manufacturers and rebate aggregators within 60 calendar days, unless extraordinary circumstances beyond its control prevent compliance.

Scale and Cost

EBSA estimates the rule will produce an $818.4 million annual transfer benefiting covered plans and their 52.9 million participants and beneficiaries ages 18 to 64, based on a Congressional Budget Office estimate suggesting that greater pharmacy benefit manager transparency could reduce prescription drug prices by up to 1%. The department acknowledges uncertainty surrounding the projected savings and examined alternative price reductions of 0.5% and 2%.

The three largest pharmacy benefit managers, CVS Caremark, Express Scripts and Optum Rx, reported combined 2025 revenues of $552.3 billion and together control roughly 80% of the market, according to the rule. EBSA estimates the rule's average annual compliance costs over three years would represent approximately 0.01% of those firms' combined revenues. For small pharmacy benefit managers, the department estimates compliance costs could reach at least 2.5% of revenues in the first year and at least 1% in subsequent years.

The Fight Over the Rule

Commenters raised objections concerning the rule's scope, statutory authority, and coverage during the rulemaking process. Several commenters argued EBSA exceeded its statutory authority by requiring disclosure of indirect compensation beyond direct compensation paid by the plan. EBSA disagreed, citing amendments to ERISA section 408(b)(2)(B) enacted through the CAA, 2026.

Many commenters asked EBSA to extend disclosure obligations to fully insured plans, citing fiduciary obligations and concerns about vertical integration of pharmacy benefit managers and health insurers. EBSA maintained the exclusion and reserved fully insured plans for future rulemaking.

Commenters also asked EBSA to expand the regulation's coverage to third-party administrators, independent brokers and consultants, insurers and network vendors. EBSA declined to expand the final rule to those providers but stated it would consider further regulatory action.

The Bottom Line

The rule takes effect Jan. 4, 2027, but its detailed disclosure requirements apply only to plan years beginning on or after July 1, 2027. The statutory disclosure obligations enacted in February remain in effect during the intervening period, subject to EBSA's temporary good-faith enforcement policy.

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