A PBM (pharmacy benefit manager) is a private company that administers and manages prescription drug benefits for health plans and payers. Core services include designing formularies, negotiating prices and rebates with drug manufacturers, contracting with and reimbursing pharmacies, processing pharmacy claims, managing pharmacy networks and mail‑order/specialty programs, and running utilization controls (prior authorizations, step therapy) and other cost‑management programs.
A self‑insured (self‑funded) group health plan is one where the employer (or plan sponsor) pays medical and prescription claims directly from its own funds rather than buying a fixed‑premium insurance policy. Fully insured plans transfer the financial risk to an insurance carrier that pays claims in exchange for a premium; self‑insured plans retain the risk (often buy stop‑loss insurance) and are generally governed by federal ERISA rules rather than state insurance laws.
Under ERISA, plan fiduciaries are the persons or entities who exercise discretionary authority or control over plan administration or assets (for example, named fiduciaries, plan administrators, trustees, and members of an administrative committee). Their key legal duties include acting solely in participants’ best interests, carrying out duties prudently, following plan documents, holding plan assets in trust, and ensuring plan expenses (including service provider fees) are reasonable—plus an obligation to monitor and document selection and oversight of service providers.
ERISA’s prohibited‑transaction rules bar certain dealings between plans and “parties in interest” (including service providers) unless an exemption applies. A service‑provider prohibited transaction exemption is a statutory/agency mechanism that allows plans to contract with service providers so long as the services are necessary and the compensation is reasonable and disclosed. The DOL issued the PBM disclosure proposal under that exemption so fiduciaries can obtain detailed information needed to determine whether PBM compensation is reasonable and permitted under ERISA.
Fiduciary audits would let plan fiduciaries verify PBM disclosures and supporting records. In practice fiduciaries could request transactional and reconciliations data (e.g., rebate amounts by drug and manufacturer, pharmacy reimbursement vs. plan‑paid prices, clawback/recoupment records), contract and fee schedules, claims‑level detail, and audit workpapers; the proposal gives fiduciaries audit rights to inspect PBM books and records and to obtain corrections or relief if disclosures are inaccurate.
The Department of Labor (EBSA) enforces fiduciary and exemption rules; EBSA would oversee and enforce the PBM disclosure requirements (alongside other DOL enforcement tools). Remedies can include requiring corrective disclosures, conditions or relief under the exemption, civil enforcement actions to recover losses to plans, and other administrative or court remedies under ERISA; criminal penalties are rare but DOL civil enforcement and litigation are the typical remedies for fiduciary/prohibited‑transaction breaches.
Mandatory PBM fee disclosures could help fiduciaries detect hidden revenue flows (like undisclosed rebate retention or pharmacy recoupments), improve fiduciary oversight and bargaining, and so lower PBM‑related leaks of plan dollars—potentially reducing employer plan costs and out‑of‑pocket drug costs over time. The effect on retail drug list prices is uncertain: disclosures increase transparency and bargaining power, but price impacts depend on how employers use revealed information, PBM contract changes, and drug manufacturer pricing and rebate practices.
The Federal Register notice‑and‑comment process gives the public 60 days after publication to submit comments on the proposed rule; DOL must consider comments before issuing a final rule. Timelines vary—after the comment period the agency reviews submissions, may revise the proposal, and issues a final rule; that process typically takes several months to over a year depending on complexity and litigation risk.