Last week, the Department of Labor decided to deliver treats instead of tricks for benefit compliance professionals in the form of a final rule for Pharmacy Benefit Manger (PBM) transparency requirements. Fortunately, the contents of this final rule largely mirror the PBM transparency rules already outlined in the Consolidated Appropriations Act of 2026 (CAA26).
CAA26 v. DOL Final Rules, What’s the Difference?
Back in April of 2025, the Trump Administration released an Executive Order that, among a variety of provisions, set a timer for the Secretary of Labor to propose PBM transparency regulations for the transactions in which that ERISA- governed plans participate.
As a result, on February 3, 2026, Congress enacted CAA26 into law, which effectively amended ERISA by adding annual reporting requirements, transparency, and audit rights for group health plans. Around the same time, the DOL released proposed PBM transparency rules. This left everyone wondering if the final DOL rules, once released, would lead to competing priorities or mismatched PBM transparency requirements. Fortunately, the DOL’s final rules now align with CAA26’s provisions.
The CAA26 Compensation Disclosure Changes
As part of the monumental CAA26 PBM transparency initiatives, Congress refined the broker disclosure requirements that originated in the Consolidated Appropriations Act of 2021 (CAA21) by clarifying that those requirements also include PBMs and additional service providers, not just brokers and traditional plan consultants.
As a refresher, entities subject to this requirement must disclose both direct and indirect compensation of $1,000 or more they expect to receive from the plan, including where the compensation is coming from, what it’s for, and any additional revenue streams that plan sponsors may not be aware of. This aspect of the CAA26 became effective immediately for the PBMs, TPAs, etc. newly subject to the compensation disclosure requirements.
The DOL Final Rule – ERISA Plans and their Service Partners
What is the new rule?
Like most federal department rules, the current PBM transparency rule focuses on an aspect of checks and balances the DOL has enforcement authority over – ERISA plans.
ERISA includes a prohibited transaction clause that prevents plans from engaging in deals that would cause a conflict of interest for the plan. However, there is an exception that permits ERISA plans to set up service contracts and arrangements that are reasonable and include reasonable compensation. The new DOL final rule helps large self-funded ERISA group health plans verify if the direct and indirect compensation their PBMs receive is in fact reasonable by requiring PBMs to disclose these amounts, the methods used to calculate/allocate compensation, and a description of the services related to these compensation categories. The final rule also provides that plan fiduciaries may work with an auditor to verify the disclosures and includes a process for fiduciary relief if a PBM and/or associated service provider doesn’t furnish the required disclosure.
In what circumstance is a disclosure required?
PBMs and associated service providers (e.g., PBM-affiliated brokers and consultants) are required to provide these disclosures to large self-funded plans that either have 100+ participants or that are sponsored by employers with 100+ employees when the PBM/service provider expects to receive at least $1,000 in direct or direct compensation for services rendered.
What is direct v. indirect compensation?
Direct compensation is defined as those dollars the PBM reasonably expects to receive directly from the covered plan or plan sponsor.
Indirect compensation is those amounts the PBM reasonably expects to receive from sources other than the plan/plan sponsor for prescription drug claims during the disclosure period, including:
- Payments from drug manufacturers;
- Spread compensation;
- Pharmacy recoupment; and
- Price protection agreements.
What do the disclosures need to include?
Disclosures should include descriptions of:
- The services the PBM will render
- The direct and indirect compensation the PBM expects to receive
- Various other types of compensation or financial incentives the PBM may receive
- The PBM’s drug pricing methodology
- If applicable, a statement that the PBM expects to act as a fiduciary for the plan
- A statement of the plan’s audit rights
When do PBMs need to comply?
The DOL final rule goes into effect for plan years beginning on or after July 1, 2027. It is important to note this disclosure should be provided reasonably in advance of new contracts or renewals, so PBMs should be prepared prior to that July 1 deadline to answer questions and provide the appropriate information. After the initial disclosure is provided for new/renewing contracts, PBMs must continue to report on their compensation every 6 months, or quarterly upon request.
What should plans do with these disclosures?
First and foremost, the information disclosed can help plan fiduciaries determine if the contract with their PBM is reasonable. But, the data shared has value beyond this, too: employers can use it to help identify pricing errors, make more informed decisions about formularies and specialty drugs, as a benchmark for evaluating and selecting alternative PBMs, etc.
As mentioned above, fiduciaries that don’t receive the required disclosures have a fiduciary responsibility to take action. In that circumstance, the final rule provides they should request the missing information in writing and, if the provider does not respond as required, notify the DOL and take any additional steps to qualify for relief.
How do these rules interact with the CAA’s compensation disclosure requirements?
The CAA21’s compensation disclosure requirements that, as the CAA26 clarified, now apply to PBMs and other similar service vendors became effective immediately and are broader than the PBM-specific requirements within the DOL’s final rule. Notably, because the threshold for whether a vendor subject to the CAA’s disclosure requirements needs to share their compensation with plan sponsors is purely monetary, as opposed to also depending on plan type and employer/plan size, many more PBMs will need to comply with this requirement than with the DOL’s final rule. Fortunately, because there aren’t any significant conflicts between the two requirements, PBMs subject to both (once the DOL’s takes effect) can presumably fulfill them with a single, comprehensive disclosure to each plan.
Why should you care?
This final rule largely aligns with the CAA compensation disclosure requirements and further cements the federal enforcement priorities as they relate to plan spending, transparency, and the rising cost in prescription drug benefits for health plans. More relevant to employers, however, is the fact that the data PBMs will disclose (and, in many circumstances, should already be disclosing) will offer greater insight into how the pharmacy benefit component of their plan functions and, in turn, enable plan fiduciaries to make better, more informed decisions about the plan.
