Chris Condeluci
Principal, CC Law & Policy

The DOL and Congress Take Aim at PBM Transparency & Compensation Disclosures

August 11, 2026
Illustration of a prescription capsule containing a dollar symbol with financial charts and market data in the background, representing pharmacy benefit manager compensation, drug pricing transparency, and healthcare costs.

Summary

Prescription drug costs are one of the most pressing challenges facing employer-sponsored health plans today. According to Benefitfocus’ State of Employee Benefits Report 2026,1 pharmacy costs are the largest portion of an employer-sponsor’s health care spend at 29.5%, increasing by 10.9% year-over-year. In an effort to lower pharmacy costs and shine a bright light on what Pharmacy Benefit Managers (PBMs) and entities providing services to an ERISA-covered health plan (referred to as “plan service providers”) get paid, the Department of Labor (DOL) and Congress added new transparency and compensation disclosure requirements to the law. Read this article to learn more about: 

  • The required disclosure of rebates, price concessions and drug costs to plan fiduciaries. 
  • The percentage of manufacturer rebates that must now pass through to the plan. 
  • The extension of compensation disclosure rules to PBMs, TPAs, brokers and consultants. 
  • How non-compliance leads to an ERISA violation and potential contract nullification.

What Happened? 

On January 30, 2026, the DOL released proposed regulations requiring a PBM – as well as any other plan service provider – providing “pharmacy benefit management services” to a self-insured health plan to disclose specified compensation these entities receive to the plan’s fiduciary.2 

Three days later, on February 3, Congress passed legislation requiring a PBM to disclose to a fully-insured or self-insured health plan a substantial amount of information, ranging from the dollar value of rebates received from drug manufacturers, price concessions, and spread compensation to the gross and net costs of the prescription drugs in the PBM’s drug formulary.3 Congress also required a PBM to pass-through to the plan 100% of the rebates the PBM received from drug manufacturers.4 

Separately, Congress also amended ERISA’s Compensation Disclosure rules in this February 3rd bill, clarifying that any plan service provider that furnishes a specified “type of service” to an ERISA-covered fully-insured or self-insured plan must disclose “direct” and “indirect” compensation they receive to the plan’s fiduciary.5 

Why Is This a Big Deal? 

Let’s start with detailing what the DOL’s proposed “pharmacy benefit management services” regulations said. Then we will discuss the PBM transparency requirements, the 100% rebate pass-through, and the updates to ERISA’s Compensation Disclosure rules. 

The DOL’s “Pharmacy Benefit Management Services” Regulations 

People in the benefits industry may think that these regulations apply to PBMs. They do. BUT, these regulations also apply to any entity providing “pharmacy benefit management services” to a self-insured plan.6 This includes TPAs, consultants, brokers, and even lawyers like me. The key here is that these entities (whether they are a PBM, or a TPA, or a broker, or even a lawyer) must be providing “pharmacy benefit management services” to trigger this disclosure requirement. What are “pharmacy benefit management services” you may ask? The DOL provides the following examples in the regulation:7 

  • Acting as negotiator or aggregator of rebates, fees, and price concessions for prescription drugs. 
  • Establishing or maintaining prescription drug formularies. 
  • Establishing or maintaining pharmacy networks, including a mail-order, specialty, retail, and other distribution channels to provide prescription drugs. 
  • Processing and payment of claims for prescription drugs. 
  • Performing utilization review and management, including the processing of prior authorization requests, step-therapy protocols, and patient compliance analyses. 
  • Adjudicating appeals related to the self-insured plan’s prescription drug benefits. 
  • Recordkeeping related to the self-insured plan’s prescription drug benefits. 
  • In conjunction with any of the above stated services, performing regulatory compliance with respect to the self-insured plan’s prescription drug benefits. 

What types of compensation must be disclosed by entities providing “pharmacy benefit management services”? Well, it depends on whether the entity actually receives the following compensation streams. If they do, then they must disclose:8 

  • Direct Compensation paid to the entity by (1) the plan or (2) the plan sponsor. 
  • Payments Received from Drug Manufacturers, including rebates, fees, and other compensation. 
  • Spread Compensation, which includes the difference between (1) the amount the entity received from the plan and (2) the amount the entity paid to the pharmacy dispensing the drugs. 
  • Co-Pay Clawbacks, which includes the dollar amount of the difference between (1) a copayment or coinsurance amount paid to the pharmacy by a plan participant and (2) the reimbursement to the pharmacy that the entity recouped from the pharmacy. 
  • Price Protection Agreements, which includes any inflation protection or price protection agreements that the entity has entered into with a drug manufacturer. 
  • Formulary Placement Incentives, which includes the amount of any formulary placement incentives that the entity receives from a drug manufacturer. 
  • Termination of Contract Payments, which includes the amount of compensation (if any) the entity would receive if the contract with the plan is terminated. 

Now, here’s the biggest deal of all, in my opinion: If the entity fails to furnish the required disclosure to the plan fiduciary, that would be a violation of ERISA, the consequences of which could result in a nullification of the service agreement between the plan and this service provider.9 

That could mean: No more future business for this plan service provider. And, if the DOL investigates, the Department may even require the entity to re-pay to the plan compensation the entity may have already received.10 

These regulations (which are currently in proposed form) were recently sent to the Office of Management and Budget (OMB) (on July 23rd) for review. Why is this important? Because OMB is the last stop before regulations are released to the public. As a result, I expect to see final regulations soon (in September). 

The Required Disclosures for PBMs 

A PBM is now required to disclose a whole host of information to the plan fiduciary of a fully-insured or self-insured plan. What information? Well, for starters:11 

  • A list of covered drugs for which a claim was filed and the proprietary name and National Drug Code for each drug. 
  • The difference between the (1) payment amount the PBM received from the plan and (2) the amount the PBM paid to the dispensing pharmacy for each covered drug (i.e., spread compensation). 
  • The type of dispensing channel used for each covered drug (e.g., retail, mail-order, or specialty). 
  • With respect to each drug dispensed through any of these channels, (1) the “wholesale acquisition cost” (in the case of a brand-name drug) and (2) the “average wholesale price” (in the case of a generic drug). 
  • The net price, after rebates, fees, or price concessions received from a drug manufacturer, per course of treatment or single fill. 
  • The total amount of participant out-of-pocket spending for each covered drug. 
  • The total net spending for each covered drug. 
  • The total amount received, or expected to be received, by the PBM from a drug manufacturer in rebates (1) for claims incurred and (2) related to utilization or spending on a covered drug. 

Additional information like a list of the 50 highest cost drugs covered under the plan, and also, specific information if the PBM owns a pharmacy, mail-order or specialty home delivery program, or retail and mail auto-refill programs must be disclosed.12 

Failure to disclose the above stated information would also be a violation of ERISA, the consequences of which are similar to what I noted above. What’s also important here is that while the DOL has primarily not undertaken enforcement actions against plan service providers like PBMs (i.e., the DOL primarily exercises its enforcement authority over plan sponsors), these new statutory requirements – plus the regulatory requirements discussed above – could change the DOL’s historical enforcement practices. That could potentially mean more DOL audits and investigations of plan service providers like PBMs. 

Rebates and Clarification to the Compensation Disclosure Rules 

Rebates 

The dominant business model among PBMs is the “Traditional Rebate Model” in which the PBM generates the lion’s share of its revenue through the receipt of rebate payments from drug manufacturers. Here, the drug manufacturer develops a “list price” for a particular drug and the dollar value of the rebate is typically based on a percentage of the drug’s list price and the PBM generally retains a percentage of this list price. This means that the higher the list price of a particular drug, the higher the rebate (and revenue) paid to the PBM. 

Employer-plan sponsors have long-argued that this results in a perverse incentive for PBMs to favor high-cost drugs, which ultimately results in PBMs choosing to include high-cost drugs on a health plan’s formulary, which results in higher health care spending for employer-plan sponsors and plan participants.13 

Congress ultimately agreed with this argument and has now effectively banned PBMs from retaining any rebates received from a drug manufacturer. Importantly, in cases where a PBM fails to pass-through 100% of the rebates they receive, an employer-plan sponsor can notify the DOL and tell the Department about the non-compliant PBM.14 This could in turn result in the DOL undertaking enforcement actions against this non-compliant PBM. 

Compensation Disclosures 

As stated above, on February 3rd, Congress confirmed that any plan service provider that furnishes a specified “type of service” set forth in the statute’s enumerated “list of services” to a fully-insured or self-insured plan must disclose to the plan’s fiduciary “direct” and “indirect” compensation that this entity receives for the service(s) provided.15 

This amendment to ERISA’s Compensation Disclosure rules is intended to confirm that (1) PBMs that furnish “pharmacy benefit management services” and (2) TPAs that furnish “third-party administrative services” (both of which are “types of services” included in the statute’s enumerated “list of services”) are required to disclose “direct” and “indirect” compensation to a plan’s fiduciary.16 

However, this clarification reaches further than just PBMs and TPAs to other entities furnishing services to a fully-insured or self-insured plan. For example, it appears that compensation received for services related to “stop-loss insurance” must be disclosed to the plan’s fiduciary. Why? Because “stop-loss insurance” shows up on the statute’s enumerated “list of services” (see, e.g., footnote 15). 

It remains unclear how the DOL is going to implement this new clarification to ERISA’s Compensation Disclosure rules. But, we can expect DOL guidance and/or regulations on this topic in the coming months and years ahead. 

As we all wait for additional guidance/regulations, one thing is clear: The DOL and Congress are taking aim at PBMs and ERISA-covered health plan service providers. The result: New legal requirements that could lead to ERISA violations and potential contract nullifications. This also signals to employer-plan sponsors that additional information is coming their way, which means increased fiduciary oversight should follow. For plan sponsors, brokers, and HR leaders, understanding what’s now required—and what’s at stake for non-compliance—has likely never been more important.

1 The State of Employee Benefits 2026 was compiled from enrollment transactions aggregated across 316 large employers (1,000+ full time employees) within the Benefitfocus customer base, representing more than 1.8 million employees in total. The data was evaluated on an anonymous basis. Enrollment records include both active and passive enrollments made by a variety of industry roles (employee, carrier representative, broker, benefits administrator, etc) from the fall of 2023 through fall of 2025 for plan year effective dates of January 1. These measurements are not meant to be a nationally representative sample, but to represent the aggregate activity for large employers on the Benefitfocus platform. 

For data related to medical and prescription drug claims, Benefitfocus drew from 68 employers in our Health Insights Platform with a total population of approximately 600,000 employees and their dependents. Claims were assessed based on claim service dates from 1/1/2024 through 12/31/2025, for year over year comparison periods. The underlying claims demographics and claims were sanitized per HIPAA Safe Harbor guidelines and were filtered to exclude generations older than Baby Boomers to comply with the age 90 cutoff mentioned in section (3) of “Guidance on De-identification of Protected Information. November 26, 2012” which cites the Code of Federal Regulations Title 45 §164.514(b)(2)(i)(C).”   

2 See 91 Fed. Reg. 4348 (Jan. 30, 2026), Improving Transparency into Pharmacy Benefit Manager Fee Disclosure.

3 See Section 6701 of the Consolidated Appropriations Act of 2026 (“CAA 2026”).

4 See Section 6702 of the CAA 2026.

5 Id.

6 See DOL Prop. Reg. 29 C.F.R. section 2550.408b–22(d)(1).

7 See DOL Prop. Reg. 29 C.F.R. section 2550.408b–22(d)(2).

8 See DOL Prop. Reg. 29 C.F.R. section 2550.408b–22(e).

9 See ERISA sections 406(a)(1), 408(b)(2), and 502(a)(5).

10 See ERISA sections 504 and 502(a)(5).

11 See, e.g., new Section 726(b)(2)(A) (added to the law through Section 6701 of the CAA 2026).

12 Id.

13 See Brookings, A Brief Look at Current Debates About Pharmacy Benefit Managers, Sept. 7, 2023 at https://www.brookings.edu/articles/a-brief-look-at-current-debates-about-pharmacy-benefit-managers/

14 See, e.g., new Section 408(b)(2)(B)(viii)(II) (added to the law through Section 6702 of the CAA 2026).

15 See ERISA section 408(b)(2)(B)(ii)(I)(bb)(AA) and (BB), enumerating the following services: plan design, insurance or insurance product selection (including vision and dental), recordkeeping, medical management, benefits administration selection (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness design and management services, transparency tools, group purchasing organization agreements and services, participation in and services from preferred vendor panels, disease management, compliance services, employee assistance programs, or third-party administration services.

16 On December 14, 2022, the Chair and Ranking Member of the House Education & the Workforce Committee sent a letter to the DOL explaining that Congress always intended to subject TPAs and PBMs to ERISA’s Compensation Disclosure requirements if the TPAs and PBMs performed services such as developing a provider network or a prescription drug formulary; processing claims and maintaining records; and/or negotiating rates. See Congressional Letter from the House Education & the Workforce Committee to the DOL, December 14, 2022 at https://files.constantcontact.com/8ede1c26901/d4145872-d74c-4ff6-b05b-1122e270f519.pdf. 

The information provided does not, and is not intended to, constitute legal advice; instead, all information and content herein is provided for general informational purposes only and may not constitute the most up-to-date legal or other information. Benefitfocus does not act in a fiduciary capacity in providing products or services; any such fiduciary capacity is explicitly disclaimed. This summary is provided by a consultant to Benefitfocus.com, Inc., and any opinions expressed within do not necessarily reflect those of Benefitfocus.com, Inc. or its affiliates and are not intended to provide specific advice or recommendations for any plan or individual. 

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