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🗞️ DOL Takes Aim at Hidden PBM Fees with New Transparency Rule

The Department of Labor proposes requiring pharmacy benefit managers to disclose all fees and rebates to employer health plans, targeting an opaque industry where middlemen profit from hidden charges affecting 90 million Americans.

onthelaborfront

29 Jan 2026 — 3 min read

The U.S. Department of Labor has issued a proposed regulation that would require pharmacy benefit managers (PBMs) to disclose comprehensive compensation details to self-insured group health plan fiduciaries. The proposal represents the most significant federal reform of prescription drug middlemen in decades and advances President Trump's executive order on lowering drug prices.

PBMs act as intermediaries between drug manufacturers, pharmacies, and health plans, managing prescription benefits for approximately 90 million Americans covered by employer-sponsored self-insured plans. However, plan fiduciaries often lack visibility into the full scope of payments PBMs receive from various parties in the pharmaceutical supply chain.

The proposed rule leverages ERISA's Section 408(b)(2) prohibited transaction exemption to mandate three critical categories of disclosures. First, PBMs must reveal rebates and other payments received from drug manufacturers. Second, they must disclose compensation obtained through spread pricing—the practice of charging health plans more for prescriptions than what pharmacies are reimbursed. Third, PBMs must report payments recouped from pharmacies in connection with dispensed drugs.

Spread pricing has emerged as a particularly controversial revenue source. State investigations have uncovered substantial examples: Ohio's Medicaid program found PBMs retained $224.8 million through spread pricing in a single year, while Kentucky documented $123.5 million annually. The practice involves PBMs charging health plans one price while paying pharmacies a lower amount, keeping the difference as profit without necessarily disclosing it.

The three largest PBMs—CVS Caremark, Express Scripts (owned by Cigna), and OptumRx (owned by UnitedHealth Group)—control approximately 80% of the prescription drug market. Their vertical integration with pharmacies, insurers, and now group purchasing organizations has raised concerns about conflicts of interest and lack of competition.

State-level transparency efforts have produced mixed results. Texas reporting requirements have seen PBM-reported rebate payments decline from $5.7 billion in 2021 to just $2.2 billion in 2023, possibly due to the emergence of affiliated group purchasing organizations that may fall outside reporting requirements. This highlights the challenge of designing effective disclosure rules.

The proposed federal regulation would allow plan fiduciaries to audit PBM disclosures for accuracy and provides additional relief if PBMs fail to meet their obligations. This enforcement mechanism addresses a key weakness in many state programs where regulators noted the need for robust penalties to ensure compliance.

Congressional efforts have complemented this regulatory approach. The Pharmacy Benefit Manager Transparency Act, reintroduced in 2025, would prohibit certain PBM practices unless they pass through 100% of price concessions and provide comprehensive fee disclosures. The bipartisan nature of these initiatives reflects widespread concern about PBM practices across the political spectrum.

The proposal enters a 60-day public comment period following its January 30 publication in the Federal Register. If finalized, the regulation would fundamentally alter the information asymmetry that has characterized PBM relationships with employer health plans, potentially enabling more effective cost control and better-informed contracting decisions.

Key Points

Comprehensive disclosure requirements: PBMs must reveal manufacturer rebates, spread pricing profits, and pharmacy payment clawbacks
ERISA enforcement mechanism: Uses existing prohibited transaction exemption framework to mandate transparency
Significant market impact: Affects health plans covering approximately 90 million Americans
Audit rights: Plan fiduciaries gain ability to verify accuracy of PBM disclosures
Market concentration concerns: Three PBMs control 80% of prescription drug market
State precedents show challenges: State transparency laws have produced inconsistent and sometimes unreliable data
Bipartisan support: Congressional legislation and executive action align across party lines
Spread pricing quantified: State audits document hundreds of millions in PBM profits from price differentials
60-day comment period: Public feedback due after Federal Register publication on January 30, 2026