The Year of PBM Reform? Recent Legal Developments, Including a Proposed Transparency Rule for Self-Insured Group Health Plans

Less than two months into 2026, several pivotal moments have emerged in the long-running pharmacy benefit manager (“PBM”) reform discussions. This Alert provides an overview of three key developments in the PBM reform landscape and offers a deeper analysis of the third – the Department of Labor’s (“DOL”) proposed rule (“Proposed Rule”),¹ which is open for public comment until March 31, 2026. For questions about these developments or assistance in preparing comments, please contact one of the authors or your usual Ropes & Gray advisor.

Overview of PBM Reforms

Omnibus Funding Bill. On February 3, 2026, Congress enacted an omnibus funding bill that, among other provisions, mandates delinking PBM compensation from list prices in Medicare Part D; requires flat-dollar, fair market value remuneration for services; and requires additional transparency with Part D plan sponsors.² The same bill institutes significant reforms in the commercial market as well – imposing transparency requirements for group health plans and health insurance issuers offering group health insurance coverage and requiring PBMs to remit all rebates and other remuneration to plan clients.³

PBM Settlement. The next day, on February 4, 2026, the Federal Trade Commission (“FTC”) announced a landmark settlement and consent order with the PBM Express Scripts that requires Express Scripts to implement various remedies no later than January 1, 2027.⁴ Those remedies could significantly reshape the business model of Express Scripts (and perhaps, eventually, other PBMs the FTC continues to investigate). Key remedies include prohibiting Express Scripts from preferring formulary high list price drugs over low list price versions of the same drug, delinking PBM compensation from drug list price, ensuring patient cost-sharing is based on drug net cost rather than list price, providing covered access to the new direct-to-consumer TrumpRx platform upon relevant legal and regulatory changes, mandating reshoring of rebate group purchasing organization (“GPO”) functions from Switzerland to the U.S., and transitioning the reimbursement model for retail community pharmacies to a “more transparent and fairer model based on the actual acquisition cost for a drug product plus a dispensing fee.”⁵

DOL Proposed Rule

These two developments followed on the heels of a significant January 30, 2026 Proposed Rule from DOL that would mandate PBM remuneration transparency in the self-insured employer market segment, which continues to comprise the largest market segment for health insurance.⁶ The Proposed Rule implements Employee Retirement Income Security Act (“ERISA”) Section 408(b)(2)(B) and fulfills the Trump Administration’s 2025 Executive Order 14273, which directed DOL to “improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers.”⁷ If finalized as proposed, the Proposed Rule would mandate that PBMs and related service providers disclose detailed financial information, empowering plan fiduciaries to better assess the reasonableness of compensation and identify conflicts of interest. The Proposed Rule would also help illuminate historically opaque categories of PBM remuneration, including manufacturer rebates, spread pricing, pharmacy claw-backs, and compensation received by affiliates, agents, and subcontractors. The required disclosures could enable plan sponsors to better compare PBM offerings, identify PBM remuneration that may have been less visible historically (such as remuneration from drug manufacturers, pharmacies, rebate aggregators, and others), and potentially use such information to negotiate more favorable terms on behalf of plans. As DOL describes it, “[t]his proposed rule would give plan fiduciaries an invaluable tool to address rising drug costs for American workers and businesses.”⁸

The Proposed Rule’s comment period is underway and closes March 31, 2026. If finalized as proposed, the related regulations would take effect 60 days after publication and apply to plan years beginning on or after July 1, 2026.

Regulatory Background

ERISA generally prohibits transactions between employer-sponsored self-insured group health plans and so-called parties in interest, including entities that provide services to the plan.⁹ Under an exception to this rule, ERISA Section 408(b)(2) allows plans to enter into service contracts where the services are necessary, and the related service arrangement is reasonable and provides for only reasonable compensation.¹⁰

In 2012, DOL imposed service provider compensation and other disclosure requirements on pension plan service providers. At the time, the agency declined to impose these types of requirements on health and welfare plans due to differences in their services and compensation arrangements.¹¹ In 2014, however, the ERISA Advisory Council turned its attention to health plans, recommending extending these disclosure regulations to PBMs, citing lack of transparency, complex compensation structures, and audit limitations.¹²

Congress instituted transparency requirements as a matter of statute in its enactment of the Consolidated Appropriations Act of 2021 (“CAA of 2021”), which amended ERISA Section 408(b)(2) by adding a new paragraph (B) applicable to certain service arrangements with group health plans.¹³ The CAA of 2021 requires covered service providers (“CSPs”) to make remuneration and other disclosures to responsible plan fiduciaries. The statute defines a CSP as:

a service provider that enters into a contract or arrangement with the covered plan and reasonably expects $1,000…or more in compensation, direct or indirect, to be received in connection with providing…[b]rokerage services…[or]…[c]onsulting…related to the development or implementation of 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.¹⁴

Under the ERISA statute, a service arrangement that does not comply with these disclosure requirements is not “reasonable” within the meaning of Section 408(b)(2) and therefore constitutes a prohibited transaction to which the statutory exemption does not apply, exposing PBMs to risk of DOL enforcement and substantial civil penalties.

Clarifying “Consulting…Related to” Pharmacy Benefit Management Services

In the years since the enactment of the CAA of 2021, some stakeholders have questioned whether PBMs are CSPs and, relatedly, what it means to provide “consulting…related to…pharmacy management services” as compared to providing pharmacy benefit management services themselves.¹⁵ In December 2021, DOL issued Field Assistance Bulletin 2021-03, noting that while neither “brokerage services” nor “consulting” is defined in the statute, the fact that a service provider does not call itself a broker or consultant is not dispositive of the CSP determination.¹⁶ The Proposed Rule would seemingly resolve any perceived distinction by establishing disclosure obligations for all entities providing “pharmacy benefit management services,” regardless of how they characterize or legally structure their activities and business model – whether as pharmacy benefit management services or related consulting services.

Scope of Proposed Rule

The Proposed Rule would apply exclusively to self-insured group health plans. DOL declined to propose rules that would pertain to fully insured group health plans but seeks comments on whether the proposed disclosures would be useful or cost-effective for fiduciaries in those arrangements, including in light of existing state requirements.

In the case of self-insured group health plans, the following categories of CSPs would be required to report their remuneration to plan fiduciaries if they reasonably expect to receive at least $1,000 in direct or indirect compensation in connection with providing the services:

• Providers of Pharmacy Benefit Management Services. The Proposed Rule defines this category of CSPs as any entity contracting with a self-insured group health plan to provide pharmacy benefit management services, regardless of title.
• Affiliated Brokers and Consultants. The Proposed Rule defines this CSP category as affiliates of PBMs providing advice, recommendations, or referrals regarding pharmacy benefit management services.
• Third Party Administrators (“TPAs”). TPAs providing pharmacy benefit management services also would be regarded as CSPs, even if their services were subcontracted.

Disclosure Requirements

Timing. CSPs would need to provide disclosures to responsible plan fiduciaries at least 30 days before entering into, extending, or renewing PBM contracts, unless the parties agree to a longer timeframe. In addition to the initial disclosure, CSPs would also need to provide semiannual reports to each plan fiduciary of the compensation actually received, tracking the same information within the initial disclosure. If the actual compensation materially exceeds initial estimates (by a change greater than 5%), the CSP must provide an explanation for the overage.

Content. Disclosures would need to be in writing and include the following information:

• Description of pharmacy benefit management services to be performed;
• Direct compensation from the health plan; and
• Indirect compensation reasonably expected from other sources, such as from a PBM to a consultant or broker.

Compensation would need to be expressed as a monetary amount (estimated if not reasonably ascertainable), be clear and concise, free of misrepresentation, and sufficiently specific to permit evaluation of reasonableness.

Compensation Categories. The Proposed Rule would require disclosure of specific categories of compensation:

• Manufacturer Rebates. CSPs would need to disclose payments from drug manufacturers and rebate aggregators, including rebates, administrative fees, discounts, and price concessions. These disclosures would need to be made on an aggregate and per-formulary-drug basis, specifying the amounts passed through to the plan and the amounts retained by the CSP or its affiliates, agents, or subcontractors.
• Spread Pricing. CSPs would need to disclose the difference between the amount charged to the plan and the amount paid to the pharmacy (also known as “spread compensation”), disclosed on an aggregate, channel-level, and formulary-drug-level basis.
• Pharmacy Claw-backs. CSPs would need to disclose payments recouped from pharmacies in connection with dispensed drugs, including the expected dollar amount and total number of transactions.

Subcontractors, Affiliates, and Agents

Under the Proposed Rule, PBMs would have to disclose compensation “reasonably expected to be received” in connection with services, including compensation received by affiliates, agents, and subcontractors. The term “affiliate” would mean an entity that “directly or indirectly (through one or more intermediaries) controls, is controlled by, or is under common control with such person or entity; or is an officer, director, or employee of, or partner in, such person or entity.” The term “subcontractor” would mean a “person or entity (or an affiliate of such person or entity) that is not an affiliate of the covered service provider and that, pursuant to a contract or arrangement with the covered service provider or an affiliate, reasonably expects to receive $1,000 or more in compensation for performing one or more services described pursuant to paragraph (d) of this section provided for by the contract or arrangement” with the self-insured group health plan. The term “agent” would mean “any person or entity authorized (whether that authorization is expressed or implied) to represent or act on behalf of another person or entity.”

With the term “agent,” DOL noted its intent to capture entities that may not technically qualify as “affiliates” or “subcontractors” but receive compensation in connection with pharmacy benefit management services and therefore also would be subject to disclosure requirements. DOL has requested comments on whether parties such as rebate aggregators, GPOs, or others that fall within the proposed definition of “agent” are likely to be covered by either of the proposed definitions of “affiliate” or “subcontractor.”

Enforcement

As noted, failure to provide required disclosures would result in the contract not qualifying for the ERISA Section 408(b)(2) exemption, thereby exposing PBMs to risk of DOL enforcement and civil penalties. However, a fiduciary safe harbor would be available to plan fiduciaries that did not know of a CSP’s disclosure failure, reasonably relied on its disclosure, and took specified corrective actions upon discovering the failure. This relief would not extend to CSPs.

Audit Rights

The Proposed Rule would establish audit rights for self-insured group health plans, affording plan fiduciaries the right to annually audit the accuracy of disclosed information. The plan fiduciary would select the auditor, and CSPs would not be able to limit the plan’s choice. CSPs also would be prohibited from imposing restrictions on the location of the audit, the number of records to be reviewed, and the time period covered by the audit. However, CSPs would be able to limit the audit to the disclosure period. Audit costs would be split evenly between the plan and the CSP.

Confidentiality Provisions

The Proposed Rule would mandate robust disclosures on aggregated and drug-specific bases. It anticipates certain limited confidentiality protections, with DOL emphasizing that it wants to ensure that plan fiduciaries could meaningfully use the information to evaluate CSP compensation. PBMs and their affiliates, agents, and subcontractors would be prohibited from restricting a plan’s use of the disclosures, but they could require reasonable confidentiality agreements to prevent redisclosure to third parties. DOL proposes a safe harbor provision for good faith disclosure errors, provided that such errors were timely corrected.