New proposed regulations from the Department of Labor (“DOL”) and recent legislation aim to shed light on the complex and often confusing arrangements under which pharmacy benefit managers (“PBMs”) are compensated. On January 30, 2026, the DOL’s Employee Benefits Security Administration issued proposed regulations that would require PBMs and their affiliates to disclose detailed information about their compensation to group health plans subject to the Employee Retirement Income Security Act (“ERISA”). Additionally, on February 3, 2026, the Consolidated Appropriations Act, 2026 (“2026 CAA”) was signed into law and includes several provisions addressing PBM transparency that overlap with and, in some cases, go beyond the requirements of the proposed regulations.
As background, ERISA classifies payments between a plan and any “party in interest,” including service providers, as a prohibited transaction, unless an exception applies. One common exception is for services necessary for the plan’s operation for which the provider receives reasonable compensation. Service providers of pension plans (since 2012) and providers offering consulting and brokerage services to health plans (since 2021) have been required to provide disclosures related to compensation in order for plans to establish that the plan meets the prohibited transaction exemption. The proposed rule extends that same framework to PBMs and health plans.
Proposed PBM Transparency Regulations
The proposed regulations would require PBMs, as well as providers of advice, recommendations, or referrals regarding PBM services who are themselves providers of pharmacy benefit management services, to disclose the following:
- direct compensation from the plan;
- payments from drug manufacturers, including formulary placement incentives;
- the amount of “spread compensation”—the difference between what PBMs pay wholesalers and what they charge plans for a particular drug, which they often retain as profit;
- a description of any co-pay claw-back retained by the PBM—the excess of a copayment paid to the pharmacy, usually for a generic drug, over the actual cost, which is then “clawed back” by the PBM; and
- any compensation that the PBM expects to receive when its contract is terminated.
The proposed regulations also would require the disclosure to include a statement as to whether the PBM is an ERISA fiduciary to the plans and would entitle plans to perform an annual audit of the PBM. Plan fiduciaries are required to report to the DOL any providers that fail to make required disclosures. The DOL has invited public comments on the proposed regulations and, in particular, has requested comment on whether additional providers that may be involved in PBM compensation arrangements, such as third-party administrators, should be covered by the regulations. Comments are due by March 31, 2026. The proposed regulations could become effective as early as July 1, 2026. However, as noted below, it is possible that the DOL will combine the proposed regulations into any rules issued under the recent legislation that also requires PBM compensation disclosures.
PBM Transparency Legislation
The 2026 CAA includes several provisions that require increased PBM transparency, both overlapping with, and adding to, the requirements of the proposed regulations. Requirements under the legislation include the following:
- a requirement that PBMs provide detailed information on prescription drug spending, including, but not limited to, the net price per course of treatment or single fill, the total amount of out-of-pocket spending by participants, the total net spending on the drug, and the total amount received by the plan or the PBM in rebates, fees, alternative discounts, or other remuneration;
- a prohibition on group health plans and PBMs entering into an agreement that would limit the PBM’s ability to provide the detailed reporting information required under the legislation;
- a requirement that group health plans notify participants of the PBM’s reporting obligations and to make summary reporting information, as well detailed information about a participant’s claim, available upon request;
- a prohibition on PBMs, or any PBM affiliate, receiving compensation in connection with the utilization of Medicare Part D drugs, other than bona fide service fees;
- a requirement that PBMs pass through 100 percent of rebates, fees, alternative discounts, and other remuneration received, to the plan on a quarterly basis; and
- plans have the right to audit PBMs to confirm the accuracy of the information they receive.
We will continue to monitor the new legislation and the proposed regulations, including any changes that may be adopted as part of a final rule, and the interaction of the proposed regulation with the 2026 CAA. Please contact Slevin & Hart for more information on how the proposed regulations and legislation affect your plan.
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