LUGPA Policy Update: DOL Finalizes PBM Fee Disclosure Rule

October 2026

At a Glance

On October 29, 2026, the U.S. Department of Labor (DOL) finalized its Improving Transparency into Pharmacy Benefit Manager Fee Disclosure rule, requiring greater transparency into pharmacy benefit manager (PBM) compensation and financial arrangements for certain large, self-insured employer health plans. The rule requires disclosure of manufacturer rebates, spread pricing, formulary incentives, and other payments, while expanding plan fiduciaries’ audit rights. It takes effect 60 days after publication in the Federal Register and applies to plan years beginning on or after July 1, 2027.

Background

PBM compensation arrangements can make it difficult for employers to determine the actual cost of prescription drugs and assess whether financial incentives influence formulary decisions. The final rule implements enhanced disclosure requirements under the Employee Retirement Income Security Act (ERISA), responding to Executive Order 14273 and related reforms in the Consolidated Appropriations Act, 2026.

The requirements generally cover self-insured ERISA group health plans sponsored by employers with at least 100 employees or plans with at least 100 participants. Fully insured plans and certain industry-affiliated plans are excluded.

Key Provisions

• Compensation and rebates: PBMs must disclose direct and indirect compensation, including manufacturer payments, rebates, and other remuneration, distinguishing amounts passed through to plans from amounts retained.
• Spread pricing: Disclosures must identify differences between what plans pay PBMs and what PBMs pay pharmacies, including details by National Drug Code (NDC).
• Formulary incentives: PBMs must explain manufacturer arrangements that may influence formulary placement and identify certain available therapeutic alternatives when applicable.
• Ongoing reporting and audits: PBMs must provide updated compensation disclosures every six months, or quarterly upon request. Plan fiduciaries gain expanded rights to conduct at least annual audits and review relevant records and transaction-level data.

DOL estimates that the rule could reduce prescription drug costs for plans and participants by as much as $22 billion over 10 years. These are projected savings, not guaranteed outcomes.

Why It Matters for LUGPA Members

For practices sponsoring covered self-insured employee health plans, the rule provides stronger tools to evaluate PBM contracts, scrutinize retained rebates and spread pricing, assess formulary incentives, and negotiate more transparent arrangements. Members should review existing contracts and audit provisions ahead of the July 2027 applicability date.

For practices treating patients covered by employer-sponsored plans, the effects are more indirect. Greater transparency could help employers challenge formulary arrangements that favor PBM financial incentives over lower net costs and clinically appropriate treatment. This may create opportunities to address restrictive specialty-pharmacy networks, forced mail-order requirements, and other barriers affecting access to urology medications.

However, the rule does not prohibit spread pricing or rebate retention, mandate coverage of specific drugs, establish new prior authorization requirements, or directly change physician reimbursement. It also does not generally apply to Medicare Part D, Medicare Advantage, or Medicaid managed care.

LUGPA Perspective

The final rule advances transparency and accountability in the PBM market, aligning with LUGPA’s broader interest in patient access to medications and reducing financial incentives that can distort treatment decisions. The impact on patients and independent practices will depend on whether employers use the information to negotiate better contracts and address restrictive coverage policies.