WASHINGTON – Companies that run drug benefits for large self-insured plans will have to tell the plans’ decision-makers how they get paid. A final Labor Department rule filed on October 30 requires it.
The rule was published in the Federal Register on November 2, at 91 FR 69092. It takes effect January 4, 2027. It applies to plan years beginning on or after July 1, 2027.
The department calls pharmacy benefit managers the “middlemen” in the pharmaceutical supply chain, citing a Federal Trade Commission staff report. It says concerns have existed for many years that they are “not fully disclosing their compensation” to the people who sign the contracts.
Pharmacy spending is a major driver of employer health costs, the department says. About 136 million people get coverage through employer plans under the benefits law ERISA. This rule reaches a subset of them.
What are the new pharmacy benefit manager rules?#
The rule covers the managers themselves. It covers brokers or consultants who advise on drug benefits and are affiliated with a manager. Each must reasonably expect $1,000 or more in pay.
Before a contract starts, the company must give the plan’s decision-makers a written account of that pay. For a renewal, the rule treats 90 calendar days of notice as reasonable.
That account must cover expected rebates, fees and discounts from drug makers and others, in total and for each drug on the formulary. It must say how much the plan is expected to receive and how much the company expects to keep.
It must also list what the plan will pay for each drug and what the company will pay the pharmacy. The difference is called spread compensation.
After a contract starts, the company must report again within 30 calendar days after each six-month period. A plan may ask for quarterly reports instead.
At least once a year, if the plan asks in writing, the company must allow an audit of its disclosures. The plan picks the auditor, and the company may not limit that choice. The plan pays the auditor.
The new rule bars conditions on the audit’s period, location or number of records, though an audit covers only the period the disclosures cover. The company must supply the audit information within a commercially reasonable period and no later than 60 calendar days, absent extraordinary circumstances beyond its control.
The department’s background section says audits are often limited today. It says managers often provide “only a sample of records relating to contractual performance.” Some require the plan’s auditor to be approved by the manager. Some require the audit to be done on site at a place the manager picks.
A plan can also ask for the disclosures “in a standard machine-readable file.” The company must supply it “within a reasonable time after such request.”
If a company fails, a plan’s decision-maker can stay exempt from two of the benefits law’s prohibited-transaction restrictions. The person must not have known of the failure and must have reasonably believed the rules were met. On discovering a failure, the person must ask the company in writing to fix it. If the company has not complied within 90 days of that request, the person must notify the department.
Who is covered#
The rule reaches only self-insured plans. In those plans the employer pays claims itself instead of buying insurance.
A single-employer plan counts as large if its employer averaged at least 100 employees in the prior year. The rule cites two other kinds of plan sponsor from the benefits law. Their plans count if they averaged at least 100 participants on business days in the prior plan year. A plan whose benefits all come through an insurance policy is excluded. So is a plan whose sponsor is, or is affiliated with, a drug maker, distributor, wholesaler, pharmacy benefit manager or rebate aggregator.
The department proposed the rule on January 30, 2026. That version applied to all self-insured plans. The final version is narrower.
The department estimates that 52.9 million people aged 18 to 64 are in the large self-insured plans the rule covers. Whether this rule touches your drug benefit depends on your plan type.
It estimates 131,102 self-insured plans are large enough to be covered. It counts 113,226 with 100 to 999 participants and beneficiaries, and 17,876 with 1,000 or more. The estimate rests on 2024 federal survey data and 2022 Census Bureau business data.
Smaller self-insured plans were in the proposal and are out of the final rule. The department says the detailed disclosures “may be most useful to responsible plan fiduciaries of larger employers.” Those are the employers “more likely to have compliance staff.” It says smaller plans still get the general compensation disclosures the benefits law already requires.
The department’s cost estimate assumes 73 pharmacy benefit managers, the number in the marketplace in 2023, which it takes from an industry estimate. It puts their first-year cost of setting up and reporting at the equivalent of about $81.6 million. It estimates about $19.8 million a year after that. It compares the three-year average cost with the 2025 revenue of the three largest managers, $552.3 billion, and calls it 0.01 percent of that.
What is still unknown#
The department’s price estimate rests on an assumption. It assumed a 1 percent drop in average net retail drug prices. That is the top of a 0.1 to 1.0 percent range the Congressional Budget Office estimated for price disclosures to health insurers. On that assumption, it estimates “an estimated $818.4 million transfer” a year to “the 52.9 million participants and beneficiaries” aged 18 to 64. It says that leaves out children in these plans, so it “underestimates the full transfer effect.”
It says the rule could have a bigger impact than the budget office’s estimates, because self-insured plans are not subject to state disclosure laws.
The rule’s background section describes one way the pay has stayed hidden. It describes “copay claw-backs,” where a patient’s copayment at the pharmacy “exceeds the total cost of the drugs purchased.” The excess goes to the manager. It cites a 2018 study of commercially insured patients. Their “copayments for generic prescriptions exceeded the total cost of the medicine 23 percent of the time.” It says self-insured plans’ responsible plan fiduciaries, the people with authority to sign the contract, “are generally unaware of this practice.” Congress outlawed the pharmacy “gag clauses” that hid lower cash prices in 2018, the department says. It adds that the federal law “did not resolve all transparency issues in drug pricing.”
On patients’ out-of-pocket costs, the department is plain. The effects “remain uncertain”. It says rebates typically go to insurers or plan administrators rather than directly to participants. What reaches participants varies with plan design.
The rule takes effect January 4, 2027. The copy filed for public inspection had left that date blank. The published text fills it.
Congress acted while the rule was pending. A law enacted on February 3, 2026 added its own disclosure rules for these managers. Its reporting and pass-through sections apply to plan years beginning on or after August 3, 2028. From then, all group health plans, whatever their size, must receive a summary document from their manager. These managers must also pass rebates and similar payments through to the plans they serve, or to insurers on behalf of those plans.
The department extended the comment period by 15 days, in a notice published March 2, 2026, to ask whether its rule should change. A few commenters asked it to withdraw the rule. Others asked it to line up its effective date with the 2028 law. It did neither. It says it agreed with commenters concerned about “unduly delaying the introduction of much needed transparency.”
For how a rule differs from the law behind it, see statute, rule and guidance are not the same. To find the text, see reading the federal rulebooks.
Source: Department of Labor, Employee Benefits Security Administration, final rule “Improving Transparency into Pharmacy Benefit Manager Fee Disclosure,” 91 Federal Register 69092, November 2, 2026; read November 5, 2026.