On Thursday, the Department of Labor finalized its rule on pharmacy benefit manager (PBM) fee disclosure. We’ve been waiting for this one. For plan years starting on or after July 2027, PBMs will have to tell their self-funded employer clients in detail how they get paid and keep telling them.
What the PBM rule requires
PBMs must disclose what they receive from drugmakers, pharmacies and others in the drug supply chain. That includes the rebates they negotiate with drugmakers and spread payments, which is the difference a PBM keeps when a plan pays more for a drug than the PBM reimburses the pharmacy. They also have to show the net price of each drug after rebates and fees, break out spread by pharmacy channel and disclose manufacturer deals that affect formulary placement. Brokers and consultants affiliated with a PBM are covered too.
The first disclosure comes before a contract is signed or renewed (90 days ahead is the benchmark for renewals). After that it comes every six months, or quarterly if the plan asks. Employers can audit at least once a year, using an auditor they choose. If a PBM doesn’t disclose, the arrangement can become a prohibited transaction under ERISA, and employers who report the gap to the Department are protected. The Department estimates the rule will lower drug costs for employers and their workers by $22 billion over ten years.
Why the PBM rule is good news
Employers have been signing PBM contracts without being able to see how the PBM is paid. KFF's latest survey found that just under half of large employers say they get enough insight into how much drugmakers pay their health plan or PBM. Meanwhile, Willis Towers Watson expects drug costs to rise 11.5% in 2026, after 9% the year before. It is hard to manage a cost that is growing that fast when you cannot see how it is built.
There is a fiduciary side to this too. Employers that sponsor self-funded plans are ERISA fiduciaries, which means they are expected to make sure the plan pays reasonable amounts for services. That is difficult to show when a large part of the PBM's compensation is invisible to you. The rule gives fiduciaries the information and the audit right to do that work and document it.
The timing of the information matters as well. The Consolidated Appropriations Act of 2026 (CAA) already requires PBMs to report detailed drug spending and utilization, but that reporting looks backward at what happened. The Department of Labor's rule asks for disclosure up front, so a plan can compare PBMs before it signs. The Department describes the two as complementary, and I agree with that reading.
Transparency helps most by pushing PBMs to compete harder against each other. The three largest PBMs handle roughly 80% of prescriptions in the U.S., so there is a lot of room for that to happen.
What the PBM rule will not do
Disclosure does not lower costs by itself. As we know with medical TiC files, transparency is not a silver bullet, and I would not tell an employer otherwise. The rule also applies to large self-insured group health plans, so many smaller employers will not see these disclosures directly.
The other limit is practical. A report listing rebates and spread payments is only useful if someone can read it, compare it to what the plan actually paid, and decide what to do next. We learned the same thing working with price transparency files. Publishing data and being able to use it are different problems.
PBMs have raised fair objections. Their trade group says the rule duplicates what the CAA already requires and that the reporting burden falls hardest on smaller PBMs. The Department of Labor estimates compliance will cost a PBM about $1 million in the first year and $300,000 a year after that, and says it aligned the rule's terms and timelines with the CAA to reduce overlap. I still come down on the side of giving the people who pay the bills more information.
What to do before July 2027
If you advise self-funded employers, or run a self-funded plan, start by asking your PBM what it expects to disclose and in what format. Read your contract for audit rights and renewal timing, since the first disclosure is tied to negotiating or renewing. Decide now who will review the numbers when they arrive, whether that is your consultant, your broker or someone on your team.
At Handl, we validate price, claims, benefit and quality data and run it through actuarial models so employers and their advisors can compare options. PBM disclosures become far more useful once they sit next to everything else you know about the plan.
This post is for informational purposes only and is not legal or compliance advice. Confirm effective dates and how the rule applies to your plan with counsel.
