U.S. Labor Department Finalizes Rule Requiring Drug Benefit Managers to Disclose Compensation
Key Facts
On October 29, 2026, the U.S. Department of Labor announced a final rule requiring pharmacy benefit managers and their affiliated service providers to disclose the fees and compensation they receive. Covered affiliates include brokerage and consulting firms connected to benefit management. The disclosures are intended to enable plan fiduciaries to assess the reasonableness of contracts and compensation and verify the accuracy of information through audits. The department said the rule responds to Executive Order 14273, which aims to lower drug prices, and increases transparency in contracting with managers, brokers and consultants. The detailed requirements are limited to a specific category of group health plans, while the rule itself does not prohibit pricing practices or the retention of manufacturer rebates.
Detailed disclosures apply to pharmacy benefit management service providers and affiliated services for large, self-funded group health plans. Large plans are generally defined as covering 100 or more participants, or as being offered by an employer with 100 or more employees. The final rule’s scope was narrowed from the proposal, leaving smaller plans and fully insured plans outside the additional detailed requirements. The department said this limitation addresses concerns that small businesses could have difficulty analyzing disclosures and that smaller management firms could face disproportionate burdens. Smaller plans remain subject to the general disclosures required by law, according to the final rule.
The disclosures cover direct and indirect payments from manufacturers and their affiliates, including fees, rebates and payments tied to drug use or spending. They also cover rebates retained by the benefit manager, the difference between what the plan pays the pharmacy and what the manufacturer pays the pharmacy, and pharmacy recoupments. Incentives tied to the placement of drugs on coverage lists are also included. The department said pharmacy benefit managers may receive compensation from health plans, manufacturers, pharmacies, rebate aggregators and other entities. The multiple sources and arrangements for compensation make it difficult for plan fiduciaries to assess, according to the department.
Service providers must submit initial disclosures before contracts are entered into, extended or renewed; providing them at least 90 days before renewal or extension is considered a reasonable timeframe. After a contract begins, ongoing disclosures must be provided within 30 calendar days after the end of each semiannual period. A plan may request quarterly disclosures instead of the default frequency. If actual compensation equals or exceeds the amount initially disclosed by 5%, the service provider must explain the amount and reason for the excess. The parties may agree to a lower threshold.
The rule gives plans the right to audit a service provider at least once a year to verify the accuracy of disclosures. The service provider must acknowledge an audit request within 10 business days and generally provide the necessary information within 60 calendar days. This right links periodic disclosure to the ability to examine the records underlying compensation data. The Labor Department said the aim is to give plan fiduciaries the information needed to assess the reasonableness of contracts and compensation. The mechanism thus extends from making data available before a contract or its renewal to reviewing it afterward.
The rule follows amendments in the Consolidated Appropriations Act of 2026, which industry groups objected could duplicate some of its requirements. The Labor Department said the law and the rule complement each other, with their scope, timelines and terminology coordinated to reduce conflicts. The rule serves a different function from the law’s requirements: the law calls for detailed retrospective data on drug spending and use, while the department’s rule is aimed at advance disclosures that help plans compare benefit managers when contracting. The department had extended the comment period on the proposal by 15 days to address the law’s amendments. It estimated compliance costs for pharmacy benefit managers at about $1 million in the first year and $300,000 in subsequent years.
The Pharmaceutical Care Management Association objected to the rule, describing the creation of a new disclosure system as “unnecessary, duplicative and extremely burdensome,” while the department said the requirements complement the law. Axios reported that CVS Caremark, Express Scripts and Optum Rx would disclose manufacturer payments and spread pricing. But the report said the rule’s effect on managers’ revenue was unclear and that it imposed no direct limits on their prices, compensation from spread pricing or retention of manufacturer rebates. The report did not cite a change in CVS’s share price due to the announcement. The proposal had targeted plan years beginning on or after July 1, 2026, before the department moved the final date to July 1, 2027, following comments that operational changes made the original timeline impractical. The rule takes effect 60 days after publication in the Federal Register, and its requirements apply to plan years beginning on or after July 1, 2027.