Pharmacy benefit manager (“PBM”) transparency requirements continue to expand. On October 29, 2026, the U.S. Department of Labor (“DOL”) finalized new disclosure requirements for PBMs and affiliated brokers and consultants serving large, self-insured group health plans (the “Final Rule”). The Final Rule requires PBMs (as covered service providers) to disclose detailed information about their compensation, including information on manufacturer rebates, spread compensation and pharmacy recoupments, and gives responsible plan fiduciaries certain audit rights. The Final Rule is applicable to plan years beginning on or after July 1, 2027.
The Final Rule finalizes the January 2026 DOL proposed rule (the “Proposed Rule”), previously summarized here. It also implements President Trump’s Executive Order 14273, Lowering Drug Prices by Once Again Putting Americans First. The Final Rule comes on the heels of federal PBM reform in the Consolidated Appropriations Act, 2026 (the “CAA”), which imposed separate PBM transparency and rebate pass-through requirements. More information on the CAA is available here.
Key Changes from the Proposed Rule
The Proposed Rule drew some industry opposition, including concerns about DOL’s authority, overlap with the CAA and the burden of the proposed requirements. DOL nevertheless proceeded with the Final Rule, with several modifications. Key changes include:
- Narrower Scope. The Proposed Rule would have applied to all self-insured group health plans. The Final Rule instead applies only to large, self-insured plans and excludes plans sponsored by entities in the drug supply chain.
- Narrower Definition of PBM Services. The Proposed Rule included claims processing, appeals, recordkeeping and regulatory compliance as PBM services. Under the Final Rule, those activities qualify only when performed in connection with core PBM functions.
- Reporting Frequency. The Final Rule allows covered service providers to make ongoing disclosures on a semiannual basis, unless quarterly disclosures are requested by the group health plan.
Scope of the Final Rule
The Final Rule requires covered service providers to make disclosures when they contract to provide PBM services to self-insured group health plans (plans that have at least 100 participants or that are sponsored by employers with at least 100 employees). A service provider is a “covered service provider” under the Final Rule if it reasonably expects to receive at least $1,000 in direct or indirect compensation for those services during the year.
PBM services include negotiating or aggregating rebates, managing formularies and pharmacy networks and performing utilization management. Whether a service provider calls itself a PBM does not control. A Third-Party Administrator (“TPA”) or other service provider may therefore be a covered service provider based on the services it contracts to provide.
The covered service provider is responsible for the disclosures even if an affiliate, agent or subcontractor actually performs the PBM services. Thus, a PBM that contracts directly with the plan is responsible for the disclosures, while a TPA or other service provider may be responsible if it contracts with the plan to provide PBM services and subcontracts that work to a PBM.
Pharmacies are not covered service providers merely by providing pharmacy services.
Disclosure Requirements
Initial Disclosures: For covered contracts subject to the Final Rule, initial disclosures must be provided to the plan’s responsible fiduciary reasonably in advance of entering into the contract and at least 90 days before an extension or renewal. Compensation must be stated as a dollar amount, although good-faith estimates are permitted if the amount cannot be reasonably determined. The purpose of the disclosures is to give the plan fiduciary information to evaluate whether the contract or arrangement is reasonable.
Required initial disclosures include:
- Compensation from the plan, including compensation for bundled services;
- Rebates and other compensation, including manufacturer rebates and fees, spread compensation, pharmacy claw-backs and other retroactive adjustments;
- Formulary and pharmacy network incentives, including formulary placement incentives and policies that steer patients to PBM-affiliated pharmacies; and
- Drug pricing information, including the net price of formulary drugs by pharmacy channel.
Ongoing Disclosures: Covered service providers must report actual compensation within 30 days after each six-month period beginning on the date the contract or arrangement is entered into, or after each quarter if the plan requests quarterly reporting. The covered service provider must also explain any category of compensation that exceeds the initial estimate by 5% or more. The six-month or quarterly reporting periods run from the date the contract or arrangement is entered into.
Audit Rights and Enforcement
Plans may audit a covered service provider’s disclosures at least once a year using an auditor of their choice. Covered service providers must produce claims and transaction-level data, along with contracts with pharmacies, manufacturers and rebate aggregators, within 60 days, and may not restrict the location of the audit or the number of records. The plan pays the auditor, and the covered service provider pays to produce the information.
Failure to comply with the Final Rule may result in a prohibited transaction under ERISA, subjecting the covered service provider to DOL enforcement and civil penalties. Plan fiduciaries that are unaware of a covered service provider’s failure are protected if they request correction and report uncorrected failures to the DOL.
How the Final Rule Fits with the CAA
The CAA also requires PBMs to disclose direct and indirect compensation to group health plans and report semiannually on drug spending and utilization. Additionally, the CAA requires PBMs servicing ERISA self-funded health plans to pass through manufacturer rebates and other remuneration. These requirements apply for plan years beginning on or after August 3, 2028 (or January 1, 2029, for plans on the calendar year).
The CAA and Final Rule have overlapping disclosure requirements, but the DOL views the two regimes as complementary. The Final Rule requires disclosures before contracting, while the CAA’s reporting requirements look back at actual drug spending and utilization. The two regimes also differ in their treatment of PBM compensation. The Final Rule requires disclosure of spread pricing and retained rebates but does not prohibit those practices, while the CAA will require rebate pass-through. The DOL declined to align the Final Rule’s compliance date with the CAA, so affected PBMs will need to comply with the Final Rule before the CAA’s pass-through and reporting requirements take effect.
Practical Takeaways
The Final Rule represents another significant milestone in federal PBM regulation, adding to the broader transparency and disclosure initiatives under the CAA. PBMs that qualify as covered service providers should evaluate whether their existing contracts, subcontractor arrangements and data systems provide access to the information needed for the required disclosures and plan audits. Affiliates, agents and subcontractors, including GPOs, should be prepared to provide covered service providers with the necessary information.
Pharmacies are not directly subject to the Final Rule, but should expect greater visibility into PBM reimbursement practices and the possibility that their contracts and related data may be reviewed in plan audits.
The DOL indicated that it is considering developing a standardized template of the Final Rule’s disclosure requirements to be published at a later date. We will continue to monitor further guidance on the Final Rule as well as future rulemaking under the CAA.
If you have questions or would like more information about this topic, please contact:
- Julie Lappas at (317) 977-1490 or jlappas@hallrender.com;
- Calvin Chambers at (317) 977-1459 or cchambers@hallrender.com;
- Raminta Kizyte at (303) 557-2112 or rkizyte@hallrender.com; or
- Your primary Hall Render contact.
Special thanks to Summer Associate Nick Boccone for his assistance in the preparation of this alert.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
