DOL PBM disclosure rules cover plan years from July 1, 2027

By Daniel Okafor

Final U.S. Labor Department rules on pharmacy benefit manager transparency apply to plan years beginning on or after July 1, 2027.

The Employee Benefit Security Administration (EBSA) released the rules, which require pharmacy benefit managers (PBMs) to disclose more compensation information and conflicts to employer health plans.

The changes touch large self-funded plans directly. A covered PBM must disclose information before the parties execute a service agreement, then every six months, quarterly if the plan requests it, and within 90 days of contract renewal. Plans also gain the right to an audit by an auditor of their choice.

What does the final rule change?

The rule applies to PBMs expecting to receive more than $1,000 for services to self-insured health plans governed by the Employee Retirement Income Security Act (ERISA) with at least 100 participants. It generally will not apply to small or midsized employers with fully insured health plans outside ERISA.

PBMs negotiate drug discounts and rebates, build pharmacy networks, process claims, set pharmacy reimbursement rates and maintain coverage tiers. Their financial arrangements and operational decisions now sit inside a more formal employer oversight process.

The new disclosures cover spread compensation, as well as fees and other payments that flow to other entities, including rebate aggregators. Spread pricing occurs when a PBM charges a health plan a higher price for a drug than it pays the dispensing pharmacy.

PBMs also must disclose conflicts of interest and clarify their fiduciary role and authority to change a plan’s formulary, meaning the list of drugs the plan covers. Large employers and plan fiduciaries can use the material to evaluate PBM contracts and arrangements with affiliated brokers and consultants.

Why do audit rights matter?

Covered plans can obtain an audit from an auditor of their choice and request information needed to meet their legal obligations to ensure that vendor compensation is reasonable. ERISA section 408(b)(2)(A) requires service contracts to be reasonable, services to be necessary to establish or operate the plan, and compensation not to exceed what is reasonable.

That is more than a glossy service report. It is closer to sending a contractor’s invoices to the employer’s own accounting team.

The Consolidated Appropriations Act of 2021 already required specified PBM disclosures so health-plan service contracts could satisfy that reasonableness condition. The final rule builds on that baseline with defined initial, recurring and renewal disclosures.

Executive Order 14273 directed the Labor Department to propose regulations to “improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers.” EBSA’s final rules implement that directive.

What changes in 2028?

A separate statutory requirement comes next. Under the Consolidated Appropriations Act of 2026, PBMs must pass through 100% of drug manufacturer rebates and discounts to group health plans for plan years beginning on or after August 3, 2028.

An amendment to ERISA, section 726, will require additional retrospective disclosures about drug spending and drug utilization for plan years beginning on or after the same date. The 2028 measures therefore sit apart from the July 2027 disclosure timetable while sharpening scrutiny of forward and past drug economics.

What should large employers prepare?

Large employers with self-funded health plans may expect more disclosure of pricing and manufacturer rebates than PBMs previously provided. The practical questions now are concrete:

• Which self-funded ERISA plans meet the 100-participant threshold, and which PBMs expect more than $1,000 for their services?
• Do current PBM agreements, and related broker or consultant arrangements, support initial, six-month or quarterly reporting, renewal disclosure and audit access?
• Do vendors identify spread compensation, payments to other entities or rebate aggregators, conflicts of interest and authority over formulary changes?
• Can benefits and finance teams reconcile the disclosures with legal duties to test whether compensation is reasonable?
• Which plan years beginning on or after August 3, 2028 will need 100% rebate pass-through and retrospective spending and utilization records?

Ogletree Deakins said its Employee Benefits and Executive Compensation and Healthcare practices will continue monitoring developments and post updates through their blogs and Administration Resource Hub. The next checkpoint arrives with the first covered plan year. Employers will need usable data before they can test vendor economics, rather than after the paperwork becomes decorative.

For large employers, the rule will be judged by whether disclosures arrive on schedule, plans can use audit rights, and 2028 rebate records align with underlying drug spending.