Department of Labor proposes pharmacy benefit manager fee disclosure rule

The Department of Labor’s Employee Benefits Security Administration issued a proposed regulation Thursday "designed to bring overdue transparency to the fees and compensation pharmacy benefit managers receive."

The proposed regulation is "the most significant federal reform of prescription drug middlemen proposed in decades" and builds on the accomplishments of the administration’s first term, the DOL said in a news release. It also advances President Trump’s Executive Order, “Lowering Drug Prices by Once Again Putting Americans First,” which directed federal agencies take additional steps to create a fairer prescription drug market that lowers costs and ensures accountability across the health care system.

By lowering drug costs, the Trump administration is putting money back in the pockets of American workers and retirees, their families, and businesses, the release said.

“[T]he Department of Labor is shining a bright light into pharmacy benefit managers’ business practices – delivering unprecedented transparency to an otherwise opaque industry,” said Secretary Lori Chavez-DeRemer. “When middlemen are forced to operate in the sunlight, American workers and their families win. Hidden fees and distorted incentives have no place in American healthcare.”

“This action will allow employers to see the full extent of the fees charged by pharmacy benefit managers, enabling them to negotiate a better deal for themselves and American workers," said Deputy Secretary Keith Sonderling.

PBMs act as an intermediary in the prescription drug supply chain for employer-sponsored self-insured group health plans that provide coverage to approximately 90 million Americans. Health plan fiduciaries, however, often cannot obtain full transparency into the payments that PBM service providers and their affiliates receive from drug manufacturers, pharmacies, and others.

The proposed rule would require pharmacy benefit managers to make disclosures to plan fiduciaries that would allow them to assess the reasonableness of compensation for the services and to fulfill their duties under the Employee Retirement Income Security Act.

Issued under ERISA’s statutory service provider prohibited transaction exemption, the proposed rule requires PBMs to disclose the following information for the first time:

• Rebates and other payments from drug manufacturers.
• Compensation received when the price paid by the plan for a prescription drug exceeds the amount reimbursed to the pharmacy.
• Payments recouped from pharmacies in connection with prescription drugs dispensed to the plan.

The proposed regulation would also allow plan fiduciaries to audit the accuracy of PBM disclosures and provides additional relief for plan fiduciaries if their PBM fails to meet its obligation.

Now available for public inspection, comments on the proposal are due 60 days from its Jan. 30 publication in the Federal Register.