{"id":4535,"date":"2026-05-08T23:45:14","date_gmt":"2026-05-08T23:45:14","guid":{"rendered":"https:\/\/www.insuracarelife.com\/blog\/navigating-pbm-reform-regulatory-changes-market-shifts-and-practical-guidance-for-erisa-fiduciaries-verrill\/"},"modified":"2026-05-08T23:45:14","modified_gmt":"2026-05-08T23:45:14","slug":"navigating-pbm-reform-regulatory-changes-market-shifts-and-practical-guidance-for-erisa-fiduciaries-verrill","status":"publish","type":"post","link":"https:\/\/www.insuracarelife.com\/blog\/navigating-pbm-reform-regulatory-changes-market-shifts-and-practical-guidance-for-erisa-fiduciaries-verrill\/","title":{"rendered":"Navigating PBM Reform: Regulatory Changes, Market Shifts, and Practical Guidance for ERISA Fiduciaries | Verrill"},"content":{"rendered":"<div id=\"html-view-content\">\n<p>Pharmacy Benefit Manager (\u201cPBM\u201d) arrangements have long relied on rebates with limited transparency into true drug costs. Recent regulatory and market developments represent a shift toward greater transparency and better net pricing. These developments span a broad range of actors and approaches, including increased regulation of PBMs by the states, legislative, rule-making and agency actions by the federal government, and evolving market-driven responses.<\/p>\n<p>This post provides a high\u2011level overview of key developments and offers practical steps for health plan fiduciaries to consider in response to:<\/p>\n<ul>\n<li>provisions of the Consolidated Appropriations Act, 2026 (the \u201cCAA\u201d), effective generally for plan years beginning after August 3, 2028, requiring significant changes to PBM contracts and new reporting from PBMs to plan sponsors and from plan sponsors to participants;<\/li>\n<li>Department of Labor proposed regulations regarding PBM compensation, which if finalized, would apply to plan years beginning on or after July 1, 2026;<\/li>\n<li>a Federal Trade Commission (\u201cFTC\u201d) settlement with Express Scripts, the largest PBM in the United States; and<\/li>\n<li>an emerging trend of direct-to-employer purchasing options for certain high-cost drugs.<\/li>\n<\/ul>\n<p>Although not effective immediately, the regulatory changes are sweeping. Fiduciaries of self-funded group health plans should be mindful of the developments and begin preparing now to ensure the plans are well positioned for the changes ahead.<\/p>\n<p><strong>The CAA<\/strong><\/p>\n<p><u>General Provisions<\/u>. The CAA establishes a clear path toward more transparent PBM pricing models that allow for enhanced fiduciary oversight. In short, the CAA:<\/p>\n<ul>\n<li>alters ERISA health plan contracts by requiring PBMs to remit 100 percent of rebates, fees, alternative discounts, and other remuneration received from any\u00a0applicable entity\u00a0related to utilization of drugs or drug spending to the group health plan;<\/li>\n<li>establishes new reporting requirements for PBMs to disclose information to health plans and for plans to disclose information to participants and beneficiaries; and<\/li>\n<li>prohibits PBMs from entering into contracts with drug manufacturers, wholesalers, or other entities in the prescription drug supply chain that would limit the ability of the PBM to provide required reporting to the group health plans.<\/li>\n<\/ul>\n<p>Failure to meet these requirements can result in civil monetary penalties of up to $10,000 per day.<\/p>\n<p><u>Reporting Obligations<\/u>. Detailed new reporting requirements aim at increasing price transparency. For example, the CAA requires PBMs to provide:<\/p>\n<ul>\n<li>at least semiannual (quarterly upon request) reports to plans that cover 100 or more participants and elect to receive such information. The reports, among other lists and explanations, must include:\n<ul>\n<li>a list of drugs for which a claim was filed, with details regarding participant cost-share and the amount of rebates, and discounts; and<\/li>\n<li>a list of all drugs for which the plan incurred $10,000 or more in gross spending (or the top fifty drugs in gross spending if fewer than fifty drugs resulted in $10,000 or more in gross spending).<\/li>\n<\/ul>\n<\/li>\n<li>a summary document that must be provided to all plans, which outlines the reporting that is required to be provided to plans that cover 100 or more participants.<\/li>\n<\/ul>\n<p>In addition, the CAA requires that group health plans provide participants and beneficiaries with:<\/p>\n<ul>\n<li>an annual notice regarding the requirement for PBMs to provide reporting on request;<\/li>\n<li>the summary PBM reporting data, if requested; and<\/li>\n<li>detailed information with respect to any specific claim incurred by the participant or beneficiary.<\/li>\n<\/ul>\n<p>The PBM requirements in the CAA are effective generally for plan years beginning after August 3, 2028, but the scope of the changes underscores the need for plan fiduciaries to begin preparing well in advance of the effective date. For example, health plans will need new processes to streamline requests from participants regarding the summary data reports and the drug costs in participant-specific claims.<\/p>\n<p><strong>The Department of Labor\u2019s Proposed Regulation<\/strong><\/p>\n<p>In January of 2026, before the CAA was enacted, the Department of Labor issued a proposed regulation that would, if finalized:<\/p>\n<ul>\n<li>significantly expand fee and compensation disclosure requirements for PBMs and brokers and consultants serving self\u2011insured group health plans in connection with PBM services;<\/li>\n<li>establish a regime where PBMs are required to provide the disclosures regarding compensation before plan fiduciaries enter, extend, or renew a contract with PBMs; and<\/li>\n<li>require PBMs to disclose any conflicts of interest and clarify their fiduciary status to plan sponsors.<\/li>\n<\/ul>\n<p>In a nutshell, the regulation would require PBMs to disclose direct and indirect compensation, including estimated rebates, spread pricing, copay claw-backs, and compensation for termination of contracts, before the service contract with the PBM is due for initial execution or renewal. In addition, the regulation would impose semi-annual reporting of actual compensation, require an explanation if actual compensation materially exceeds the estimate in the initial disclosure, and grant plan fiduciaries an annual audit right.<\/p>\n<p>If finalized, the regulation would apply to plan years beginning on or after July 1, 2026. With the passage of the CAA, however, it is likely that the regulation will be significantly reworked before it becomes effective.<\/p>\n<p>A key takeaway for sponsors of group health plans is that the proposed regulation, similar to the CAA, focuses on regulating PBMs by increasing the information that the PBM is required to disclose to health plans. Even if the proposed regulation is substantially revised or withdrawn, health plans should prepare to implement new processes to evaluate and monitor new and more robust disclosures from PBMs.<\/p>\n<p><strong>FTC\u2019s Settlement and Consent Order with Express Scripts <\/strong><\/p>\n<p>The FTC reached a Settlement and Consent Order with PBM Express Scripts, resolving allegations that the company helped inflate insulin product prices.<\/p>\n<p>The FTC alleged that Express Scripts, CVS Caremark, and Optum Rx engaged in substantially similar anticompetitive and unfair practices, including rebate\u2011driven formulary designs that favored higher\u2011list\u2011price drugs offering larger manufacturer rebates over lower\u2011net\u2011cost alternatives. According to the FTC, this model incentivized manufacturers to inflate insulin list prices to compete for preferred formulary placement, resulting in higher drug costs for patients. To date, the FTC has only reached settlement with Express Scripts.<\/p>\n<p>The Settlement Order includes specific requirements for insulin products, as well as various broader remedies for all drugs, which Express Scripts is required to implement no later than January 1, 2027.<\/p>\n<p><u>The Remedies<\/u>. The remedies in the Order align with the efforts of legislators and other regulators to enhance transparency and include:<\/p>\n<ul>\n<li>prohibiting Express Scripts from offering or administering any formulary that covers a high-priced drug and omits a low-priced drug with the same active ingredient(s) or biological products, dosage form, route of administration, and strength, manufactured or marketed by the same drug manufacturer;<\/li>\n<li>delinking PBM compensation from drug list price; and<\/li>\n<li>ensuring patient cost-sharing is based on drug net cost rather than list price.<\/li>\n<\/ul>\n<p>The Order also requires Express Scripts to provide and promote a \u201cStandard Offering\u201d formulary to health plans and retail community pharmacies. The Standard Offering formulary must include:<\/p>\n<ul>\n<li>drugs with lower list prices where \u201cidentical drugs\u201d are offered under different names at high and low list-prices; and<\/li>\n<li>drugs the cost of which is based on list prices or other benchmarks that do not exceed the price of the drug net of any rebates.<\/li>\n<\/ul>\n<p>Express Scripts specifically agreed to disclose, clearly and conspicuously, the existence and availability of the Standard Offering to plan sponsors in any advertising and promotional materials. Notably, Express Scripts may respond to a written request by plan sponsors and offer different terms than its Standard Offering, so long as the Standard Offering is also made available.<\/p>\n<p>Once produced by Express Scripts, the Standard Offering can serve as a starting point for plan sponsors to renegotiate their contracts with Express Scripts and may provide a reference point that can be used to evaluate formularies across the industry. Although the Standard Offering will be the first of its kind, it could represent a path to significant drug cost savings for plan sponsors, simply due to disclosure of the low-priced drugs that have high-priced identical versions.<\/p>\n<p><strong>Direct-to-Employer Purchasing for Select High-Cost Drugs<\/strong><\/p>\n<p>Manufacturers such as Eli Lilly and Novo Nordisk, as well as GoodRx, a digital drug-pricing platform that provides consumers with price comparisons and discounts for prescription medications, have introduced direct-to-employer purchasing arrangements for select high-cost drugs, including GLP-1 therapies. The arrangements focus on a subset of high-cost drugs and offer more transparent pricing.<\/p>\n<p>At this stage, direct-to-employer purchasing will not disrupt the core relationships with PBMs, but these arrangements provide an impetus for plan sponsors to evaluate alternative drug-pricing options, starting with high-cost drugs.<\/p>\n<p>For an in-depth discussion of this new approach and its current challenges, including PBM contract provisions that require all prescription drug coverage to flow exclusively through the PBM, read our blog post, Direct-to-Consumer Models for Prescription Drug Coverage: A New Trend in Coverage for GLP-1s.<\/p>\n<p><strong>Next Steps for Fiduciaries<\/strong><\/p>\n<p>With the shift to price transparency, regulated use of rebates, and the rise of direct drug access models, fiduciaries remain responsible for acting prudently and solely in the best interest of plan participants. Accordingly, fiduciaries must have an understanding of available drug pricing and alternatives in the changing market. Plan sponsors can focus on mitigating fiduciary liability exposure by:<\/p>\n<ul>\n<li>developing strategies and processes to receive, review and create actionable insights based on the disclosures PBMs will be required to provide;<\/li>\n<li>conducting and documenting periodic reviews of pharmacy strategies, including new modes of purchasing drugs;<\/li>\n<li>engaging in negotiations with Express Scripts and other PBMs to drive better outcomes for participants, including taking advantage of information gained from the Standard Offering (when available) and other benchmarks to inform those negotiations;<\/li>\n<li>utilizing requests for proposal to ensure competitive pricing and quality service from PBMs and other vendors who supply medications;<\/li>\n<li>memorializing a well-reasoned rationale for decisions regarding coverage and vendor contracts; and<\/li>\n<li>engaging with continuing education regarding the clinical and financial trade-offs of the available drug purchasing options.<\/li>\n<\/ul>\n<p>To effectively coordinate this effort, plan sponsors should consider establishing a specialized formal health and welfare plan fiduciary committee. As a starting point, consider the bulleted list of recommendations from our post, Establish an Administrative Committee for Your ERISA Health and Welfare Benefit Plans.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Pharmacy Benefit Manager (\u201cPBM\u201d) arrangements have long relied on rebates with limited transparency into true drug costs. Recent regulatory and market developments represent a shift toward greater transparency and better net pricing. These developments span a broad range of actors and approaches, including increased regulation of PBMs by the states, legislative, rule-making and agency actions [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4536,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[2862,3338,1703,324,754,2989,2066,256,2188,2376,2934],"class_list":["post-4535","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-erisa","tag-fiduciaries","tag-guidance","tag-market","tag-navigating","tag-pbm","tag-practical","tag-reform","tag-regulatory","tag-shifts","tag-verrill"],"_links":{"self":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4535","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/comments?post=4535"}],"version-history":[{"count":0,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4535\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media\/4536"}],"wp:attachment":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media?parent=4535"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/categories?post=4535"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/tags?post=4535"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}