Pharmacy benefit managers (PBMs) will soon have to provide self-funded health plans a detailed disclosure of how they are paid, and plans will gain new rights to audit those disclosures. On Oct. 29, 2026, the U.S. Department of Labor (DOL) issued a final rule establishing new compensation disclosure requirements for PBMs and their affiliated brokers and consultants. The rule is intended to increase transparency regarding PBM compensation arrangements and assist fiduciaries of large self-funded group health plans subject to the Employee Retirement Income Security Act (ERISA) in determining whether PBM service arrangements and compensation are reasonable.
The final rule applies to self-funded group health plans sponsored by employers with at least 100 employees, as well as certain other self-funded group health plans with at least 100 participants. The rule implements ERISA Section 408(b)(2), which requires service arrangements to be reasonable and prohibits plans from paying more than reasonable compensation for services.
The final rule applies to plan years beginning on or after July 1, 2027.
Importantly, the final rule does not replace or fully implement all the new PBM-specific transparency and oversight requirements enacted earlier this year as part of the Consolidated Appropriations Act, 2026 (see our eAlert here). Other PBM transparency requirements have separate effective dates, and the DOL is expected to address them in future guidance.
New PBM Compensation Disclosure Requirements
Under the final rule, PBMs and affiliated brokers and consultants that reasonably expect to receive at least $1,000 in compensation for covered services must provide detailed disclosures regarding the direct and indirect compensation they receive for services provided to covered group health plans.
The required disclosures include:
- Direct Compensation: Fees and other compensation received directly from the plan or plan sponsor, including administrative fees and compensation attributable to particular services.
- Indirect Compensation: Compensation received from third parties, including rebates, discounts and other payments from drug manufacturers, pharmacies and other entities.
- Spread-Pricing Compensation: Amounts retained by PBMs when the amount charged to a health plan for a prescription drug exceeds the amount reimbursed to the pharmacy.
- Other Compensation: Pharmacy reimbursement recoupments, price-protection payments and other compensation received by PBMs and their affiliates, agents and subcontractors.
Covered service providers must provide initial disclosures reasonably in advance of entering, renewing or extending a service agreement. Updated disclosures must be made every six months, or quarterly at the plan’s request. The disclosures must contain sufficient information for plan fiduciaries to evaluate the reasonableness of the PBM’s compensation and identify potential conflicts of interest.
New Audit Rights for Group Health Plans
The final rule also establishes important audit rights intended to allow covered group health plans to independently verify the accuracy of PBM compensation disclosures. Under the final rule, covered plans have the right to audit their PBM’s disclosures at least once a year. Plans may independently select their auditors, and PBMs may not impose restrictions that interfere with the exercise of these audit rights. PBMs must make available records and information reasonably necessary to verify their disclosures, including claims and transaction-level data and relevant contracts with pharmacies, drug manufacturers and rebate aggregators. PBMs must also provide required information maintained by their affiliates, agents and subcontractors.
PBMs must acknowledge audit requests within 10 business days and must provide the requested information within 60 calendar days. The plan is responsible for the costs of retaining the auditor, while the PBM is responsible for the costs associated with producing the requested information.
What Should Employers Do Now?
The final rule provides meaningful new tools for plan fiduciaries to evaluate PBM compensation arrangements and monitor service providers. However, the additional disclosures and audit rights also reinforce the importance of maintaining a prudent and documented fiduciary process for selecting and monitoring PBMs.
Employers sponsoring covered self-funded group health plans should review their existing PBM agreements and consider the following when negotiating new agreements or renewals:
- Compensation Disclosures: Ensure that PBM agreements require timely and sufficiently detailed disclosures of direct and indirect compensation, including compensation received by affiliates and subcontractors.
- Audit Rights: Review contractual audit provisions to ensure they are consistent with the new requirements and do not impose restrictions that improperly limit the plan’s ability to verify PBM compensation.
- Contractual Limitations Periods: Carefully evaluate provisions limiting the time within which the plan may bring claims against the PBM. Because compensation discrepancies may not become apparent until after disclosures are reviewed or an audit is completed, employers should consider negotiating limitations periods that provide sufficient time to identify potential violations and pursue appropriate remedies. Where practicable, employers should consider provisions that start the limitations period when the issue is discovered rather than on the date of the underlying transaction.
- Record Retention and Remedies: Consider whether contractual record-retention requirements, access to historical data and available remedies are sufficient to support meaningful audits and recovery of improperly retained compensation.
Employers should also establish procedures for reviewing PBM compensation disclosures and documenting their evaluation of whether the fees and services remain reasonable. Although PBMs are responsible for providing the required disclosures, plan fiduciaries remain responsible for prudently selecting and monitoring service providers and evaluating the reasonableness of their compensation.
Warner Norcross + Judd Has You Covered
Employers sponsoring self-funded group health plans should review their PBM agreements and fiduciary oversight procedures to prepare for the new disclosure requirements. If you would like assistance reviewing your PBM agreement, evaluating compensation disclosure and audit provisions or assessing the impact of the new rule on your group health plan, please contact Stephanie Grant, De’Andre Robbins or your Warner attorney.
