Experts are split on what the Labor Department’s new PBM transparency rule means for pharma’s future

Pharmacy benefit managers (PBMs) are in the government’s sights once again.

The Department of Labor (DOL) on Oct. 29 finalized a rule requiring PBMs to disclose fees and compensation to self-insured group plans for large employers. The agency said in a statement that seeing what PBMs get paid from drugmakers and pharmacies will help plans make more informed decisions about which PBMs they partner with and negotiate lower prescription drug costs.

PBMs have come under intense government scrutiny in recent years for allegedly inflating drug prices. US drug spending rose 10.2% to $805.9 billion between 2023 and 2024, according to a study published last year.

As of July 1, 2027, PBMs will have to disclose to self-insured health plans with more than 100 members the rebates and other payments they receive from drugmakers as well as payments recouped from pharmacies. They’ll also have to disclose spread-pricing arrangements, which is when a PBM charges an insurer a higher price for a drug than it pays pharmacies. That information has historically been considered trade secrets by PBMs. But it’s hard for health plans to know if they’re making a good deal on prescription drug benefits without the full picture, Julie Selesnick, executive director of legal and compliance at healthcare advisory firm Judi Group, told Healthcare Brew.

Experts are torn

Experts have differing ideas about the ripple effects the DOL’s new rule could have on the pharma industry and drug costs overall.

Selesnick said she believes “it is a very substantial rule with teeth” and could “help plans really do a better job comparison shopping” when choosing a PBM.

The rule is predicated on the assumption that greater transparency will turn into lower prescription drug costs, Abrams said, adding that this actually depends on plan fiduciaries using the information to negotiate more favorable PBM contracts.

“And there’s the rub: Just knowing…what you’re being charged for in more detail does not automatically translate into a change in how much you are charged,” he said.

The DOL did not respond by publication.

The industry responds

There are, perhaps unsurprisingly, mixed reactions across the industry, too.

The Pharmaceutical Care Management Association, the largest trade group representing PBMs, argued in a statement on Oct. 29 that the rule is unnecessary because PBMs are already transparent (PBMs have been forced by the federal government to take steps toward transparency in recent years). David Marin, the group’s president and CEO, said the group is “extremely concerned that it will lead to higher patient costs and less competition, the opposite of the department’s stated intent.”

Marin also warned the move could lead to further concentration in the PBM market since small PBMs could struggle to keep up with the reporting requirements. David Schryver, president of a small PBM called ProAct, said in a public comment that the costs of generating the required reports “could slow [the] company’s growth.”

On the other hand, Garrett Hohimer, VP of policy and advocacy at employer trade group Business Group on Health, told Healthcare Brew the organization is “very supportive of the new rule.”

He is concerned, however, there will be increased scrutiny over how employers use the information once it becomes available. Johnson & Johnson and Wells Fargo have both been sued in recent years over claims of employee health benefits mismanagement, though both cases were dismissed.

“I think we’d be most concerned about plaintiffs’ lawyers looking for this as a new opportunity to just bog plans down in legal process trying to seek settlements,” Hohimer said.

Chris Bond, a spokesperson for AHIP, the health insurance industry’s trade group, told Healthcare Brew that “transparency is necessary and important, but it does not address the underlying affordability problem.”

Instead, Bond put the onus of lowering drug costs on pharma companies, arguing that “no one has more control over those prices than the brand drugmakers who set and perpetually raise them.”

The National Community Pharmacists Association, which represents independent pharmacies, said in an Oct. 29 statement that it “strongly supports” the rule. Ronna Hauser, the association’s SVP of policy and pharmacy affairs, said “the employers who pay PBMs to administer their health plans have been kept in the dark for many years when it comes to these fees and other forms of compensation.”