The U.S. Department of Labor announced a final regulation on October 29, 2026, expanding pharmacy benefit manager (PBM) fee and compensation disclosures to employer-sponsored group health plans. While the disclosures give plan fiduciaries new tools to uncover compensation arrangements and potential conflicts, they also sharpen the practical responsibility to review what is disclosed and act prudently to protect the plan.

Why the Rule Matters

PBMs negotiate drug rebates, administer formularies and pharmacy networks, and process prescription claims. Their revenue may include administrative fees, manufacturer rebates, spread pricing, pharmacy recoupments, and other direct or indirect payments. Without sufficient transparency, fiduciaries may struggle to determine the full cost of services or whether compensation incentives conflict with the plan’s interests.

The rule implements disclosure protections under ERISA § 408(b)(2), which provides a conditional exemption for certain otherwise prohibited service-provider transactions. It is designed to help responsible plan fiduciaries assess service arrangements, conflicts and reasonable compensation. The detailed regulatory requirements generally focus on covered PBM arrangements with large self-insured group health plans; broader statutory requirements may affect additional plans.

What PBMs Must Disclose

Covered providers must report specified direct and indirect compensation, including manufacturer rebates and other payments, spread pricing, pharmacy recoupments, price-protection payments and related fees. The framework includes disclosures before entering into or renewing covered arrangements, continuing reporting, explanations of certain material variances, and audit access to test the accuracy of reported compensation. The regulation generally applies to plan years beginning on or after July 1, 2027; related statutory requirements and transitional guidance warrant attention now.

New Powers Also Bring a Responsibility to Investigate and Evaluate

The additional disclosure and audit rights are not merely optional cost-saving opportunities. ERISA fiduciaries must discharge their duties prudently and solely in the interests of participants and beneficiaries, including by paying only reasonable plan expenses. See ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1). The standard is one of prudent process: fiduciaries should obtain relevant information, understand the financial incentives embedded in PBM arrangements, compare costs and services against reasonable alternatives, and document the basis for their decisions.

Accordingly, once disclosures identify potentially excessive fees, retained rebates, spread-pricing margins, related-party compensation or other conflicts, fiduciaries should not simply file the reports away. They should evaluate whether those arrangements affect formulary decisions, drug costs, pharmacy reimbursement or other plan outcomes; seek explanations and supporting data; use contractual audit rights where appropriate; and determine whether corrective negotiations, additional monitoring, replacement of the provider or other action is warranted. The nature and depth of review should reflect the plan’s circumstances and the significance of the identified risk.

The prohibited-transaction implications are equally important. ERISA § 406, 29 U.S.C. § 1106, generally restricts certain transactions with parties in interest, including service-provider arrangements, unless an exemption applies. Under § 408(b)(2), an arrangement must satisfy conditions including necessity of services, reasonableness of the arrangement and no more than reasonable compensation. Disclosure compliance is relevant, but receipt of a disclosure does not by itself establish reasonable compensation, eliminate a conflict, or establish that every exemption condition is met. Fiduciaries should assess the substance of the arrangement and respond to red flags rather than treating the new paperwork as a safe harbor.

A failure to undertake a prudent review may increase exposure to claims of fiduciary breach or nonexempt prohibited transactions, depending on the facts and the fiduciary’s role. Conversely, a documented, informed process for investigating conflicts, benchmarking expenses and monitoring the provider can help demonstrate appropriate fiduciary oversight. The regulation supplies information and audit tools; it does not transfer the fiduciary’s judgment to the PBM.

Recommended Employer and Fiduciary Actions

While the rule applies beginning with post June 1, 2027 plan years, employers and fiduciaries should start preparing now.

• Inventory PBM, broker and consultant contracts and determine which disclosure obligations apply to each plan.

• Review fee schedules, rebates, spread pricing, recoupments, affiliate payments, formularies and specialty-pharmacy incentives.

• Assign responsible fiduciaries or committees to review disclosures, seek explanations and record decisions.

• Benchmark total compensation and plan expenses against services, market alternatives and participant outcomes.

• Use audit and data-access rights when discrepancies or significant conflicts arise; negotiate corrective contract provisions as appropriate.

• Coordinate with ERISA counsel and benefits advisers to evaluate prohibited-transaction exemptions, fiduciary procedures and upcoming renewals.

Timing and Implementation

The DOL announced the final rule October 29, 2026. Its effective date is tied to Federal Register publication, and its detailed requirements generally apply for plan years beginning on or after July 1, 2027. Changes and added clarifications are possible. Employers should verify the official published text, scope and transition provisions before applying specific deadlines.

Solutions Law Press Employer Takeaway

Greater PBM transparency is accompanied by greater practical accountability. Fiduciaries who gain access to compensation, conflict and audit information must be prepared to evaluate it as part of a prudent process, challenge unreasonable fees and expenses, and address arrangements that may constitute prohibited transactions. Employers should update PBM oversight procedures now so that new disclosure rights translate into documented fiduciary compliance—not simply more reports.

For Help or More Information

The author of this update, Cynthia Marcotte Stamer has decades of experience advising and representing health and other employee benefit plans, their employer and other sponsors, fiduciaries, administrators, insurers and others on these and other laws and operations. 

Her experience includes extensive work helping these and other clients design, audit, and defend their organizations and practices including conducting NSA and other audits and investigations, designing and updating compliance and risk management programs, responding to government investigations, conducting transaction, governance, and other due diligence, and assisting with other legal and operational compliance and risk management and legislative and regulatory affairs. She is available to assist your organization in assessing the impact of these developments and navigating the compliance and strategic steps that follow. 

Well-known for her knowledge, training and publications on health and other employee benefits and workforce matters, Ms. Stamer also is nationally recognized for her extensive publications, training and advocacy on health and other employee benefits matters, including:

• A recorded briefing on “Winning The War On Out-Of-Network Claims: Updating Your Battle Plan For Avoiding No Surprises Act & Other Out-Of-Network Claims Compliance, Cost Control & Claims Management Minefield” she recently conducted with The OccuNet Company Chief Production Officer Carol Lockwood for the Fort Worth HR Compensation and Employee Benefits PEG on October 7, 2026;
• Her upcoming virtual program on “Road Ready Your Health Plan For 2027 With A Health Plan Wellness Checkup” that Ms. Stamer is scheduled to present on November 4, 2026; and 
• Many other Solutions Law Press and other presentations and programs. 

For more information about securing a copy of the recording, attending the upcoming or other briefings, or other health or other employee benefits, workforce, health care or other training, resources, or services, see http://www.solutionslawyer.com orcontact Ms. Stamer via e-mail or via telephone at (214) 452 -8297.

About the Author

Cynthia Marcotte Stamer is an American College of Employee Benefits Counsel and a Martindale-Hubble “AV-Preeminent” (Top 1%) attorney and advisor board certified in labor and employment law by the Texas Board of Legal Specialization peer peer celebrated as “Top Rated Lawyer” and “LEGAL LEADER™ “Top Rated Lawyer” and “Best Lawyer” for her work in ERISA & Employee Benefits Law, Health Care Law, Labor and Employment Law, and Business and Commercial Law.

Nationally recognised for her decades of leading edge health and other employee benefits and insurance, compensation, human resources and other management work, public policy leadership and advocacy, coaching, teachings, and publications, Ms. Stamer is well known for her decades of pragmatic, leading edge work, scholarship and thought leadership on health benefit and other health and managed care, privacy and data security and other employee benefit, insurance, and health industry legal, public policy and operational concerns. 

Ms. Stamer’s work throughout her career has focused heavily on working with health care and managed care, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns.  As a a key focus of this work, she has continuously and extensively worked with domestic and international health plans, their sponsors, fiduciaries, administrators, and insurers; managed care and insurance organizations; third party administrators and other health benefit service providers; hospitals, health care systems and other health care providers, accreditation, peer review and quality committees and organizations; billing, utilization management, management services organizations, group purchasing organizations; pharmaceutical, pharmacy, and prescription benefit management and organizations; consultants; investors; EMR, claims, payroll and other technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, self-insured health and other employee benefit plans, their sponsors, fiduciaries, administrators and service providers, insurers and other payers, health industry advocacy and other service providers and groups and other health and managed care industry clients as well as federal and state legislative, regulatory, investigatory and enforcement bodies and agencies.

Her experience includes more than 35 years of leading edge work for employer and other plan sponsors, plans and their fiduciaries, insurers, third party administrators, health care clearinghouses and other health care, insurance and other data and technology providers, and others on health and other employee benefits design, administration, compliance, and policy including decades of work on fiduciary compliance and risk management; eligibility, coverage and other plan mandates; administrative simplification and transparency; PBM, pharmacy and pharmaceutical management and regulation; surprise billing and other non-par provider; direct provider, vendor and other credentialing, contracting and management; and other managed care and insurance; high deductible, minimum or level premium, captive and other non traditional funding; and agency and private audits, investigations and enforcement; and other insured and self-insured health benefit contracting, design, administration, regulation, fiduciary and other liability managment, and other design, compliance, risk management, defense, and operations solutions.

She also has extensive experience helping health care systems and organizations, group and individual health care providers, health plans and insurers, health IT, life sciences and other health industry clients prevent, investigate, manage and resolve  sexual assault, abuse, harassment and other organizational, provider and employee misconduct and other performance and behavior; manage Section 1557, Section 504, Civil Rights Act and other discrimination and accommodation, and other regulatory, contractual and other compliance; vendors and suppliers; contracting and other terms of participation, medical billing, reimbursement, claims administration and coordination, Medicare, Medicaid, CHIP, Medicare/Medicaid Advantage, ERISA and other payers and other provider-payer relations, contracting, compliance and enforcement; Form 990 and other nonprofit and tax-exemption; fundraising, investors, joint venture, and other business partners; quality and other performance measurement, management, discipline and reporting; physician and other workforce recruiting, performance management, peer review and other investigations and discipline, wage and hour, payroll, gain-sharing and other pay-for performance and other compensation, training, outsourcing and other human resources and workforce matters; board, medical staff and other governance; strategic planning, process and quality improvement; meaningful use, EMR, HIPAA and other technology,  data security and breach and other health IT and data; STARK, ant kickback, insurance, and other fraud prevention, investigation, defense and enforcement; audits, investigations, and enforcement actions; trade secrets and other intellectual property; crisis preparedness and response; internal, government and third-party licensure, credentialing, accreditation, HCQIA and other peer review and quality reporting, audits, investigations, enforcement and defense; patient relations and care;  internal controls and regulatory compliance; payer-provider, provider-provider, vendor, patient, governmental and community relations; facilities, practice, products and other sales, mergers, acquisitions and other business and commercial transactions; government procurement and contracting; grants; tax-exemption and not-for-profit; privacy and data security; training; risk and change management; regulatory affairs and public policy; process, product and service improvement, development and innovation, and other legal and operational compliance and risk management, government and regulatory affairs and operations concerns. to establish, administer and defend workforce and staffing, quality, and other compliance, risk management and operational practices, policies and actions; comply with requirements; investigate and respond to Department of Insurance, Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, trucking, alcohol and firearm, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; JCHO and other accreditation and quality organizations; private litigation and other federal and state health care industry actions: regulatory and public policy advocacy; training and discipline; enforcement;  and other strategic and operational concerns.

Former lead advisor to the Government of Bolivia on its Social Security Privatization reform, miss Stamer also has extensive legislative and regulatory affairs experience on federal, state and international employee benefits, healthcare, workforce, education, insurance, data privacy and security, antitrust, and other regulations and reforms.

In addition, Ms. Stamer contributes her time and leadership to numerous policy, professional, civil and other organizations, Ms. Stamer currently or previously served as the Scribe leading annual agency meetings on HIPAA and other issues with the Department of Health and Human Services; leadership Council Representative, speaker, author and faculty lead for the American Bar Association (“ABA”) Joint Committee on Employee Benefits; the ABA International Section International Employment Law Committee and International Life Sciences Committee Chair; the ABA Tort Trial and Insurance Practice Section Medicine and Law Committee Chair and Employee Benefits and Worker’s Compensation Committees Vice Chair; the ABA Health Law Section Managed Care & Insurance Interest Group Chair and Risk Management Interest Group Chair; the ABA RPTE Employee Benefits & Other Compensation Group Chair and Welfare Benefit, Fiduciary Responsibility, and Plan Terminations and Transactions Committees Chair; Vice President and Executive Director of the North Texas Health Care Compliance Professionals Association; a Southwest Benefits Association Board Member; a SHRM Consultants National and Region IV Board Chair; WEB National Board Member and Dallas Chapter President; National Kidney Foundation of North Texas Board Member and Compliance Chair; Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency Board President; a North Texas United Way Long Range Planning Committee Member; and other leadership involvement in a broad range of other professional and civic organizations.

Author of hundreds of highly regarded works on health and other benefits, human resources, health care, insurance, data privacy and security and other related concerns, examples of these publications include “Transparent PBM Contracting,” “ACOs, Direct Contracting: Legal & Practical Challenges For Employers, Providers & TPAs,” “The Medicare Advantage Contracting Manual,” “Third Party Administrator (TPA) Contracting Principles and Strategies and a multitude of other publications and presentations. 

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

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