Federal pharmacy benefits manager (PBM) reforms are here
Federal changes are coming for group health plans with respect to their contracts with Pharmacy Benefit Managers (PBMs). Following are three recent developments:
- A proposed rule requiring all size self-insured ERISA plan years on or after July 1, 2026, to secure and evaluate:
- PBM compensation disclosures with estimates of all non-transparent compensation before a contract or agreement begins each year, and
- A semiannual explanation for any overages of 5% or more.
- A new law effective for plan years on or after August 3, 2028, requiring:
- Detailed PBM reporting for all large group health plans (100+),
- New PBM notices and summaries for all size health plans, and
- Pass-through of all non-transparent PBM compensation in all size ERISA contracts.
- A Federal Trade Commission (FTC) settlement in which the large PBM, Express Scripts, agreed to implement a number of business changes that impact employer group health plans.
Who this applies to:
All employers sponsoring prescription drug coverage will experience an impact in some way, directly or indirectly, including a new employee notice requirement coming in late 2028. ERISA plans have fiduciary obligations to ensure PBM compensation disclosures and summaries are provided and evaluated. Governmental, tribal, or church plans are exempt from ERISA but are subject to some of the reporting and disclosure requirements imposed by the new law.
Key details:
Read more about these new reforms in recent Alerts:
More information about the FTC settlement with Express Scripts is found on the FTC’s website. The FTC is undertaking similar enforcement action against Caremark Rx and OptumRx.
Penalties for non-compliance:
For changes to ERISA plans, fiduciaries have an obligation to review compensation and contracts for reasonableness to avoid engaging in a prohibited transaction. The new law’s notice requirement, going into effect in late 2028 for all size employers regardless of ERISA status, imposes a $10,000 per day penalty for failing to provide the required notice.
Impact to employers:
The intent of these changes is to provide employers greater transparency into their PBM contracts and compensation. So, it is prudent to start establishing procedures for how these disclosures will be evaluated by the plan’s fiduciaries for reasonableness and potential conflicts of interest. The new notice requirement can be part of the standard notices employers routinely provide, but this is the largest penalty seen thus far for failing to provide a specific notice.
Compliance update brought to you by Benefit Compliance Solutions (BCS) in partnership with Nava Benefits. The information contained in this update, including any attachments, is presented solely in the capacity of Nava as compliance consultants. Nothing contained herein should be construed as tax or legal advice or opinion or used as a substitute for consultation with professional legal counsel. Nava is not authorized to practice law, is not an attorney or law firm, and is not rendering legal advice. Communications with Nava are not subject to attorney-client privilege.