Congress Eyes PBM Referral Payments
New legislation would ban pharmacy benefit manager referral fees to brokers and other intermediaries. It’s the wrong approach.
After placing new transparency requirements on pharmacy benefit managers (PBMs) earlier this year, Congress is showing it is not done with the issue.
On April 22, the House Education and Workforce health subcommittee held a hearing to examine pharmacy benefit managers’ compensation structures, their influence on prescription drug pricing, and potential reforms to reduce costs for employer-sponsored health plans.
A major focus of the hearing was subcommittee Chairman Rick Allen’s (R-Ga.) PBM Kickback Prohibition Act (HR 7895), which he has called a “signature component” of President Donald Trump’s new healthcare plan, which features four pillars: lowering drug prices, reducing insurance premiums, “holding big insurance companies accountable,” and maximizing price transparency. The proposal includes ending kickbacks from PBMs to “the large brokerage middlemen that deceptively raise the cost of health insurance.” Building on this effort, Allen’s legislation would amend the Employee Retirement Income Security Act of 1974 (ERISA) to prohibit PBMs from providing kickbacks or referral fees to brokers, consultants, advisors, or similar intermediaries in exchange for directing employer-sponsored health plan or insurer business to a PBM.
Bill proponents argue that these compensation arrangements can create conflicts of interest and influence decisions in ways that do not align with the interests of employers or patients. This is an issue that has bipartisan interest. Witnesses at the hearing expressed concerns that referral fees and other compensation practices may influence decision-making in ways that contribute to higher drug costs for consumers. They argued that prohibiting these fees and reducing potential conflicts of interest could help create a more transparent and competitive marketplace.
The Council takes a different view, opposing HR 7895 and submitting letters to subcommittee members outlining our concerns. While improving transparency and reducing costs are important goals, a blanket ban on certain PBM-paid compensation is not the right solution. Banning referral compensation between PBMs and brokers is unlikely to eliminate these payments, and they may be restructured in ways that are less transparent and harder for plan sponsors or regulators to evaluate. The bill’s proposed restrictions risk shifting additional costs and fees to plan sponsors that could increase the overall cost of benefits, which would be particularly difficult for small and midsize businesses. Plan sponsors might respond by cutting costs through scaling back or forgoing broker services, resulting in reduced access to advisory support, reluctance to engage specialized expertise, and less informed decision-making.
The Council believes brokers play an important role in driving competition among PBMs by helping employers understand pricing structures, evaluate options, and negotiate more favorable contract terms. Weakening the role of these intermediaries could diminish one of the few forces actively applying pressure on PBM pricing and contracting practices without addressing core cost drivers such as rebate structures, formulary design, and spread pricing.
Rather than imposing a blanket prohibition on certain compensation practices, The Council highlights recent legislative progress as a more effective approach. In the Consolidated Appropriations Act of 2026, Congress extended ERISA compensation transparency requirements to PBMs and third-party administrators. The Council has long supported compensation transparency for all ERISA plan service providers and was a strong proponent of these PBM reforms. This expanded transparency framework is a more effective way to promote accountability and reduce costs, including by forcing PBMs to disclose their means of compensation to group health plan fiduciaries. The Council remains actively engaged with the Department of Labor as it implements these new PBM fee disclosure transparency rules.
As Congress evaluates potential changes to compensation structures, The Council will continue to underscore the valuable advice and services that brokers provide to help employer plan sponsors offer high-quality benefits for their employees. We will advocate for policies that build on recent transparency reforms, rather than impose restrictions like the PBM Kickback Prohibition Act that could unintentionally increase expenses or limit access to expertise. It is important for Council members to remain engaged in this policy debate so we can ensure that any further reforms do not disrupt delivery of cost-effective healthcare coverage.
