Taking a Bite out of PBMs

In February, President Donald Trump signed into law several pharmacy benefit manager (PBM) reforms long sought by The Council.

Among them was achieving compensation transparency parity under ERISA between brokers and benefits consultants and PBMs and third-party administrators (TPAs).

Of course, we aren’t a group to rest on our laurels: Council members immediately started evaluating the real-world opportunities for their clients under the new law. And literally the day the law was enacted, The Council of Employee Benefits Executives (CEBE)—The Council’s advisory body on employee benefits policy issues—started discussing what we might tackle next to further promote prescription drug and healthcare affordability.

Let’s start with the wins.

The Consolidated Appropriations Act (CAA) of 2026 explicitly names PBMs and TPAs as “covered service providers” that must report their plan-related direct and indirect compensation to ERISA plan sponsors. Brokers and consultants have operated under this compensation transparency regime since 2021. Now, PBMs and TPAs have no colorable argument that they are outside of these requirements and must make these disclosures before a plan can contract with them for services.

Beginning in August 2028, the CAA also requires PBMs to pass through 100% of rebates to plans and to disclose detailed data to large plans on spread pricing, drug costs and prices, patient and plan drug spend, and participant claims, among other things—granular data brokers have had to fight for until now because PBMs unilaterally control this information.

The law includes provisions to head off anticipated PBM efforts to circumvent these new requirements. Pharmacy benefit managers, for instance, may only contract with entities that agree to provide the data needed to fulfill PBMs’ disclosure obligations and not delay or limit those disclosures. The CAA also closes the so-called “gag clause” loophole from prior transparency laws by imposing an affirmative obligation on the PBMs to disclose the requisite data.

Industry Opportunities

What does this all mean for brokers and their clients?

At a very high level, the recent reforms shine a bright spotlight on the PBMs and the drug supply chain. The CAA requires rulemaking by the Department of Labor on several of the law’s provisions, so for the next two years (at least), regulators will closely scrutinize PBM practices and hear from many stakeholders on how to improve this notoriously complex and opaque part of the healthcare ecosystem. This microscope on PBMs may give brokers and their clients a better overall negotiating posture for services and benefits. Notably, it also could provide smaller, independent PBMs with flexible, transparent, non-vertically integrated business models more opportunity to compete with the three juggernauts—CVS Caremark, Express Scripts (Cigna), and Optum Rx (UnitedHealth).

One specific broker opportunity is improving employer client education. The data will give employers (likely via their brokers) a fuller picture of the costs and value associated with different PBMs and prescription drug benefit options, helping them make more informed decisions about their benefits programs. In light of growing fiduciary litigation within employee benefits, some employers may find this more robust picture (and related data and documentation) to be a useful tool against lawsuits. Additionally, this could be an opportunity for brokers to accelerate PBM innovation by highlighting the value of independent providers and challenging the “brand name” bias of employers and employees toward doing business with the largest three operators.

Council members also expect that employers will rely on their brokers and consultants to help them parse the newly available data. Many Council member firms are extremely sophisticated in data analytics and will be well positioned to help their clients operationalize the new PBM information by distilling and presenting clean, auditable, and usable data.

Ultimately, the new compensation, drug, and pricing data should help brokers and employers do more apples-to-apples comparison shopping between PBMs and negotiate better contract terms for their services and pharmacy benefits.

The Fight Continues

We recognize that these reforms are an incremental improvement in a sea of prescription drug and broader healthcare challenges. In any policy context, transparency is often a necessary first step, but it’s unlikely to alone solve widespread systemic problems. Despite the big wins in the new law, Council members readily acknowledge the remaining headwinds to bring down costs and increase competition in the prescription drug arena.

One challenge will be some clients’ appetite for innovation in their benefits programs and the serious investment in number crunching that likely will be required to bring post-CAA innovation to fruition. Everyone we’ve spoken to is highly skeptical that the PBMs will actually turn over complete, accurate, usable data, and some employers already are inclined to tune out the amount of data they must manage. Going forward, that employer attitude might carry higher risk. To the extent that class action attorneys and plan participants are working with newly available data, they arguably have more ammunition to challenge employers’ service provider and benefits selections as “unreasonable” and therefore in violation of plan sponsors’ fiduciary duties. Brokers may have to figuratively drag some clients along to investigate and dig into what it now means to have “reasonable” service provider contracts and compensation, or risk litigants using the new data to tell their own story.

Despite what the law says, we fully anticipate typical PBM evasion shenanigans with respect to the CAA reforms. These measures took years to pass, and many won’t be effective for two more years. Pharmacy benefit managers have ample time to adjust business practices, profit centers, and pricing models in anticipation of the new requirements. And there are many opportunities to game any transparency regime, say by exploiting definitional ambiguities and creating new revenue streams not captured by “indirect compensation” and/or releasing huge amounts of unintelligible data. Fortunately, the Labor Department can close at least some potential loopholes through clarifying regulations.

Consolidation and vertical integration in the drug supply chain clearly are massive cost-drivers not solved by transparency alone. The large PBMs can almost endlessly shift and/or replace profit streams because they have tremendous leverage over the drug manufacturers (via formulary placements, ownership/control of distribution channels, and other means) and because they can extract profits at so many points they control along the supply chain, including distribution, wholesalers and aggregators, provider/prescribers, third-party plan administration, and pharmacies.

So, although the CAA reforms should—with proper regulatory guardrails and enforcement—shed light on direct and indirect compensation that pharmacy benefit managers receive for their plan services (and therefore help employers shop for and compare PBM services and benefits options), any policy that does not address the broader anti-competitive market realities will have a blunted impact on overall prescription drug costs. Not surprisingly then, CEBE already is discussing possible policy solutions that tackle those structural issues more directly, including anti-tying legislation modeled on a 2025 Indiana law that prohibits PBMs from leveraging their market power in one area (TPA services) to require employers to use their affiliated PBM services. This type of policy, layered on top of meaningful transparency for TPAs and PBMs, could drive more competition and innovation in PBM services and give employers much more negotiating power.

We have had great success in addressing opaqueness around PBM compensation, drug pricing, and drug utilization for plan sponsors. We are moving the needle one step at a time, and pushing for policies that dismantle the PBM industry architecture makes good sense as a next step.

We’d like to thank these industry leaders for helping us craft this month’s column: Chris Antypas, lead pharmacy consultant, Anu Dhamecha, director of pharmacy practice, and Andy Vetor, president of benefits consulting and chief growth officer at The MJ Cos.; and Richard Lo, director of clinical services for OneDigital Pharmacy Consulting/RxConnection, and Peter Gruenberg, executive vice president of National Industry and Program Business at OneDigital.