The Labor Department finalized a rule to promote transparency as pharmacy benefit managers work with large self-insured group health plans, shared during an Oct. 29 event.
The Wall Street Journal initially reported on the final rule one day ahead of the announcement. The final rule follows the Labor Department’s January proposal, shortly before Congress took its own steps with disclosures. The department subsequently extended its comment period to better understand how to bring the rule into alignment.
At the Oct. 29 event, U.S. Secretary of Labor Keith Sonderling said savings could reach up to $22 billion for employees and employers over the next decade. The plans affected by the rule must have at least 100 participants or be sponsored by employers with at least 100 workers.
“No more negotiating in the dark,” White House Domestic Policy Council Director Vince Haley said, referencing the disclosures, ongoing compensation updates and audit rights that come with the rule.
Here are seven things to know about the rule:
- Initial disclosures are required. PBMs must disclose services and expected compensation reasonably ahead of entering a contract, or at least 90 days before a contract renews or extends.
- Disclosures must encompass direct and indirect pay. Indirect compensation is broadly defined, including rebates, spread pricing and copay clawbacks.
- PBMs must report on actual compensation every six months. This could also take place quarterly, upon a plan’s request.
- Self-insured plans get audit rights. They are permitted an annual audit to review the accuracy of disclosures.
- The disclosures must be accessible and in plain language. They should not contain jargon unless defined. These disclosures must show compensation as a monetary amount or through a good-faith estimate if it cannot be determined. All compensation information should be available in a standard machine-readable file format upon request.
- Plan fiduciaries, such as employers, get liability protection if they were unaware that their PBM failed to disclose and reasonably believed requirements were met. Upon learning of a disclosure issue, fiduciaries should report that to the Labor Department. Contract termination is not required.
- The rule goes into effect 60 days after it hits the Federal Register. Requirements apply for plan years starting July 1, 2027, or later.
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