The Trump administration's Labor Department has finalized a rule that forces the drug middlemen known as pharmacy benefit managers to open their books to the employer health plans they serve — showing the rebates, the spread pricing and the other payments they collect along the way — in a move officials say will save more than $800 million a year and cut what working families pay for their medicine.
Most Americans who get health cover through a job never deal with a pharmacy benefit manager, or PBM, but the PBM stands behind almost every prescription they fill. It builds the network of pharmacies the plan uses, negotiates what the pharmacies are paid, decides which drugs sit on the plan's list of covered medicines, processes every claim and bargains with drugmakers. The final rule, issued by the department's Employee Benefits Security Administration under the federal pension and benefits law ERISA, is called Improving Transparency into Pharmacy Benefit Manager Fee Disclosure, and the department says it answers President Trump's executive order on lowering drug prices by putting Americans first, which directed the department to drag PBM pay into the open.
The problem the rule attacks is that the middleman's money has largely been hidden from the customer paying the bill. Drugmakers pay rebates — discounts handed over in return for a top spot on the plan's drug list — and much of that money flows through the PBM and companies tied to it, with the employer unable to see how much was kept on the way. Under what is called spread pricing, the plan can pay the PBM more for a medicine than the PBM pays the pharmacy that handed it over, and the PBM quietly pockets the difference. The Labor Department's own rule document notes that the Federal Trade Commission found the three largest PBMs took a combined $1.4 billion in spread income between 2017 and 2022 on just 51 drugs. Employers choosing between PBM contracts have been negotiating half-blind.
The rule ends that for the plans it covers. Before a plan signs, extends or renews a PBM contract, the PBM must hand the officials who run the plan — the fiduciaries legally responsible for spending the workers' health money prudently — a full advance disclosure of the compensation it reasonably expects to receive. After that, updated disclosures must come every six months, or every three months if the plan asks. Everything must be shown: the fees the plan pays directly; the rebates, fees and other payments from drug manufacturers, including money collected through PBM-linked purchasing organizations; the spread kept on each drug; payments clawed back from pharmacies; price-protection deals; and the payments tied to which drugs win a place on the covered list. Plans also gain the right to audit the numbers for accuracy at least once a year, and the disclosure duty is a condition of the legal exemption that makes these service contracts permissible at all — so a middleman that will not show its pay puts the whole arrangement at risk.
The benefit to workers runs through their employers' new leverage. A plan that can finally see the rebates and spreads can demand they be passed through, renegotiate them away, or take its business to a middleman that charges openly — and every dollar an employer plan stops overpaying for prescriptions is a dollar that is not coming out of premiums and paychecks. Federal officials estimate the rule will save more than $800 million a year; the Labor Department's own analysis puts the yearly benefits in the hundreds of millions, and calculates that if the new transparency drives the average net drug price down by just 1 percent, roughly $818 million a year would flow back to the workers and families in these plans in lower drug spending. Supporters at the announcement put it more bluntly: patient advocate Cynthia Fisher, who spoke alongside department leaders, said the rule means Americans will no longer be left in the dark about how much the middlemen are taking from their paychecks, and gives employers the leverage to crack down on rebates, clawbacks and spread pricing.
The rule reaches the biggest part of the employer market: large, self-insured plans — the ones where the employer itself pays the medical claims — run by employers with at least 100 workers or covering at least 100 participants. The department counts more than 130,000 such plans and more than 70 PBMs in the market it covers, in a system where about 136 million Americans get their health coverage through an employer. It applies to plan years beginning on or after July 1, 2027, and it lands ahead of Congress's own PBM law, which from 2028 will force middlemen to hand plans 100 percent of manufacturer rebates.
The middlemen's trade group is already pushing back. The Pharmaceutical Care Management Association, which represents PBMs, called the rule a solution in search of a problem, warned it would raise costs for patients and squeeze smaller PBMs, and said it would weigh its options — a signal a court fight may be coming. For now, though, the direction is set: from the middle of 2027, the companies that manage America's prescriptions will have to show the customer every way they get paid.
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