Employee Benefits Insights
New Transparency Rules Target Rising Pharmacy Costs for Employers — But Will It Be Enough?
MAY 5, 2026
Total prescription drug spending in the U.S. has grown 7.9% to $467 billion, and is only going to increase year over year.1 Pharmacy costs are also unique in that insurance carriers and/or pharmacy benefits managers (PBMs) profit from prescription drug claim costs — in addition to premiums or administration fees.
As revenue flows from prescription drug usage, most stakeholders remain incentivized to keep costs high. In many cases, employers are not even aware of the insurer, PBM, or broker profit sources embedded in their plans.
The lack of transparency in PBM contracts prevents employers from fully understanding how pharmacy dollars are spent. As a result, employers may face higher (and often hidden) costs, making it harder to effectively manage their health plan expenses. Increasing transparency into PBM practices is essential to understanding what is driving costs and helping employers better manage health plan spending.
Federal Government Aims to Shed Light on PBM Compensation
The federal government has taken several significant steps to increase transparency around PBM practices and compensation with recent legislation and proposed rulemaking. The following is a high-level overview of several developments highlighting primary requirements and the practical impact of these changes.2
Newly Enacted Legislation
The Consolidated Appropriations Act of 2026 (CAA-26), enacted on February 3, introduces sweeping reforms to PBM practices, with a focus on transparency and accountability. Key provisions include:
- Requiring PBMs to provide detailed reporting on prescription drug pricing/compensation to group health plans and carriers.
- Prohibiting PBMs from contractually limiting information they are required to disclose.
- Requiring PBM contracts for ERISA group health plans to fully pass through rebates and other remuneration to the plan or carrier, and allowing group health plans to audit PBM records annually on pass-through compensation.
- Mandating employers to provide notifications to health plan participants regarding pharmacy.
This legislation will take effect for plan years beginning on or after August 3, 2028 (January 1, 2029, for calendar year plans). Additional rulemaking and guidance are expected next year.
Proposed PBM Disclosure Rule
On January 29, 2026, the Department of Labor (DOL) issued a proposed rule that, if finalized as-is, creates a new disclosure requirement. Specifically, entities that provide pharmacy benefits to ERISA self-insured group health plans must provide plan fiduciaries with detailed disclosures on their compensation. These disclosures will be made twice a year and include the actual compensation the PBM receives. The proposed rule also includes audit rights for plan fiduciaries. USI Insurance Services is monitoring this closely and will provide an update on the final rule.
Amended Compensation Disclosure
The Consolidated Appropriations Act of 2021 (CAA-21) requires fiduciaries of group health plans to obtain compensation disclosures from “covered service providers.” Initially, many service providers interpreted the definition of a covered service provider to be limited to “brokers and consultants.” CAA-26 amends the definition to incorporate most service providers for ERISA group health plans, including PBMs and third-party administrators (TPAs). However, some service providers (i.e., PBMs) may continue to take the position that they don’t have to comply with the disclosure requirements until new, specific regulations have been issued. USI remains dedicated to transparency and will continue to disclose compensation as required.
These are just a few of the federal initiatives to bring visibility into PBM compensation. Whether these initiatives will ultimately slow the impact of pharmacy spending on health plan costs remains to be seen. Employers should continue to monitor new and evolving regulatory developments in this space, as these changes could impact how they manage health plan spending, and introduce additional compliance requirements.
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Learn more about these disclosure and compliance requirements and how they may impact your organization’s health plans. |
How USI Can Help
USI strictly adheres to transparency and is not incentivized by additional or hidden revenue streams. Our independence from the PBM infrastructure allows us to put employers’ best interests first and provide objective recommendations. We use client-specific pharmacy data to help employers identify their unique cost drivers and cost-saving opportunities. We then recommend targeted solutions to address and reduce pharmacy and other health plan costs.
For example, USI thoroughly reviews contracts between employers and insurance companies/PBMs for opportunities to reduce costs and eliminate hidden revenue. Our underwriting experts:
- Review contract language related to rebates and drug descriptions, and negotiate more favorable terms.
- Review formulary options and limit the inclusion of drugs selected solely for PBM profit.
- Conduct regular market checks and negotiate guaranteed discounts to increase cost competitiveness.
USI also uses its proprietary analysis tools to assess the financial impact of updating terms and conditions to align with top-performing contracts, often producing savings of 15% to 25% for clients.
For more information about strategies to reduce health plan costs and improve health outcomes for your plan members, contact your local USI benefits consultant or email ebsolutions@usi.com.
Sources:
1 According to the most current National Health Expenditure (NHE) data available, as of 2024.
2 This summary is by no means exhaustive and may continue to evolve as additional regulations and agency guidance are issued.
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