DOL’s PBM Proposal: What it Signals About Fiduciary Expectations and How Plan Sponsors Can Use It

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) recently proposed a regulation to increase transparency in pharmacy benefit manager (PBM) compensation and financial arrangements. While initial discussions have focused on technical details, the proposal’s greater significance lies in what it signals about evolving fiduciary expectations under ERISA and how plan sponsors can use this guidance to strengthen oversight.

Proposals like this typically reflect concerns that regulators have already identified through investigations, audits and enforcement actions. Plan fiduciaries should view EBSA’s proposal not only as a future compliance requirement, but also as a key indicator of how PBM oversight is currently evaluated.

Plan sponsors have long recognized PBMs as a critical and complex part of the prescription drug supply chain. PBMs operate between drug manufacturers, pharmacies, and employer-sponsored health plans, influencing drug selection, pricing, reimbursement and rebate flows that often involve billions of dollars in plan assets.

For many plan sponsors, the main challenge is not recognizing PBMs as a fiduciary risk, but obtaining the transparency and contractual rights needed to oversee PBM operations. Despite repeated efforts, sponsors often face opaque pricing, limited disclosure and resistance to contract terms that enable independent validation of PBM compensation, incentives and performance.

As a result, many fiduciaries are responsible for overseeing arrangements they cannot fully evaluate, not from lack of diligence, but because PBM contracts and data limitations restrict their ability to do so effectively.

In this context, EBSA’s proposal is significant not for introducing new fiduciary concepts, but for acknowledging and addressing longstanding barriers to effective oversight.

For many plan sponsors, the challenge has been how to act effectively in an environment with limited transparency and negotiating leverage. EBSA’s proposed regulation changes this landscape.

By identifying PBM compensation transparency as a fiduciary necessity under ERISA, the proposal provides plan sponsors with a regulatory basis to revisit oversight practices and contract terms previously resisted. Requests for enhanced fee disclosure, data access, audit rights and performance accountability can now be positioned as essential elements of prudent fiduciary oversight.

Practically, this enables plan sponsors to re-engage PBMs from a stronger position. Instead of negotiating in isolation, fiduciaries can reference evolving regulatory expectations when addressing issues that have previously stalled, such as data access rights, expanded audit provisions and independent validation of PBM performance and compensation.

Importantly, plan sponsors do not need to wait for final rulemaking or enforcement to leverage the proposal. Regulatory guidance often shapes fiduciary expectations before formal implementation, especially when it addresses known oversight challenges. For sponsors who previously faced resistance, the proposal validates that their requests were reasonable and consistent with fiduciary obligations.

EBSA’s proposal reflects a broader regulatory trend toward transparency, accountability, and data access in healthcare. Regulators now expect plan fiduciaries to move beyond passive reliance on vendor representations and instead conduct documented, independent evaluations of key service providers.

Historically, regulatory signals in areas like service-provider fee disclosures and cybersecurity oversight raised fiduciary standards before formal enforcement began. PBM oversight now appears to follow a similar path, with increased expectations for documentation, validation, and governance.

As EBSA’s proposal is recent, many plan sponsors are still assessing its implications. However, it offers a useful framework for evaluating current PBM arrangements and identifying areas where fiduciary oversight may need renewed attention as regulatory expectations evolve.

In that context, plan sponsors may wish to consider:

These considerations are intended to support thoughtful governance in response to emerging regulatory signals, not to prompt immediate disruption of service-provider relationships.

Regardless of whether EBSA’s PBM transparency proposal is finalized as written, its message is clear: PBM compensation and pricing practices are now a primary fiduciary concern. Plan sponsors who proactively evaluate and document PBM oversight will be better positioned to manage risk, strengthen negotiating leverage and demonstrate fiduciary prudence.