Congress has declared its intent on pharmacy benefit manager reform, and the Labor Department should heed it.
One of the constant frustrations of the executive branch comes when an administration wants to enact a particular policy but the U.S. Congress—either deliberately or by omission—has not provided sufficient legislative tools to move the ball forward. In these situations, regulators may be able to address only part of a problem. If the Administration wants to take a more aggressive approach, then they might attempt to cobble together legal solutions based on tortured interpretations of existing statutes, but that strategy could struggle to survive judicial review given several recent U.S. Supreme Court decisions. It therefore stands to reason that when Congress does provide the executive branch with explicit legislation to support an administration’s favored policy, then it behooves the executive branch to go “pens down” on its own initiatives and follow Congress’s instructions.
This precise scenario is now playing out with the U.S. Department of Labor’s efforts to bring more transparency to the practices of pharmacy benefit managers (PBMs), the companies that manage prescription drug plans for insurers or employers.
The story began last year when President Donald J. Trump signed an executive order entitled Lowering Drug Prices by Once Again Putting Americans First. As the President’s statutory options were limited at the time, this executive order directed the Secretary of Labor to propose regulations under the Employee Retirement Income Security Act of 1974 (ERISA) “to improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers.” In January 2026, the Labor Department published a set of proposed rules for public comment.
But given the statutory limitations of ERISA, the Labor Department was only able to offer a partial fix: The proposed rules focus on compensation paid to PBMs by self-insured ERISA-covered group health plans. Fully insured plans—those in which employers purchase coverage from an insurance carrier—would not be covered by the proposed rules.
Basically, the proposed rules would direct PBMs to provide plan fiduciaries with a report, at least twice a year, describing each service provided, direct compensation expected, rebates and fees, and the like. In so doing, the Labor Department’s proposed rules seek to give plan fiduciaries—typically plan sponsors—the information needed to determine whether a PBM contract is “reasonable” as required by ERISA.
Further complicating implementation, the Labor Department’s proposed rules would also shift the burden of analyzing and reporting the terms of health plans. After a PBM provides the required information, the proposed rules would require plan sponsors to analyze those reports as part of their existing core ERISA fiduciary duties to ensure that the PBM contract is reasonable. Failure to do so could expose them to legal liability. The Trump Administration prides itself on aggressive efforts to reduce regulatory burdens, but the Labor Department’s proposed rules would increase compliance costs for both PBMs and plan fiduciaries alike—a regulatory double-dose.
Yet Washington is always full of surprises. As part of a last-minute political compromise, language to govern PBM transparency was added to the Consolidated Appropriations Act of 2026 (CAA) —a bill that President Trump signed into law in February. And the CAA takes a very different approach to PBM transparency than what the Labor Department has proposed.
First, unlike the department’s rules, which would be limited to self-insured plans, the CAA takes a comprehensive approach, affecting both insured and self-insured health plans alike.
Second, the CAA requires PBMs to compile at least six disclosure reports each year, up from the two reports proposed by the Labor Department.
Finally, rather than adopt the Labor Department’s focus on PBMs’ finances, the CAA directs PBMs to provide extensive information about drug pricing and rebates. This includes not just totals or summaries but also granular numbers that let plan sponsors and participants see every penny and every decision. A PBM’s report for each individual drug must include several key items, including how much the PBM was paid under the plan; how much the PBM paid the pharmacy; the difference in price that the PBM kept, or “spread”; whether the drug is brand-name or generic; the wholesale price on the day it was dispensed; how it was dispensed such as by retail store, mail-order, or specialty pharmacy; how many prescriptions were written; how many patients used them; how many pills were distributed; how many days of pills are supplied under the prescription, such as 30 or 90 days; the net price to the plan after all rebates, fees, and discounts; and patients’ out-of-pocket costs.
The CAA’s reporting requirements, both in terms of scope and frequency, mark a significant increase from the information required under the Labor Department’s proposed rules. But unlike the Labor Department’s approach, under which fiduciaries would be obligated by regulation to review the mandatory reports to comply with ERISA, the extensive reports mandated by the CAA serve to provide information to plan administrators about whether their existing PBM provides a good value or whether they should switch to a competing PBM when their contract expires.
Finally, it is interesting to note that Congress did not want the Labor Department to take the regulatory lead on this issue. Instead, the CAA assigned primary responsibility to the U.S. Department of Health and Human Services to write the new PBM reporting rules.
Which brings us to the point of the pencil: The CAA represents a clear statement by Congress on exactly how the federal government should regulate transparency in the PBM industry. Congress could have codified—and even expanded—the Labor Department’s approach but specifically refused to do so. As Congress does not “hide elephants in mouseholes,” the department’s proposed rules, aside from being superfluous, do not reflect the will of Congress. Piling on regulatory requirements increases compliance costs—costs that will ultimately be passed through to the American consumer at a time when health care affordability is a headline concern.
Immediately upon taking office, President Trump signed an executive order entitled Unleashing Prosperity Through Deregulation. This executive order provides that, unless prohibited by law, “whenever an executive department or agency… publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least 10 existing regulations to be repealed.” In the case of PBM transparency, two new sets of extensive regulations have been proposed with no offsetting deregulation in sight. The CAA’s extensive reporting requirements are not optional because they are mandated by Congress. The Department of Labor, however, has no such congressional directives. It thus makes little sense for the Labor Department to pile-on by adopting a “belt and suspenders” regulatory approach for the PBM industry.
Congress has said its piece about what it wants for PBM reform. The Labor Department needs to put down its pen.
