DOL Rule Risks Undermining Competition, Innovation, and Choice in the PBM Market

Employers deserve clear, actionable information about their prescription drug spending that can help them make informed decisions. The Consolidated Appropriations Act (CAA) that the president signed into law in February, along with reforms the industry has made over the past several years, guarantees they will receive exactly that from their pharmacy benefit manager (PBM).

But a parallel proposed rule from the Department of Labor (DOL) risks causing regulatory burdens and reducing competition in the PBM market, especially for small and mid-market PBMs and the employers and unions that rely on them. The rule, proposed just weeks before the CAA passed, provides little new transparency beyond what is now required by Congress, but would drastically increase the compliance costs. That’s why PCMA recently called on DOL to rescind the rule.

The PBM market is very competitive, with more than 70 full-service PBMs operating today. Small and mid-size PBMs are winning business from the larger PBMs through competitive bids, and they do so while operating with lower overhead costs. The rule is a threat to that kind of market competition. The excessive, costly, and unnecessarily duplicative disclosure requirements in the DOL rule present significant risks, including:

• The proposed rule may slow the growth of mid-market PBMs: Smaller PBMs that do not maintain large in-house regulatory teams will be overburdened with new data pipelines, system redesigns, compliance controls, and legal review. These high upfront and ongoing costs will result in fewer resources available for hiring, clinical programs, service improvements, and innovation.
• The aggressive timeline disadvantages smaller players: Congress took a deliberate approach in the CAA, allowing time for input, standard setting, and phased implementation. The DOL proposal moves on a significantly shorter timeline and requires disclosures that overlap substantially with information already being developed under the CAA.
• Lack of alignment with the CAA undermines Congress’ goals: Misalignment matters most for smaller PBMs. Rather than investing once in a standardized, durable reporting infrastructure required under the CAA, these companies will be forced to build and rebuild systems over several years to comply with duplicative federal requirements.

Transparency, like the provisions included in the CAA, works when it is clear, coordinated, and aligned with how employers actually make decisions. The DOL’s proposed rule takes a different approach: high-volume, highly technical disclosures on an accelerated timeline, layered on top of existing and emerging federal requirements. For small and mid-market PBMs and the employers they serve, that approach risks undermining competition, innovation, and choice – for little actual benefit to employers.

Transparency should be a tool to empower employers, not a barrier that reshapes the market in unintended ways.