A duplicative proposed Department of Labor (DOL) rule would severely limit competition in the PBM market, heaping costly compliance burdens on smaller PBMs. There are more than 70 full service PBMs in America, and last week, several mid-market PBMs submitted formal comments and warned the DOL that the proposal would add significant costs to their companies, leading to a chilling effect for new market entrants in the PBM industry.
Mid-market PBMs, including ProAct, quantified the time and expense complying with the rule would require:
“While just estimates, if the rule is finalized as written, our team has provided me estimates that this could cost the company upwards of a million dollars... These costs could take up a meaningful share of our net operating margin and make it harder for us to hire, grow and continue to service our clients.”
Navitus underscored the negative impact the rule could have on innovation and competition in the PBM market:
“The complexity of this rule, coupled with evolving requirements, will significantly increase operational, technical, and administrative demand. Smaller PBMs do not have the economies of scale to spread these costs across large member populations or absorb them and remain competitive on an administrative cost basis. As a result, the proposal could have a chilling effect on market entry and expansion, discouraging innovation and inadvertently reducing competition.
Mid-market PBMs also emphasized that the timeline in the proposed rule is too aggressive for them to deliver accurate, meaningful data. Welldyne encouraged DOL to consider a more realistic timeline that matches the Consolidated Appropriations Act (CAA):
“Generating data for a specific client request is very different from building standardized reporting systems capable of meeting federal regulatory requirements… These changes require substantial engineering, testing, and legal review—particularly for companies that must integrate data across pharmacy claims systems, rebate arrangements, and client-specific contract structure.”
RxBenefits pointed out the impact that the proposed rule will have not only on PBMs but on the small businesses they serve:
“This means it will be necessary for these small businesses to engage outside consultants to review the disclosure and help limit any fiduciary risk associated with interpreting whether the compensation figures are reasonable… small business clients are sure to see increased costs in the form of increased consulting fees.”
Script Care made it clear that mid-market companies support transparency, but regulations must work for all competitors:
“The proposed rule would disproportionately burden mid-market PBMs relative to the largest market participants, while delivering limited additional transparency benefits to the small and mid-size employer group plan sponsors that depend on mid-market PBMs as a viable alternative… We support transparency that works for all market participants and that preserves the mid-market PBM’s ability to compete and to continue serving the small to mid-size employers that value choice in their PBM partner.”
University of Wisconsin-Madison Professor Tony Lo Sasso summarized the impact to Modern Healthcare, saying, “It’s the little guys who aren’t as vertically integrated who are trying to compete in this space that are not going to be able to.”
Protecting competition in the PBM market means ensuring transparency requirements are workable for all participants, not locking mid-market PBMs and the businesses they serve out of the market. It’s time for DOL to rescind their proposed rule and let the wide-ranging transparency provisions enacted in the CAA take effect.
