A proposed Department of Labor (DOL) pharmacy benefit manager (PBM) disclosure rule has as a stated goal to “create a fairer and more competitive prescription drug market, lower costs, and ensure accountability across the healthcare system.”
But, in practice, could that rule backfire and actually limit competition in the PBM market, heaping costly compliance burdens on smaller PBMs that drive up costs for everyone?
According to several midsized PBMs that submitted formal comments to DOL, the answer is an emphatic yes.
These smaller PBMs are warning that the proposal would add significant costs to their companies, leading to a chilling effect for new market entrants in the PBM industry. As PCMA’s Head of Research, Amanda Frost, PhD, recently explained, the DOL rule will have unintended consequences and cause massive ripples, forcing small and mid-size PBMs to leave the market, leading to less competition and fewer choices for employers.
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.”
DOL should protect patients and ensure that the final PBM rule preserves affordable prescription drug coverage and a competitive PBM market.