Washington spends a lot of time arguing about drug prices, but it often ignores the middlemen who sit at the center of the pharmaceutical marketplace. Pharmacy benefit managers—PBMs—have enormous influence over which medicines patients receive, what employers pay, and how rebates flow through the system. Yet for years they have operated with remarkably little transparency.
A new proposal from the U.S. Department of Labor could begin to change that.
The rule, developed through the department’s Employee Benefits Security Administration, would require PBMs that work with self-insured employer health plans to disclose far more about how they are compensated and how their financial arrangements affect prescription drug benefits. Employers would gain clearer information about the payments PBMs receive from plans, the revenue they collect from drug manufacturers, and the mechanics of pricing arrangements that often remain hidden inside complex contracts.
That matters because employers—and the workers they cover—ultimately finance these health plans. Yet the people responsible for overseeing them frequently lack a full picture of how prescription drug benefits are managed or how the incentives in those arrangements actually work.
The American drug supply chain is famously opaque. Rebates, discounts, service fees, and spread pricing move through the system in ways that even sophisticated purchasers struggle to track. When those flows remain invisible, it becomes difficult for plan fiduciaries to determine whether a PBM’s incentives align with the interests of patients and employers.
Greater disclosure does not automatically lower prices, but it does create the conditions for accountability. If employers can see how their pharmacy benefits are structured—and where the money goes—they are better positioned to negotiate contracts that prioritize value and patient access.
Transparency also introduces something Washington often forgets – competition. Markets function best when buyers understand what they are purchasing and how intermediaries are paid. Without that visibility, middlemen can thrive even when the value they deliver is unclear. For example, plans routinely exclude certain drugs, like more affordable biosimilars, from their formularies in favor of the deep discounts they receive for prioritizing the biologic. And yet, biosimilars have the potential to substantially reduce costs for employers, patients and the entire healthcare system.
The Labor Department’s proposal is not a silver bullet. Drug pricing remains complicated, and responsibility for high costs extends well beyond PBMs. Manufacturers, insurers, regulators, and policymakers all play a role.
But sunlight is a good place to start. The Federal Trade Commission is also taking important steps toward this with its recent settlement with Express Scripts and we hope to see more in the future.
For years, policymakers have promised to make the prescription drug system easier to understand. Requiring PBMs to open their books to the employers who hire them would be a meaningful step toward that goal—and a reminder that transparency is still the foundation of sound health policy.
Comments are due to the Department of Labor by March 31, and can be submitted HERE.
Andrew Langer is Executive Director of the Coalition Against Socialized Medicine.
Jerry Rogers is editor at RealClearPolicy and RealClearHealth. He hosts 'The Jerry Rogers Show' on WBAL NewsRadio 1090/FM 101.5. Follow him on Twitter @JerryRogersShow.
