AH106 - What You Need to Know About the DOL’s Proposed PBM Rules, with Julie Selesnick

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The Department of Labor (DOL) recently closed its comment period for proposed rules to enhance pharmacy benefit manager (PBM) transparency. With hundreds of comments submitted by stakeholders across the healthcare supply chain, the entire industry is waiting to see how this potential shift could affect long-awaited transparency reforms.

For years, plan sponsors have struggled to identify actual costs associated with their pharmacy benefit. PBM contracts are notoriously complex and often include “old-world” pricing models. As Josh Golden pointed out on episode 105 of the podcast:  

“But important to realize that like pretty much every one of the publishers of AWP has either been sued into not publishing it anymore or has to publicly acknowledge that it's basically a bogus index and no one really believes that it reflects drug price. So why does it persist in contracts? And the answer there is because it preserves legacy economics for the intermediaries that have relied on it for profit for so long - that changing to a more rational index...would upend the economics of these public companies to a point where it would be financially devastating to them.” - Josh Golden

In short, contracts are notoriously complex, and hidden revenue streams have made it nearly impossible for fiduciaries to accurately assess the value of a PBM partner during the procurement process. These newly proposed regulations aim to change that dynamic by mandating detailed compensation disclosures from vendors.

In this episode of the Astonishing Healthcare podcast, host Justin Venneri chatted with Julie Selesnick, Executive Director of Legal and Compliance at Judi Group. Selesnick, who submitted a comprehensive 20-page comment letter on the proposed rules, breaks down what these regulations mean for plan sponsors, where the gaps remain, and how the industry can move toward true financial alignment.

Why PBMs Are Already Subject to Disclosure Rules

A persistent debate within healthcare is whether PBMs and third-party administrators (TPAs) are required to disclose their compensation under existing laws. According to Julie, the answer is a definitive yes.

Since the passage of the Consolidated Appropriations Act (CAA) of 2021, vendors who perform substantive activities for health plans have been expected to make 408(b)(2) disclosures. However, some large vendors have resisted compliance.

“The vast majority of PBMs and TPAs took the position that it doesn’t apply to them and continue to take that position,” Julie notes.

The new DOL regulations are designed to eliminate any remaining ambiguity. They create an enhanced disclosure framework that requires plan service providers to clearly outline their direct and indirect compensation. This information is critical for plan fiduciaries, who must protect themselves from prohibited transactions by verifying that all vendor fees are reasonable.

The Importance of Applying the New Rules to the Medical Benefit

While a lot of the regulatory focus has been trained on traditional pharmacy benefits, a massive financial shift is occurring behind the scenes: within five years, it's possible drug spend on the medical benefit will outpace drug spend on the pharmacy side.

If new transparency regulations don’t apply to the medical benefit, the industry risks shifting hidden fees and opaque pricing models from one side of the plan to the other. Julie emphasizes that the rules must be crystal clear in their application to all services provided through a plan’s medical benefit. Otherwise, third-party administrators could continue withholding critical rebate data and spread pricing details under the guise of administrative fee agreements.

Uncovering Hidden Compensation and Reclassification Fees

Currently, most plans cannot confidently state their total compensation to a PBM. Not only does this open the plan up to financial risk, in the form of hidden fees and buried contract language, but it also presents a serious fiduciary concern. The proposed rules seek to uncover these hidden revenue streams, including indirect compensation and controversial reclassification practices.

Drug reclassification is when a pharmacy fills a brand-name drug for a plan member, but the PBM later reclassifies it as a generic. The plan and the member pay the brand rate while the pharmacy is only reimbursed at the generic level.

“If that is happening and it’s not being returned, it should be disclosed. That is compensation,” Julie says.

A prime example of hidden compensation is drug reclassification. This occurs when a pharmacy fills a brand-name drug for a plan participant, but the pharmacy benefit manager later reclassifies it as a generic. The plan and the participant pay the brand rate, while the pharmacy is only reimbursed at the generic level.

"If that is happening and it's not being returned, so it should be disclosed. That is compensation."

Other areas of focus include clawbacks from pharmacies and manufacturer fees. Vendors often argue that certain manufacturer fees are unrelated to the health plan. Selesnick challenges this logic, pointing out that any fee related to providing drugs to plan members is inherently connected to the plan's assets and must be disclosed.

How Fiduciaries Can Navigate the New Data

A common concern raised by opponents of the new rules is the administrative burden placed on plan fiduciaries. If vendors must disclose detailed, drug-level pricing data, how can a mid-sized employer possibly review and analyze it all?

“I mean that would be a full time job inside of another full time job. And that is definitely a little too much into the minutia for what health plan fiduciaries are able to do, especially for small, smaller and midsize businesses,” she explained.

But Julie also pointed out that much of the required information is already tracked by vendors. For instance, PBMs already know their spread pricing and rebate totals, as they report this data for other regulatory requirements, like RxDC reporting.

To make this data actionable for plan sponsors, Julie supports the creation of standardized, machine-readable files.

Moving Toward a World with Benchmarks

So what is the ultimate goal of these transparency rules? To allow plan sponsors to benchmark their contracts against the broader market.

"Even once you figure out what you're paying, we're still in an environment where a lot of the times it's very difficult to know if that's reasonable or not because you have nothing to compare it against," Selesnick explains.

Standardizing data formats would enable plans to finally compare their costs objectively, while also streamlining compliance efforts and simplifying existing reporting requirements. In total, that empowers fiduciaries to make better procurement decisions for their members.

The CAA 2026 and Future of Federal and State PBM Regulation

With the slew of federal rules and legislation released at the beginning of 2026, it’s easy to forget that state legislatures are also playing a key role in pursuing PBM reform. Historically, vendors have used ERISA preemption arguments to challenge state laws. However, Julie believes the new federal regulations will actually strengthen state-level efforts.

“Clarifying on the federal level that ERISA requires this is going to go a long way in making sure that these state laws don't get challenged and that any state law that's passed in furtherance of it buttresses and helps enhance these requirements but doesn't cut against them.”

The DOL’s proposed rules represent a critical step toward a more transparent and sustainable healthcare system. The CAA 2026, DOL proposed rules, state regulations, and FTC settlements reinforce one another. By forcing vendors to open their books, plan sponsors will finally have the tools they need to protect their assets and plan members, and demand fair pricing.

If you would like to learn more about Judi Health’s approach to transparent pharmacy benefit management, contact our team today!

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Disclaimer

This podcast is for informational and entertainment purposes only. The views expressed are those of our guests, do not constitute professional advice, and may not represent Judi Health's/Capital Rx's position on any matters discussed. We make no representations or warranties regarding the accuracy or completeness of the content; information is subject to change and may not be updated.

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