The 408(b) rules respond to the directive in President Trump’s Executive Order 14273 to improve transparency regarding PBM compensation. The rules build upon the statutory framework established by ERISA Section 408(b)(2)(B), which requires group health plan sponsors to request and review fee information from “covered service providers” to demonstrate the reasonableness of the arrangement under ERISA’s prohibited transactions requirements. See Foley’s prior articles on this requirement and related guidance here, here, and here. Specifically, the 408(b) rules provide that a contract with a covered service provider is not “reasonable” unless the disclosure obligations of the rules have been satisfied. If finalized, the regulations would become effective 60 days after publication of the final rule, with an applicability date for plan years beginning on or after July 1, 20…

The definition of pharmacy benefit management services is expansive and includes, but is not limited to: Acting as a negotiator or aggregator of rebates, discounts, and other price concessions Establishing or maintaining prescription drug formularies Establishing or maintaining pharmacy networks Processing and paying prescription drug claims There are three types of disclosures required under the 408(b) rules: (1) a comprehensive initial disclosure requirement, (2) updated financial disclosures of the information in the initial disclosure to be made twice a year, and (3) upon request by the plan sponsor to meet reporting obligations of the plan sponsor. All disclosures must be clearly worded and reference compensation in monetary amounts (e.g. $1,000) rather than as formulas or percentages (except where expressly noted otherwise in the 408(b) rules). Notably, PBMs may…