PBMs Could Be ERISA Fiduciaries

Summary#

H.R. 6837, titled To amend the Employee Retirement Income Security Act of 1974 to ensure that pharmacy benefit managers are considered fiduciaries, and for other purposes, would amend the Employee Retirement Income Security Act of 1974 (ERISA). Its stated goal is to treat certain pharmacy benefit managers (PBMs) as fiduciaries—people or entities with legal duties to act for a plan—and expand compensation disclosures.

  • A person or entity would be deemed an ERISA fiduciary for a group health plan if it maintains the plan’s prescription-drug network or formulary through drug purchases, or performs specified drug-price, claims, or utilization-management work for or in connection with the plan.
  • The specified work includes negotiating or aggregating rebates, fees, discounts, or other price concessions; processing and paying drug claims; and conducting prescription-drug utilization review and management.
  • The bill would add PBM and third-party administrator services to a specified ERISA compensation-disclosure provision when the provider, an affiliate, or a subcontractor reasonably expects certain direct or indirect compensation.
  • A covered service provider could not be the responsible plan fiduciary for those disclosures. A PBM could fill that role for a plan it sponsors for its own employees.
  • A person or entity deemed a fiduciary under the new provision generally could not be indemnified or otherwise relieved from its ERISA responsibilities, duties, or liability; contracts that violate this rule would be void. The bill includes an exception referring to another ERISA provision.

What it means for you#

  • PBMs and other entities doing the listed work: They could be treated as ERISA fiduciaries for a group health plan and subject to the duties and liability that status brings. The bill does not set out a separate process for deciding which entities meet the test.
  • Plan sponsors, administrators, and health insurers offering group coverage: The bill would add specified PBM and third-party administrator services to the compensation disclosures covered by the amended ERISA provision. The provider could not serve as the responsible plan fiduciary for those disclosures, except for a PBM sponsoring its own employees’ plan.
  • Workers and plan members: The bill does not directly change coverage, drug prices, or eligibility for health benefits.
  • Plans and providers: The changes would apply to plan years beginning at least 12 months after the bill’s enactment. The bill has been introduced and referred to a House committee; it is not law, and passage is uncertain.

Money#

No publicly available information.

  • The bill does not state a public spending amount or estimate costs to plans, PBMs, or third-party administrators.
  • It adds disclosure requirements and limits indemnification for the newly deemed fiduciaries, but does not estimate the resulting costs or financial effects.

What is unclear#

  • The current ERISA provisions being amended were not supplied, so the existing disclosure rules, fiduciary duties, and limits on indemnification cannot be fully checked against current law.
  • The bill does not define key terms such as “maintains” a network or formulary, or explain how to decide whether work is done “in connection with” a plan.
  • It does not set out how the new fiduciary test would be applied, or add decision timelines, an appeal process, or reporting rules.
  • The indemnification rule refers to an exception in another subsection of ERISA. The supplied material does not include that subsection, so the scope of the exception is unclear.
  • The bill does not explain how the new disclosures would interact with other disclosure requirements.

Case for#

  • The bill appears intended to make entities doing specified drug-benefit work accountable as fiduciaries to group health plans.
  • Requiring compensation disclosures for PBM and third-party administrator services could give plans more information about payments and financial arrangements.
  • Preventing a provider from being the responsible fiduciary for its own disclosures could reduce a conflict in who oversees that disclosure.

Case against#

  • The fiduciary test reaches anyone meeting its listed activities, not only entities called PBMs. Without clearer definitions or an application process, its reach may be uncertain.
  • The bill restricts indemnification for the newly deemed fiduciaries, which could change contract terms and expose those providers to more direct financial liability.
  • The bill adds disclosure and accountability rules but does not explain how they will be enforced or how they fit with existing ERISA rules.