Bipartisan Coalition of State AGs Backs Federal PBM Transparency Rule

In mid-April, a bipartisan coalition of 45 State Attorneys General (AG) submitted a formal letter to the U.S. Department of Labor (DOL) expressing their collective support for a proposed rule (Improving Transparency into Pharmacy Benefit Manager Fee Disclosure, or RIN 1210-AB37), which would — if enacted — impose new disclosure obligations on pharmacy benefit managers (PBM) regulated under the Employee Retirement Income Security Act of 1974 (ERISA).

Introduced in late January 2026, the proposed rule seeks to act upon directives laid out in a 2025 executive order (E.O. 14273, Lowering Drug Prices by Once Again Putting Americans First), which called upon the U.S. Secretary of Labor to “propose regulations pursuant to section 408(b)(2)(B) of the Employee Retirement Income Security Act of 1974 to improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers.” As conveyed in the drafted rule, the DOL believes that making such information available will enable fiduciaries (e.g., plan sponsors) to assess for themselves the “reasonableness” of their contracted PBM’s compensation arrangements.

To compel these disclosures, the proposed rule would introduce a new regulation to operate within ERISA’s prohibited transaction framework, which, under ERISA § 406(a)(1)(C), categorically prohibits a plan fiduciary from causing the plan to engage in a transaction involving the “furnishing of services” with a “party in interest” absent an applicable exemption. The new regulation would make fee disclosures a condition of satisfying the “reasonableness” requirement of the existing ERISA § 408(b)(2) prohibited transaction exemption — meaning a PBM’s failure to disclose would cause the underlying service arrangement to fall outside the exemption’s protection. From a practical perspective, this change would make fee disclosures a routine step in PBM contracting.

In their letter, the State AGs applaud the proposed changes, writing that “as the Department correctly identifies, the black box nature of PBM practices is a critical concern.” The authors note that “dozens” of states have passed a patchwork of laws to regulate PBMs in various ways, from banning gag clauses to prohibiting discrimination against non-affiliated pharmacies, and — most relevantly — requiring PBMs to disclose information to their clients and/or state regulators. However, the AGs balance their approval with their perspectives on several potential points of contention within the proposed text:

• • The AGs contend that the proposed rule’s placement within ERISA’s prohibited transaction framework reinforces — rather than undercuts — the case for state law survival. Because the rule’s disclosure requirements are imposed on PBMs as service providers rather than on plan fiduciaries, the AGs argue that the rule does not displace state oversight of PBMs. They further contend that state PBM transparency laws fail to satisfy ERISA’s “relates to” preemption test because such laws address, at most, a peripheral aspect of plan administration with minimal bearing on the uniformity of benefit administration across states. In support of this position, the AGs rely on the U.S. Supreme Court’s 2020 decision in Rutledge v. Pharmaceutical Care Management Association, which upheld a state PBM law against an ERISA preemption challenge, to reason that state transparency statutes neither dictate the terms of plan benefits nor function as a substitute for ERISA’s own civil enforcement regime.
  • The AGs urge DOL to include an explicit non-preemption statement in the final rule. Seeking to preserve state PBM laws from litigation based on preemption arguments, the AGs call for a clear statement from DOL on this point.
  • The AGs ask DOL to affirmatively acknowledge in the final rule (or its preamble) that State Attorneys General are intended partners in PBM oversight. They propose specific language confirming that the rule does not foreclose DOL from engaging with State AGs — whether by coordinating on enforcement activity, passing along relevant information, or directing matters that implicate state law to the appropriate state authority.

On the separate question of potential rulemaking under the Consolidated Appropriations Act of 2026 relating to PBM pass-through pricing, the AGs urged the DOL to defer action. In their view, any such rulemaking should await the finalization of the current transparency rule and an opportunity to assess its real-world effects.

Implications and Next Steps

Whether the DOL will incorporate all (or any) of these recommendations into its final rulemaking remains to be seen. The comment period for the proposed rule officially concluded on March 31, 2026. The DOL is expected to review the comments submitted — including this multistate letter — and issue a final rule, which would take effect 60 days after publication. Its substantive requirements, however, would not apply to plans until plan years beginning on or after July 1, 2026. The DOL designed this phased approach to give PBMs and group health plans adequate time to bring their existing and future contracts into compliance.

Our team will continue to monitor developments as rulemaking progresses. For insight into how the proposed rulemaking may impact your organization, please reach out to any author of this client alert or your preferred Crowell & Moring lawyer.