Sweeping Changes to PBM Rules May Lower Drug Costs – But Not For Workers’ Compensation Payers

Workers’ compensation insurers and self-insured employers may be left behind as sweeping federal reforms expose previously hidden PBM compensation and provide new opportunities to control prescription drug costs.

New federal legislation, a Department of Labor rule finalized on October 29, 2026, and major Federal Trade Commission settlements are changing the economics of pharmacy benefit management. These reforms promise greater transparency into the amounts PBMs pay pharmacies, the amounts they charge their clients, and the additional compensation they receive.

But workers’ compensation programs generally fall outside the new federal disclosure requirements. Unless employers and insurers act, their workers’ compensation programs may continue operating without comparable transparency or the resulting opportunities to negotiate better pricing.

And even those improvements would leave another costly vulnerability: prescriptions filled outside PBM networks. PBMs are intermediaries almost universally used by employers and insurers to process and pay drug bills in workers’ compensation cases. Traditionally, PBMs disclosed little data to their clients, closely guarding information about their revenue streams and actual drug costs versus amounts charged to payers. Action is being taken in almost every state and at the federal level to force PBMs to become more transparent and to disclose practices such as “spread pricing” to clients. “Spread pricing” occurs when a PBM pays the dispensing pharmacy one amount but charges the paying party a higher amount. In some cases, especially for generic drugs, the spread can be enormous.

The most recent and dramatic PBM reform news comes from the federal government. On October 29, 2026, the U.S. Department of Labor announced its final PBM fee disclosure rule. It covers PBMs and certain affiliated service providers dealing with large, self-insured employer group health plans governed by ERISA. It requires disclosures concerning compensation, including manufacturer payments, spread pricing, pharmacy claw-backs and related financial arrangements.

The rule generally applies to plan years beginning on or after July 1, 2027. But the new federal provisions do not apply to workers’ compensation programs. For example, if a company uses a given PBM for its employee health insurance program, and the same PBM for its workers’ compensation program, disclosure rules only apply to the health insurance program. One theory is that state legislatures will “tag along” and enact measures incorporating or mirroring the new federal rules, but this could take years and some states may not act at all. Another theory is that there will be a “trickle-down”, whereby state programs will see the new federal rules as “best practices” and shop for PBMs that will apply the federal rules to their workers’ compensation programs. Again, this could take years, and in some cases, workers’ compensation payers may, for familiarity and simplicity, stick with their current PBMs regardless of whether they will voluntarily comply with the new federal dictates.

One thing is clear – without taking action to review and amend PBM contracts, shop for new PBMs, or otherwise compel PBMs to voluntarily honor the new federal rules in state workers’ compensation programs, employers and insurers may default into continuing to dramatically overpay for drugs, and at the same time, fail to see the underlying data necessary to make intelligent decisions.

Workers’ compensation payers may also face another unique problem caused by a hole in the laws in some states. For some private payers such as health insurers and employer-sponsored plans subject to ERISA, a patient can be directed to use a pharmacy in a designated PBM network. Typically, patients can choose from about 80,000 brick-and mortar or online pharmacies. But in some states, injured workers can do an end-run around the PBM pharmacy network and get their prescriptions filled at an “out-of-network” pharmacy. By doing so, all the new rules and all the advantages of a PBM can be circumvented, leaving the employer or carrier paying up to 50 times more for drugs than paid by other types of payers. For example, Ondansetron (Zofran), an anti-nausea drug, costs only about $30 at CVS (per GoodRX.com) even for a cash-paying customer with no insurance. An out-of-network pharmacy recently billed a workers’ compensation self-insurer $1,270.47 for the same drug, same quantity, same strength.

Key Takeaways

1. Don’t assume the new federal reforms will benefit your workers’ compensation program. Employers and insurers should review their PBM agreements and seek the same transparency, financial disclosures and audit rights now being required for covered employer group health plans.

2. A good PBM contract is not enough. Even favorable PBM pricing and transparency provisions may provide little protection against excessive charges for prescriptions filled outside the PBM network. Payers should develop supplemental programs to identify, review and challenge unreasonable out-of-network drug charges, or contract with companies that provide these services.

3. Don’t wait for state legislatures to act. State lawmakers and regulators should be encouraged to adopt the new federal transparency standards and address unreasonable out-of-network pricing. But employers and insurers should pursue available contractual, administrative and legal remedies now.

4. Protect against future changes in the law. PBM agreements should give payers meaningful audit rights and the ability to renegotiate or terminate contracts without penalty when material legal or regulatory changes substantially affect the financial terms of the relationship.

Cliff Goldstein, Esq., formerly the CEO and a Senior Litigator at Chartwell Law, has 40 years of experience in litigating complex workers’ compensation cases. He now concentrates solely on addressing excessive pricing, fraudulent practices, abuse, and waste regarding drugs used in workers’ compensation cases. He can be reached at 215 588 4901 and cliffagoldstein@gmail.com

This article does not provide legal advice. All cases are unique and if appropriate, should be discussed with an attorney of the client’s choosing. This article does not create or imply an attorney-client relationship. Do not take or refrain from taking any action based on this article and be sure to consult with an attorney of your choice about the risks of taking or refraining from any actions. Not all PBMs work under the same standards, formulae, and terms, and PBM contracts vary. No particular pharmacy, PBM, billing company, or doctor is accused herein of any wrongdoing. Not all out-of-network or workers’ compensation pharmacies use the same pricing methodologies and prices and other terms vary significantly from company to company and drug to drug. Cliff Goldstein is licensed to practice law in Pennsylvania and maintains an office in Merion Station, PA.

For more information, please contact Cliff Goldstein at cliffagoldstein@gmail.com.

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