Takeaways

  • A bipartisan bill introduced in December 2025 would amend ERISA to treat pharmacy benefit managers (PBMs) as fiduciaries when providing services to employer-sponsored group health plans.
  • If enacted, the legislation would impose fiduciary duties, require detailed compensation disclosures, and restrict contractual indemnification provisions that shift fiduciary risk to plans.
  • Employers may gain increased transparency into PBM compensation structures, but should expect potential changes to PBM contracting practices and service models.

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On December 18, 2025, bipartisan legislation was introduced in the U.S. House of Representatives, following a similar introduction in the U.S. Senate on December 17, 2025, entitled the PBM Fiduciary Accountability, Integrity, and Reform (FAIR) Act. If enacted, the FAIR Act would change significantly how pharmacy benefit managers (PBMs) operate in connection with employer-sponsored group health plans by amending the Employee Retirement Income Security Act of 1974 (ERISA) to treat PBMs as fiduciaries, impose new legal duties and transparency requirements, and prohibit contractual risk shifting.

PBMs play a central role in managing prescription drug benefits for group health plans. Their services typically include negotiating rebates with drug manufacturers, designing plan formularies, establishing pharmacy networks, and processing prescription drug claims. Under current law, PBMs generally are not considered ERISA fiduciaries and therefore are not legally obligated to act solely in the best interests of plan sponsors or participants. Supporters of the FAIR Act contend this regulatory gap has contributed to opaque pricing practices and rising prescription drug costs.

The FAIR Act would fundamentally change this framework by designating PBMs as ERISA fiduciaries for many of their core functions. As fiduciaries, PBMs would be required to act prudently and loyally, avoid conflicts of interest, and place the interests of the health plan and its participants ahead of their own financial interests.

In addition, the legislation would subject PBMs—and certain third-party administrators—to compensation disclosure requirements similar to those currently applicable to brokers and consultants. These disclosures would require PBMs to provide plan administrators with detailed information regarding the direct and indirect compensation they reasonably expect to receive in connection with plan services. This compensation may include rebates, administrative fees, and other forms of payment tied to prescription drug pricing.

The bill also would restrict PBMs’ ability to shift responsibility for fiduciary breaches back to plans through contractual indemnification provisions. This limitation could have meaningful implications for PBM contracting practices and the allocation of fiduciary risk between plans and their vendors.

To provide time for compliance and operational adjustments, the FAIR Act generally would apply to plan years beginning at least 12 months after enactment.

For employers that sponsor group health plans, the FAIR Act could result in greater transparency into PBM compensation structures and stronger alignment between PBM decision-making and plan interests. At the same time, PBMs may respond by modifying service models, pricing structures, or contractual terms to reflect their new fiduciary status. Employers may wish to review existing PBM agreements and prepare for potential changes if the legislation advances.

The FAIR Act is part of a broader federal and state effort to increase oversight of PBMs and address rising prescription drug costs. Although the bill has bipartisan and bicameral support, its ultimate fate remains uncertain. Employers should continue to monitor legislative developments and consult with benefits and legal advisors regarding potential impacts on plan administration and vendor relationships.

Members of the Jackson Lewis Employee Benefits Practice Group can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.  Subscribe to the Benefits Law Advisor Blog here.