PBMs, GLP-1 drugs and employer health costs

A pharmacy benefit manager (PBM) runs your plan's drug benefit: it builds the pharmacy network, negotiates rebates with drugmakers, sets the formulary and pays claims. It also earns money in ways that are not always visible to the employer. Federal law signed on February 3, 2026 now requires more disclosure and rebate pass-through for employer plans, but most of those rules do not start until 2028 or later, so contract terms you negotiate this year still do most of the work.

How PBMs get paid

PBMs can be paid through several channels, and the mix is what you need to understand.

• Administrative fees per claim or per member. Easy to see.
• Rebates and manufacturer fees. Drugmakers pay rebates for formulary placement. Whether you receive them, and in what share, depends on the contract.
• Spread pricing. The PBM charges the plan more for a drug than it reimburses the pharmacy and keeps the difference.
• Pharmacy-side revenue. Many PBMs own mail-order and specialty pharmacies, so dispensing margin lands inside the same corporate family.
• Network and clinical programs such as step therapy, prior authorization and specialty management.

The three largest PBMs, CVS Caremark, Express Scripts and OptumRx, managed 79% of prescription drug claims in 2023, covering about 270 million people, according to the FTC as summarized by KFF (updated February 2026). Their ownership by or affiliation with large insurers and pharmacies is what drives regulatory attention.

What the FTC has found

The FTC's Section 6(b) study of PBMs produced interim staff reports. The second report, issued January 14, 2025, found that the three largest PBMs and their affiliated specialty pharmacies generated more than $7.3 billion in revenue from dispensing specialty generic drugs in excess of estimated acquisition cost, and that on 51 specialty generics, 22% of claims were reimbursed at more than 1,000% over estimated acquisition cost in commercial claims for 2020 to 2022 (FTC press release, January 2025). Those are staff findings about the drugs studied, not a statement about every claim in your plan, but they explain why employers now ask for pass-through pricing.

The FTC also sued the three PBMs administratively over insulin rebate practices. It announced a settlement with Express Scripts in February 2026. As of KFF's February 2026 update, the Caremark and Optum Rx matters were still pending, and later trade press reported proposed consent orders with those two as well. Check the FTC site for the final status before relying on any one outcome.

Federal legislation as of October 2026

The Consolidated Appropriations Act, 2026 (H.R. 7148), signed February 3, 2026, contains the first PBM reforms to reach employer plans. According to KFF:

1. PBMs must report detailed drug spending and utilization data to most employer plans, including gross and net spending and pharmacy reimbursement. This applies for plan years beginning 30 months after enactment, which puts it in the second half of 2028.
2. PBMs must pass through 100% of rebates and discounts to ERISA employer plans, insured and self-insured. Government plans such as state and local plans and the FEHBP are excluded.
3. ERISA's "covered service provider" disclosure rule is widened to include PBMs and third-party administrators, which must disclose direct and indirect compensation to plan fiduciaries.
4. In Medicare Part D, PBM pay is delinked from drug prices starting January 1, 2028. That helps seniors, not your plan directly.

Separately, the Department of Labor proposed a rule on January 29, 2026 to require PBMs to disclose compensation to self-insured ERISA plans, with audit rights. The comment period closed March 31, 2026. Treat it as proposed unless DOL's site shows a final rule. State PBM laws keep passing; whether they apply to a self-funded ERISA plan is contested, because ERISA preempts state laws that regulate plan administration (the Supreme Court upheld a state law on pharmacy reimbursement rates in Rutledge v. PCMA in 2020, but courts have split on laws touching network design). A fully insured plan is generally subject to state insurance law, which makes your funding choice relevant (fully insured vs self-funded health plans: which fits your business).

GLP-1 drugs

GLP-1 medicines for diabetes and weight management are the biggest single cost question in employer pharmacy plans. KFF's 2025 Employer Health Benefits Survey found coverage of GLP-1s for weight loss in 16% of firms with 200 to 999 workers, 30% of firms with 1,000 to 4,999, and 43% of firms with 5,000 or more; at the largest firms, 59% said use was higher than expected. Of firms that cover them for weight loss, 34% require enrollees to meet with a dietitian, case manager or therapist, or join a lifestyle program. Marsh (Mercer), in its August 31, 2026 survey, estimated that rising GLP-1 use adds about one percentage point to 2027 employer cost growth, and some employers are dropping this coverage.

For a plan sponsor, the decision is a design choice, not a legal requirement. Employer plans can generally cover GLP-1s for diabetes and exclude them for weight loss, but state-regulated fully insured plans may follow state mandates, and any exclusion should be written in the plan document and the summary of benefits. Options include:

• Cover only with prior authorization and documented BMI and comorbidities.
• Require a lifestyle program and continued participation to stay on the drug.
• Cap the benefit with annual spending or duration limits.
• Exclude weight-loss use and keep diabetes coverage.

Small employers feel this through why group health renewals rise and how to negotiate them rather than through direct PBM contracts. Self-funded groups should look at how stop-loss insurance for self-funded health plans: specific, aggregate and the fine print treats high-cost drugs, since some carriers add specific exclusions or higher individual deductibles for GLP-1 users.

What to ask a PBM before you sign

1. Is the contract pass-through, or does the PBM keep some rebates? Define "rebate" broadly, including administrative fees from drugmakers.
2. Is spread pricing allowed? Ask for pharmacy reimbursement guarantees by brand, generic and specialty.
3. Who owns the specialty and mail-order pharmacies, and is use mandatory?
4. What audit rights do you have, and who chooses the auditor?
5. How do formulary changes get communicated, and can you opt out of a formulary exclusion?
6. Does the PBM report claim-level data you can use for benchmarking?
7. Does your broker or consultant receive any compensation tied to the PBM? Ask for it in writing.

Because a plan sponsor that is an ERISA fiduciary must choose service providers prudently and monitor fees, the answers belong in your file. A fiduciary breach claim over excessive PBM fees is a liability exposure for the plan; see ERISA basics for small employers: what the law requires of your benefit plans and fiduciary liability insurance for employee benefit plans.

A hypothetical example

Say a 120-employee self-funded Texas distributor spends $1.8 million a year on drugs through a traditional PBM. A consultant benchmarks the contract and finds that the plan pays a flat per-claim fee, receives 85% of rebates, and has no spread-pricing prohibition. A rebid for a pass-through arrangement shows an estimated net saving of 6%, or $108,000 a year, after higher admin fees. At the same time, GLP-1 claims make up an increasing share of spend, and the plan adds prior authorization and a lifestyle program requirement. Neither number is a market quote; the point is that contract terms and design each have a dollar value you can estimate with your own claims.

Key takeaways

• PBMs earn through fees, rebates, spread pricing and their own pharmacies; read the contract definitions of "rebate" and "spread."
• The February 3, 2026 federal law requires 100% rebate pass-through to ERISA plans and more reporting, but most provisions start in 2028 or later.
• DOL's January 2026 PBM fee-disclosure rule for self-insured plans was still a proposal in the sources checked for this guide.
• GLP-1 coverage is a plan-design decision; Marsh estimates it adds about one point to 2027 cost growth.
• Document PBM selection and fee monitoring as part of your fiduciary process.