Congress, the U.S. Department of Labor and the Federal Trade Commission recently took historic action to rein in pricing abuses by PBMs (pharmacy benefit managers). New laws, rules and a massive civil settlement are all aimed at reducing drug prices that were inflated by certain pervasive PBM practices. But none of these much-needed reforms appear to apply to prices paid for drugs under workers’ compensation programs.

Cliff Goldstein

PBMs are intermediaries that control not only the administrative process of paying drug bills for their clients, but they also set up and control favored drug “formularies,” set prices paid to dispensing pharmacies and determine the amounts charged to the paying companies. Typically, there is a gap between what the PBM pays the pharmacy and what the PBM bills to the paying company. This gap is known as the "spread."

PBMs can also receive “rebates” from drug manufacturers, and they don’t have to pass through or share such rebates with the paying company. Because PBMs are not yet required to disclose the details of the spread, their rebates and other critical data, paying companies are in the dark about actual drug net prices versus amounts taken by their PBMs.

The new wave of PBM reforms sweeping the nation is focused on these three critical issues: data transparency and sharing, elimination of spread pricing, and requiring that rebates be passed on to the paying companies.

In a sweeping set of rules buried within the massive 2026 federal Consolidated Appropriations Act, there are provisions requiring PBMs to become more transparent and to end spread pricing by 2029. In a proposed rule from the Department of Labor, PBMs would be required to disclose rebates and other forms of direct or indirect compensation paid to PBMs, and new transparency provisions are detailed.

In a third development, the Federal Trade Commission settled a lawsuit brought by the federal government against one of the largest PBMs in the nation. As part of that settlement, the PBM agreed to a list of transparency improvements and the phasing out of spread pricing. Other suits are pending, and this settlement may serve as a template for reforms that other major PBMs may follow.

The new federal law, DOL rules and the terms of the FTC’s settlement will be transformative and drive down drug costs, especially for generic medications, while providing companies with the data critical to making more intelligent choices when contracting with PBMs.

But none of the seismic changes noted above appear to apply to drug payments made under workers’ compensation programs. Instead, they apply to some governmental programs such as Medicare and Medicaid, or apply to employer-funded health insurance plans covered by ERISA laws. None of these reforms specifically mentions applicability to workers’ compensation programs, and strong arguments can be made that none of the new transparency and pricing controls will apply to workers’ compensation programs.

There are a few states that are attempting to enact some level of transparency and pricing controls on PBMs in workers’ compensation, but most states have yet to enact the types of meaningful and sweeping changes being pursued at the federal level. In the handful of states that enacted PBM reform applicable to workers’ compensation and that include an end to spread pricing, court challenges are delaying implementation.

To adequately control PBM drug pricing abuse in state workers’ compensation systems, legislatures need to enact measures banning spread pricing, requiring complete disclosure of PBM acquisition costs, payments to pharmacies, charges to the payer, rebates and all other forms of compensation, direct or indirect, to PBMs. Until then, there may actually be a surge in workers’ compensation drug spending, as PBMs will see workers’ compensation as the last “safe haven” for practices that they can no longer use in other payment programs. 

Simply put, the new federal laws, rules and settlement agreements do not apply to state workers’ compensation programs. Until state legislatures take meaningful action, workers’ compensation payers will continue to pay up to 100 times more for medications than allowed under other programs. 

Cliff Goldstein, Esq., formerly the CEO and a Senior Litigator at Chartwell Law, has 35 years of experience in litigating complex workers' compensation cases. He now concentrates 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.