The Need for Greater Fee Disclosure Among the PBM Industry

Testimony Before the Employee Benefits Security Administration, U.S. Department of Labor

By David Balto | December 7, 2010

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SOURCE:Center for American Progress

CAP fellow David Balto testifies before the Employee Benefits Security Administration, U.S. Department of Labor. Read the testimony (CAP Action).

I appreciate the opportunity to come before you today and testify about fee disclosures to welfare benefit plans under Section 408(b)(2). The Employee Retirement Income Security Act, or ERISA, welfare benefit plans include a wide range of services across the health care industry. I submit the following comments on a specific segment of the health care industry: pharmacy benefit managers, or PBMs.

As my testimony outlines, extending the fee disclosure provisions to PBMs will benefit ERISA beneficiaries by enabling plans to have the full set of information necessary to make PBM markets work effectively and secure benefits at the lowest cost. Greater disclosure will give plans the necessary tools to detect and prevent conflicts of interest and secure all the appropriate compensation, including undisclosed indirect compensation. Plans currently do not fully benefit from PBM cost control efforts because of conflicts of interest and the ability of PBMs to hide undisclosed indirect compensation, such as rebates from drug manufacturers. Extending the fee disclosure provisions will enable plans to secure the full benefit of compensation received on their behalf.

CAP fellow David Balto testifies before the Employee Benefits Security Administration, U.S. Department of Labor. Read the testimony (CAP Action).