HR-7895-119
Placed on the Union Calendar, Calendar No. 634.
Sponsored by Rick Allen (R-GA)
What it does
This bill would amend the Employee Retirement Income Security Act (ERISA) to prohibit pharmacy benefit managers (PBMs) — companies that manage prescription drug benefits for employer health plans — from paying compensation to brokers, consultants, or advisors in exchange for steering plan business their way. It would apply to any payment tied to referrals, recommendations, plan design influence, or participation in contracting processes such as requests for proposals or market checks. Payments to brokers would be presumed to be kickbacks unless the parties can document in writing that the compensation reflects fair market value for actual services unrelated to plan steering. The prohibition would take effect for plan years beginning after the bill's enactment.
Who benefits
Employees and their dependents covered by employer-sponsored health plans, who may see lower drug costs if PBM conflicts of interest are reduced. Employers and plan sponsors who would gain greater assurance that their PBM was selected on merit rather than broker incentives. Independent brokers and consultants who do not accept PBM payments and currently compete at a disadvantage against those who do. Smaller PBMs that compete on price and transparency rather than broker relationships. Taxpayers who fund employer health plans through the tax exclusion for employer-sponsored insurance.
Who is hurt
Large PBMs that currently use broker compensation arrangements to secure or retain plan contracts. Brokers and consultants who receive revenue from PBMs in addition to employer-paid fees, and who would need to restructure their business models. Health insurance issuers that partner with PBMs and rely on existing contracting arrangements. Employers and plan administrators who may face short-term transition costs in renegotiating contracts and documenting compensation arrangements. Smaller brokerage firms that may lack the administrative capacity to produce the contemporaneous written documentation required to rebut the presumption of a kickback.
Supporters argue
Supporters argue that PBM broker kickbacks create a direct conflict of interest: brokers who receive undisclosed payments from PBMs are financially incentivized to steer employer plans toward those PBMs regardless of cost or quality, ultimately driving up drug costs for workers and employers. They contend that the bill's "economic substance" standard closes loopholes that allow kickbacks to be disguised as consulting fees or administrative payments, and that the 34-0 committee vote reflects broad bipartisan recognition that the current system lacks basic transparency and accountability.
Opponents argue
Opponents argue that the bill's broad presumption — treating all PBM-to-broker payments as kickbacks unless proven otherwise — could sweep in legitimate service arrangements and impose significant compliance burdens on small brokerage firms that lack legal resources to produce the required documentation. They contend that existing ERISA fiduciary disclosure rules already require brokers to disclose conflicts of interest, and that adding a categorical prohibition with a rebuttable presumption may reduce competition among brokers by effectively barring PBM-funded compensation models without clear evidence those models harm plan participants.