PBM Fiduciary Status
Whether a PBM is an ERISA fiduciary depends on the scope of its discretionary authority. A PBM that exercises discretionary authority over plan assets (e.g., formulary design, rebate management) may be a fiduciary. A PBM that merely provides ministerial services (e.g., claims processing) is not a fiduciary. Most PBM contracts are structured to avoid fiduciary status — but the question is increasingly litigated.
CAA Disclosure Requirements
CAA Section 202 requires PBMs to disclose compensation to plan fiduciaries. The disclosure must include all direct and indirect compensation expected to be received in connection with the PBM contract. Employers must review the disclosure and determine whether the compensation is reasonable for the services provided.
Employer Fiduciary Obligations
Compliance Note
Employers have fiduciary obligations to monitor PBM performance and compensation. Employers who passively accept PBM compensation without review face growing fiduciary liability — particularly in light of the Johnson & Johnson case (2024). Document your PBM compensation review process and the basis for your reasonableness determination.