The landscape of employer-sponsored health plans is shifting once again—this time under the scrutiny of federal legislation targeting Pharmacy Benefit Managers (PBMs). The Pharmacy Benefit Manager Transparency Act (S. 526) and Prescription Pricing for the People Act (S. 527)—reintroduced in early 2025—aim to reshape how PBMs operate and interact with ERISA-governed health plans. But as these bills advance, they’ve triggered a renewed legal debate: Do these reforms overstep ERISA’s preemption boundaries?
Let’s break down what’s happening—and what’s at stake for plan sponsors, PBMs, and benefits professionals.
What the PBM Reform Bills Propose
The two bipartisan bills take aim at what many see as opaque and exploitative PBM practices. If passed, they would:
- Ban spread pricing, where PBMs charge payers more than they reimburse pharmacies.
- Prohibit arbitrary clawbacks that can penalize pharmacies after point-of-sale.
- Require transparency around fees, rebates, and compensation received by PBMs.
- Mandate pass-through of manufacturer rebates to group health plans and potentially to plan participants.
These reforms would directly impact self-funded employer health plans, the majority of which fall under the Employee Retirement Income Security Act of 1974 (ERISA).
Why ERISA Preemption Matters
ERISA was designed to provide uniform national standards for employee benefit plans, shielding them from a patchwork of inconsistent state laws. Its powerful preemption clause ensures that state regulations that “relate to” an ERISA plan are often invalidated.
The legal debate now centers on this question:
Can Congress or state governments regulate PBMs in a way that indirectly affects ERISA plans without violating ERISA’s preemption clause?
While Congress has more leeway than states, legal experts argue that some aspects of the proposed reforms may cross into the territory of plan administration—a protected domain under ERISA.
Recent Court Rulings Add Fuel to the Fire
This debate isn’t just theoretical. The Supreme Court’s 2020 ruling in Rutledge v. PCMA upheld a state’s right to regulate PBM reimbursements, signaling that not all PBM regulation is preempted. But in 2024, the Tenth Circuit’s ruling in PCMA v. Mulready struck down Oklahoma laws that dictated how PBMs interacted with plan networks—finding they were preempted by ERISA.
In August 2025, the Supreme Court denied certiorari in that case, reinforcing the idea that laws directly affecting plan structure or administration may be off-limits, while laws targeting broader PBM practices may stand.
What This Means for Employers and Plan Sponsors
If the PBM reform bills become law, employers offering ERISA-governed health plans will face new challenges:
- Compliance risk if federal transparency mandates conflict with ERISA fiduciary rules.
- Greater scrutiny over whether pharmacy benefit structures meet new disclosure and rebate pass-through requirements.
- Potential litigation if plan sponsors or PBMs are accused of failing to meet fiduciary duties under the new legal framework.
Legal Takeaways
- Plan sponsors should monitor federal PBM reform closely, especially as regulations evolve and DOL guidance emerges.
- ERISA preemption remains a shield—but not a guarantee. Plan design decisions that rely heavily on PBM arrangements may come under new scrutiny.
- Now is the time to review your PBM contracts and disclosures. Legal counsel can help determine if your current arrangements will withstand the coming wave of reform.
How Stewart Lee Karlin Law Group Can Help
At Stewart Lee Karlin Law Group, PC, we specialize in protecting the legal interests of employers and employees navigating complex benefit structures. Whether you’re a plan sponsor evaluating compliance risks or an employee questioning your plan’s transparency, our experienced ERISA attorneys are here to help.
Contact us today to discuss how these PBM reforms might impact your ERISA plan or benefit structure.
Related Content: Why State Law Might Not Protect You: ERISA Preemption and Your Florida Benefits Claim
