PBM Fiduciary Duty

The question of whether PBMs should be held to a fiduciary standard, legally requiring them to act in the best interest of the plan sponsors and patients they serve, has become one of the most debated issues in pharmacy benefit regulation.

The Current Standard

Under most current PBM contracts, the PBM operates as a vendor providing services under the terms of its agreement with the plan sponsor. There is no inherent legal obligation for the PBM to prioritize the plan sponsor's interests over its own. This vendor relationship allows PBMs to engage in practices that benefit themselves, such as retaining rebates, earning spreads, and steering to owned pharmacies, as long as these practices do not violate the specific terms of the contract.

The Fiduciary Alternative

A fiduciary standard would legally require PBMs to act in the best interest of their clients, prioritizing plan sponsor and member welfare over PBM profit. Under a fiduciary model, practices that create conflicts of interest, such as profiting from spreads or steering to owned pharmacies, would need to be disclosed, managed, or eliminated. Several states and federal proposals have introduced fiduciary requirements for PBMs.

Industry Perspectives

PBM industry groups argue that a fiduciary standard is unnecessary because competitive market forces already discipline PBM behavior and that fiduciary obligations would increase compliance costs that would ultimately be passed to plan sponsors. Consumer and employer advocates counter that the market has not produced adequate transparency or alignment of incentives and that a fiduciary standard is necessary to address structural conflicts.

Several PBMs and PBOs have voluntarily adopted fiduciary commitments as a competitive differentiator, suggesting that some market participants see value in the standard even without a legal mandate.