Fiduciary duty ensures trust and accountability between PBMs and clients in the complex world of pharmacy benefit management. Understanding PBM fiduciary duty helps benefits directors, brokers, and CFOs align PBM agreements with organizational goals while protecting plan members’ interests.

What Is Fiduciary Duty?

Fiduciary duty requires a PBM to act in the best interests of its clients—self-insured employers, health plans, or unions. This duty extends beyond standard business obligations, encompassing care, skill, prudence, and diligence comparable to a similar enterprise with aligned objectives. Fiduciary responsibility ensures transparency and mitigates conflicts of interest that could compromise the client’s financial or operational integrity.

Core Components of PBM Fiduciary Duty

• Standard of Care PBMs like TransparentRx agree to operate with a high standard of care, skill, and prudence. This means managing the pharmacy benefit program with the same diligence as a fiduciary in a comparable role, safeguarding the client’s and covered individuals’ interests.
• Conflict of Interest Disclosure Fiduciary PBMs must notify clients of any activity or policy that creates a direct or indirect conflict of interest. For instance, if a PBM profits from recommending a higher-cost drug instead of a lower-cost alternative, it must disclose such arrangements.
• Transparent Financial Reporting PBMs must provide clients with detailed financial and utilization data. This includes information on drug costs, rebates, and any payments received from pharmaceutical manufacturers. Transparency empowers clients to verify that plan dollars are being utilized effectively and ethically.
• Drug Substitution Transparency PBMs must disclose cost details and benefits gained from substituting one prescription drug for another. If a substitution increases costs or generates a financial benefit for the PBM, they must pass those benefits entirely to the client.
• Pass-Through Rebates and Payments Fiduciary PBMs ensure that any payments or benefits received from drug manufacturers, based on sales volume or other incentives, are transferred directly to the client. This practice prevents misaligned incentives that could otherwise drive up plan costs.
• Disclosure of Financial Arrangements PBMs must disclose financial arrangements with pharmaceutical manufacturers or other stakeholders, such as formulary management fees, educational support, or data sales fees, to the client. To ensure full transparency while protecting proprietary information, clients may need to sign confidentiality agreements.

Legal Recourse for Breaches of Fiduciary Duty

Clients can seek legal remedies, like injunctive relief or damages, if a PBM violates its fiduciary duty. Courts may award attorney’s fees and costs to prevailing clients, helping organizations hold PBMs accountable without excessive financial strain.

Why Fiduciary PBMs Are the Future

Fiduciary PBMs like TransparentRx are reshaping the pharmacy benefits landscape by prioritizing transparency, accountability, and client outcomes. For employers and plan sponsors, partnering with a fiduciary PBM translates into measurable cost savings, ethical practices, and improved plan member satisfaction. Fiduciary duty is not just a legal term—it’s a commitment to doing what’s right.

Conclusion

Understanding PBM fiduciary duty equips benefits professionals and organizational leaders with the knowledge to demand transparency and accountability. By aligning with fiduciary PBMs, organizations can ensure that every dollar spent on pharmacy benefits works toward the health and well-being of their covered individuals, rather than fueling unnecessary profit margins.

Choosing a fiduciary PBM isn’t just a strategic decision—it’s a responsibility to your organization and its members.