Many pharmacy benefit manager (PBM) proposals now use the same vocabulary: transparent, pass-through, fiduciary-aligned. When those words appear together in a request for proposal (RFP) response, they can sound interchangeable. The employer, as plan sponsor, still has to decide which claims hold up once the contract and the claims data are on the table.

The label is common, and the contract terms behind it vary widely. A fiduciary-aligned PBM is defined by how it is paid, where it earns money, and what it lets the plan sponsor verify. Each of those can be tested before a contract is signed.

What Is a Fiduciary-Aligned PBM?

A fiduciary-aligned PBM is built so its revenue doesn't rise when the plan's drug spend rises. It holds itself to high standards modeled on a fiduciary's, and its business model is structured so its financial incentives line up with the plan sponsor's fiduciary duty. In practice, its formulary, network, and routing decisions favor the clinically appropriate lowest net cost, and it gives the plan sponsor the pricing transparency and data to verify that structure.

Under the Employee Retirement Income Security Act (ERISA), a plan fiduciary is legally obligated to act solely in the interests of plan participants and beneficiaries. A fiduciary-aligned PBM structures its incentives to point the same way, whether or not it accepts fiduciary status in its contract.

Alignment alone does not create fiduciary duties. The employer, or another named plan fiduciary, remains responsible for prudently selecting and monitoring the PBM, and a fiduciary-aligned PBM can help it meet those obligations.

For a benefits leader, fiduciary alignment is something a PBM should be able to demonstrate in the contract and the claims data. Ask the PBM to show how its money moves, and treat its answers as evidence.

Why PBM Incentives Are a Fiduciary Issue for Employers

ERISA sets the duties an employer must meet when it hires and oversees a PBM. The Department of Labor (DOL) restated those duties in the preamble to its PBM fee disclosure rule, finalized in October 2026.

Responsible plan fiduciaries must act solely in the interests of plan participants and beneficiaries. They must negotiate contract terms prudently so the plan pays only reasonable and necessary costs. They must also monitor how their service providers perform.

Meeting those duties depends heavily on knowing how the PBM is paid, so any test of a fiduciary-aligned PBM starts with its compensation model. A plan sponsor has a hard time judging whether compensation is reasonable when it arrives indirectly and isn't stated in dollars. When a PBM's revenue rises with plan drug spend, its incentives and the plan's interests can pull in opposite directions.

That makes compensation structure a plan-sponsor risk and a scored RFP criterion. It belongs in the same documented review that covers other employer fiduciary obligations under ERISA, such as plan documents and claims procedures.

PBM Revenue Sources That Can Work Against Your Plan

Misalignment comes from revenue that grows with drug cost or volume, or from channels the PBM owns. Every PBM earns revenue, so the useful question is whether that revenue rises when the plan spends more. Some of it also sits outside the stated administrative fee, which makes it harder to see in a proposal's pricing exhibit.

Transparency, Pass-Through, and Ownership: Three Separate Tests

Transparency and pass-through often get collapsed into a single RFP checkbox, and that checkbox tends to skip a third test: ownership. Each one answers a different question.

• Transparency (disclosure): The PBM discloses its pricing, fees, and rebate arrangements, so the plan sponsor can see what the plan pays and why. It shows what the PBM earns without changing how it earns.

• Pass-through (dollar flow): The PBM charges the plan what it pays the pharmacy and returns manufacturer rebates and discounts to the plan. The fee structure then shows how the PBM itself is paid.

• Ownership: The PBM or an affiliate may own the specialty, mail-order, or retail pharmacies a claim can pass through. Those channels let the PBM earn beyond its stated administrative fee and can give it a reason to route claims there.

A PBM can pass one test and fail another. It can disclose a conflict without removing it, or pass through rebates while earning more through an owned pharmacy or ancillary fees. Knowing how transparent and pass-through contracts differ helps an employer read each term in a proposal precisely.

For a fiduciary-aligned PBM, pass-through is one contract feature, and it signals alignment only when the fee structure and ownership support it. In an RFP, score disclosure, dollar flow, and ownership as separate lines instead of accepting a single "transparent" answer.

What 2026 Federal PBM Reform Changes for Employer Plans

Two federal actions in 2026 raise the baseline for PBM disclosure in employer plans: an enacted law that amends ERISA and a final DOL rule.

The Consolidated Appropriations Act, 2026

The Consolidated Appropriations Act, 2026 (CAA 2026), signed February 3, 2026, amended ERISA's PBM disclosure requirements, and the DOL's final rule confirms those amendments took effect on enactment.

CAA 2026 also requires PBMs to pass through rebates, fees, and alternative discounts to group health plans for plan years beginning on or after August 3, 2028.

Employers renewing before then can negotiate comparable pass-through, disclosure, and audit terms. Our summary of the federal PBM reform enacted in February 2026 outlines what to request.

The Department of Labor's Final Fee Disclosure Rule

The DOL finalized its PBM fee disclosure rule in October 2026, and it was published November 2, 2026. The rule requires PBMs to disclose their compensation to fiduciaries of large self-insured ERISA group health plans, generally those with at least 100 participants or offered by employers with at least 100 employees, for plan years beginning on or after July 1, 2027.

Smaller self-insured plans and fully insured plans fall outside the rule's detailed requirements, though their service providers must still meet ERISA's statutory disclosure requirements. Initial disclosures come before a new contract, extension, or renewal. Semiannual disclosures follow, quarterly at the plan's request, and plans can audit them at least once a year.

The DOL rule itself does not prohibit spread pricing or require PBMs to pass through all rebates. Neither the law nor the rule makes any PBM a fiduciary or changes the employer's duty to select and monitor its PBM prudently. Dollar flow, ownership, and clinical execution still separate one PBM from another.

How to Evaluate Whether a PBM Is Fiduciary-Aligned

The questions below test a fiduciary-aligned PBM claim across compensation, ownership, data, and clinical execution. Employers can add them to an RFP or raise them at renewal, alongside a longer list of pricing questions for their PBM.

• What do the PBM and each affiliate earn from the plan in dollars, and does any of it rise with drug price or volume?

• Which rebates, fees, and discounts pass through, how does the contract define "rebate," and how does the PBM reconcile pass-through?

• Does the PBM or an affiliate own pharmacies, and how does the PBM choose the pharmacy source for each claim?

• What claim-level data does the plan receive, how often can the plan audit, and who selects the auditor?

• Do pricing guarantees track lowest net cost, or do they track discount percentages off list price?

• Who makes formulary and utilization management decisions, and how does the PBM act on lower-cost, clinically appropriate alternatives?

• Does the PBM state in writing whether it acts as an ERISA fiduciary, and does it disclose its conflicts?

Note where a PBM answers vaguely or only in part. Record each request, each response, and how the benefits committee weighed them. That record becomes part of the fiduciary process the employer can point to when it explains its PBM decision.

How SmithRx Approaches Fiduciary Alignment

Employers evaluating a fiduciary-aligned PBM need alignment they can verify in the contract and the data. We combine transparent economics with a fixed per member per month (PMPM) administrative fee and 100% pass-through of manufacturer rebates, so our compensation does not increase when medication costs rise.

Alignment also has to hold where claims are processed. We don't own pharmacies, and our Drug Pathways Engine evaluates claims for the clinically appropriate drug, pharmacy source, and available savings programs. For certain drugs, the lowest net cost source can be a partner channel, such as a manufacturer-direct or cost-plus pharmacy, and our team supports members and providers when a change is needed.

Plan sponsors have access to their pharmacy-benefit data, and the SmithRx Partner Portal, provided through our PBM service, gives employers and brokers tools and data for plan-performance analysis. We expect employers and their advisors to test our results against the same questions they would ask any PBM.

In 2025, SmithRx clients saw 20%+ lower PMPM than the industry benchmark.

If your organization is evaluating its pharmacy benefits, we can walk you through how a modern PBM model built on transparent economics and aligned incentives would work for your plan. Talk with our team to start that conversation.

Frequently Asked Questions

Can an employer improve fiduciary alignment without changing PBMs?

An employer can often improve alignment at renewal by negotiating pass-through definitions, dollar-level compensation disclosure, audit rights, and data access. Conflicts rooted in pharmacy ownership or the compensation model depend on the PBM's structure, so contract terms can only go so far.

How often should employers review a PBM's alignment?

Monitoring service providers is an ongoing fiduciary duty, and the DOL final rule gives large self-insured plans a practical review cadence. Starting with plan years beginning on or after July 1, 2027, it sets semiannual disclosures, quarterly on request, and an audit right at least once a year.

How do brokers and consultants fit into fiduciary alignment?

Brokers and consultants often guide PBM selection and renewal, and the DOL final rule requires those affiliated with a PBM to disclose their compensation to large self-insured plan fiduciaries. Employers and their advisors can make that disclosure routine for any PBM-related compensation, which strengthens the shared record behind the decision.

As the new disclosures arrive, the PBMs worth keeping will be the ones whose numbers match their claims.