Workers’ Comp Pharmacy Update
Three changes in the law that affected April should be understood by every workers’ compensation expert who tracks pharmacy or PBM programs. Two have immediate effects on operations, and one is changing the competitive landscape in ways that the WC market hasn’t fully understood yet.
The Federal PBM Reform Wave: Why WC Isn’t Safe
In the last 60 days, the federal government has done more to regulate PBMs than at any other time in U.S. history. Workers’ compensation players need to be aware of and proactively address these changes. In workers’ comp, we say that what happens in group health will happen in workers’ comp – just ten years later.
ERISA, which oversees employer-sponsored group health insurance, does not apply to workers’ compensation pharmacy programs – but it is still worth tracking. The Department of Labor’s proposed regulation on PBM fee disclosure, published on January 30 under Executive Order 14273 and open for comment until April 15, applies only to ERISA self-insured group health plans. The Consolidated Appropriations Act of 2026, signed on February 3, adds a 100% rebate pass-through requirement, audit rights, and requirements for ERISA plans to de-link PBM compensation from drug prices. The FTC’s landmark settlement decree with Express Scripts, made public on February 4, mandates changes to formulary design, price disclosure, and employee compensation. A compliance monitor will be in place for three years.
None of this directly controls WC PBMs. The challenge is that the PBMs that work with WC programs are the same companies that have to follow these group health rules. Optum, Express Scripts, and CVS Caremark together fill around 80% of all U.S. prescriptions, including those for workers’ compensation. When the federal government requires member cost-sharing based on net price, bans spread pricing for covered products, and requires disclosure of manufacturer rebates and affiliate income, it changes the way the organizations that your programs rely on are compensated.
The real-world result is a changing marketplace. WC payers and TPAs that haven’t looked at their PBM contracts for spread pricing, rebate retention, and affiliate fee arrangements in a while are working blind, a reality that will become clearer as federal rules on openness spread to contracting expectations. SB 41 in California, already in place, imposes a fiduciary duty on PBMs that work with commercial health plans in the state. Our March digest discussed Massachusetts’ new 211 CMR 157.00 rule, which requires PBMs that work with WC carriers to hold state licenses and inform customers about spread pricing. These actions at the state level follow the federal government’s guidance.
The comment period for the DOL ends on April 15. If your group has opinions on whether the disclosure framework should go beyond ERISA, which is something the DOL asked for comments on, now is the time to speak up.
Massachusetts is one of the first states to call out WC-inclusive PBM licensing.
The new PBM licensing regulation, 211 CMR 157.00, is notable for requiring disclosure of workers’ compensation carrier relationships — one of the few state PBM licensing frameworks to explicitly name WC carriers as a reporting category. PBMs operating in Massachusetts must obtain a state license, disclose all WC carrier clients, report on spread pricing, and submit corrective action plans for network deficiencies.
This makes Massachusetts one of the first states to close the gap between commercial health PBM regulation and WC pharmacy programs. This gap has allowed behaviors in WC that regulators in other fields would more closely scrutinize. PBMs and WC carriers that do business in Massachusetts should be reviewing their compliance stance.
The wider political landscape supports the path we’re on. Bills in New York, Oklahoma, and Tennessee would make it illegal for PBMs to own mail-order facilities to which they send patients. This is a direct attack on the vertical integration model that defines the three major PBMs. Pennsylvania’s S.B. 1215 would limit the amount reimbursed for complex drugs to $400 for a 30-day supply and mandate pricing based on each ingredient’s NDC. These steps address the same structural problems as the federal acts do, but at the state level and within WC-applicable frameworks.
Update to the California Fee Schedule—A Deadline for Operations
The California Division of Workers’ Compensation modified the physician and practitioner section of its Official Medical Fee Schedule in late March. The new payment rates are now in effect for treating providers. PBMs, payers, and TPAs that do business in California should ensure their payment systems reflect the new rate tables.
This change is one of several that will be made to the fee schedule in April. The Workers’ Compensation Division of Oregon has released new cost-to-charge ratios for use in determining hospital payments. For operators in more than one state, it’s a good idea to check whether system updates have been applied in both states before the end of the month.
Other Important Points
These three problems show that the rules are changing quickly at both the federal and state levels simultaneously. The FTC is still going after Caremark and OptumRx, while CVS Health is apparently in talks to settle. If those cases end similarly to the Express Scripts order, the changes to how PBMs are compensated will affect the entire market. That change needs to be closely monitored, as it will affect WC pharmacy contracts.
The companies that handle this change well are those that are aware of it before the contracts are up for renewal. PBMs play a crucial role in controlling workers’ compensation costs and managing care. These changes should be embraced by all players as a natural outgrowth of the scrutiny our industry has faced due to the activities of a few marginal actors.
Every month, we put out a full Regulatory Risk Intelligence Monitor that covers all six areas of WC pharmacy and PBM: PBM licensing, pharmacy charge schedules, care directives, physician dispensing, Nurse Case Manager rules, and TPA licensing. Subscribers get clear instructions on how to deal with partners, can see bills in real time throughout all 50 states, and can get cost analysis right away.
Dennis M. Sponer, J.D., LL.M., and MBA, is the Principal of SRX Advisors, a company that specializes in regulatory intelligence and legal services for regulation in workers’ compensation.
