What ERISA Plan Sponsors Should Know About the FTC-Caremark PBM Settlement

What erisa Plan Sponsors Should Know About the F.T.C-Caremark P.B.M Settlement

Kara Maddalena, lexology dot com

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Employers are wise to consider and learn from the F.T.C's most recent settlement with Caremark when it comes to evaluating P.B.M contracts and fiduciary oversight of pharmacy benefit arrangements

The F.T.C's second major P.B.M settlement with Caremark continues to reshape how erisa plan sponsors must evaluate P.B.M contracts and fiduciary oversight of pharmacy benefit arrangements. On July 14, 2026, the F.T.C announced a settlement with Caremark Rx L.L.C and Zinc Health Services L.L.C (collectively, "Caremark") resolving the F.T.C's administrative antitrust case alleging that Caremark used rebate-driven formulary practices that inflated insulin list prices and increased patient costs. The settlement follows the F.T.C's February 2026 settlement with Express Scripts, Inc. (E.S.I) and reflects continued federal scrutiny of pharmacy benefit manager (P.B.M) pricing, formulary, rebate, and compensation practices. Read our prior advisory for more information about P.B.M's and the E.S.I settlement. The F.T.C's proposed order with Caremark was placed on the public record for comment before becoming final and will remain in effect for ten years after the Implementation Date (defined below).

Although the order applies directly to Caremark, it is highly relevant to erisa plan fiduciaries and employer-sponsored health plans that use Caremark or are negotiating P.B.M arrangements. Beginning in 2027 and 2028, Caremark must incorporate many settlement requirements into its standard package of pharmacy benefit management products, services, features, or terms (Standard Offering), which may affect formulary administration, rebate pass-throughs, participant cost sharing, insulin affordability programs, transparency reporting, and P.B.M compensation. For plan sponsors, upcoming renewals and mid-term negotiations should be treated as an opportunity to evaluate whether P.B.M arrangements remain prudent, reasonable, transparent, and aligned with participant interests.

Key Plan Sponsor Takeaways from the F.T.C-Caremark Settlement

Like the E.S.I settlement, the Caremark settlement phases in key requirements beginning on: (1) the Implementation Date (the earlier of (i) the date Caremark certifies that it has fully implemented the order or; (2) January 1, 2027), or (2) January 1, 2028. The discussion below does not summarize every requirement in the Caremark order; instead, it focuses on selected provisions most relevant to erisa plan sponsors.

What's Similar to the E.S.I Settlement?

1. Non-Discrimination Against Lower List Price Versions of a Drug. Effective as of the Implementation Date, Caremark must include low wholesale acquisition cost (Low-W.A.C) versions of drugs on its standard formularies whenever they have the same or lower net cost than the higher-list-price version and are not subject to specified F.D.A shortage conditions. Low-W.A.C products cannot be excluded, placed on less favorable tiers, or subjected to greater utilization management than equivalent high-W.A.C products. This requirement generally tracks the approach taken in the E.S.I settlement.

- Insight: By requiring equal or better formulary treatment for lower-list-price versions whenever their net cost is the same or lower, the F.T.C appears to be attempting to ensure formulary placement is driven by overall economics rather than rebate opportunities.

2. Relationship Between Patient Out-of-Pocket Costs, Client Contracted Amount, and Rebates. Effective as of the Implementation Date, Caremark's Standard Offering must limit member cost sharing to no more than the employer's negotiated price ("Client Contracted Amount") less claim-specific rebates. The order prohibits calculating cost sharing from list price and requires access to affordability programs, including the Copay Certainty Program (a Caremark pharmacy benefit management program available to plan sponsors that is meant to cap member responsibility for participating drug products) and first-dollar coverage for insulin and other preventive drugs. Customized arrangements may deviate only through the Order's competitive exception process. The E.S.I settlement addressed this same cost-sharing concept.

- Insight:The F.T.C appears to be signaling that rebates should benefit the participant who generated the claim, not merely reduce the plan sponsor's aggregate cost after year-end reconciliation. This could accelerate industry adoption of point-of-sale rebate models and increase scrutiny of benefit designs that calculate coinsurance from gross prices.

3. Standard Offering and TrumpRx. If federal law is amended to permit it, effective as of the Implementation Date, Caremark's Standard Offering must allow members to access direct-to-consumer pricing through the TrumpRx platform, credit those purchases toward deductibles and out-of-pocket maximums, and provide equivalent treatment for eligible drugs. Religious and moral exemptions for drug coverage are preserved for plan sponsors. A similar provision was included in the E.S.I settlement.

- Insight: Although contingent on future federal action, the TrumpRx provision indicates the F.T.C's willingness to treat direct-to-consumer purchasing platforms as alternatives to traditional P.B.M distribution channels, and to require P.B.M's to integrate eligible purchases into plan benefit designs.

4. Specific Requirements for Insulin Products. Effective January 1, 2028, when a plan sponsor adopts a formulary that includes an insulin product covered by Caremark's Copay Certainty Program, it must include at least one insulin product in each of the rapid-, short-, and long-acting categories. Member cost sharing is also capped at $25, $50, or $75 depending on the prescription supply, unless the employer opts out. The E.S.I settlement included a similar obligation to reduce insulin cost sharing, but the Caremark order establishes more specific dollar caps and therapeutic-category requirements.

- Insight: Competitors may face pressure to offer comparable caps, particularly during R.F.P's and renewal discussions.

5. Restrictions on Compensation From Drug Manufacturers. Effective as of the Implementation Date, Caremark cannot receive manufacturer compensation (including administrative, data, or similar fees) that is directly or indirectly tied to a drug's list price or another list-price benchmark under the Standard Offering. This restriction is consistent with the E.S.I settlement and reinforces the F.T.C's focus on compensation arrangements linked to list-price benchmarks.

- Insight: This provision prevents P.B.M's from nominally abandoning rebate-based compensation while replacing it with list-price-based administrative or data fees. It could further push the industry toward flat-dollar, P.M.P.M, per-claim, or service-based manufacturer fees.

6. Increased Transparency for Plan Sponsors. Effective January 1, 2028, Caremark must provide enhanced reporting under its Standard Offering, including annual drug-cost reporting, claim-level data, Transparency in Coverage assistance, and disclosure of compensation paid or facilitated for consultants and brokers. Together with the E.S.I settlement, this provision reflects the F.T.C's continued emphasis on P.B.M transparency and plan sponsor access to meaningful cost and compensation information.

- Insight: The consultant-compensation provision is significant. P.B.M-funded consulting arrangements, placement fees, credits, and other indirect compensation may receive greater scrutiny from plan sponsors, particularly where the adviser influences P.B.M selection. The result could be increased demand for compensation-neutral procurement models and explicit conflict disclosures.

What's New?

1. Standard Offering Regarding Compensation and Rebates. Effective January 1, 2028, spread pricing is prohibited under the Standard Offering, and Caremark must pass rebates through at the point of sale to a member without charging additional administrative fees (other than actual pre-funding costs). Also, guarantees of predetermined manufacturer compensation (including rebate guarantees) are prohibited. However, unique to the Caremark settlement, drug-level net pricing guarantees using Caremark's TrueCost program or using per-member per-month pricing are permissible, provided those offerings otherwise comply with the settlement terms. (TrueCost is Caremark's program for drug-level net pricing guarantees, meaning it guarantees the net cost of individual drugs rather than a predetermined amount of manufacturer rebates or other compensation.)

- Insight: By preserving TrueCost while prohibiting rebate guarantees, the F.T.C appears to be encouraging P.B.M's to compete on lowest net cost rather than highest rebate.

3. Use of Pharmacy Hub Services. Effective as of the Implementation Date, Caremark is prohibited from restricting or interfering with relationships between Hub Pharmacies and Pharmacy Hub Services Providers, subject to specified fraud, compliance, quality, and legal exceptions. A "Pharmacy Hub Services Provider" is a company that receives prescriptions, helps patients access manufacturer savings programs, coupons, or affordability programs, and then directs dispensing through partner pharmacies ("Hub Pharmacies"). This is a unique provision to the Caremark settlement.

- Insight: This provision appears to signal the F.T.C's broader concern that P.B.M's should not restrict alternative pharmacy arrangements that may reduce participant costs or increase competition.

5. Promoting the Standard Offering. Effective as of the Implementation Date, Caremark must spend at least $10 million annually for five years marketing the Standard Offering, disclose it in marketing materials and R.F.P responses, refrain from disparaging it, and avoid coercing plan sponsors or pharmacies into customized arrangements. This is unique to Caremark's settlement.

- Insight: By requiring advertisement of the Standard Offering, the F.T.C appears to be ensuring that customers are aware of it as an option; nominally available product will not affect competition if sales teams steer clients toward more profitable customized arrangements.

7. Customized Terms Only After Acknowledgment of Standard Offering. Effective immediately, Caremark may negotiate customized terms requested in writing by plan sponsors or retail community pharmacies, but only after first presenting the Standard Offering and obtaining written acknowledgment that the plan sponsor received and understood it before choosing different terms. The exception does not apply to Aetna's fully insured plans. This is unique to Caremark's settlement.

- Insight: For erisa fiduciaries, this creates a documented record that the employer knowingly declined the F.T.C's preferred contractual protections, making it particularly important for fiduciaries to document the business rationale for selecting alternative terms.

erisa Fiduciary Action Items

As Caremark implements the settlement and other P.B.M's face similar scrutiny, plan fiduciaries should use upcoming P.B.M procurements, renewals, and mid-term amendments to evaluate whether their pharmacy benefit arrangements remain prudent, reasonable, and participant-focused. In particular, fiduciaries should consider whether:

- P.B.M incentives are aligned with reducing net drug costs rather than maximizing rebates;

- Participants receive the benefit of negotiated pricing and rebates at the point of sale;

- Reporting provides meaningful visibility into drug costs, rebates, fees, and consultant or broker compensation; and

- Contract terms reflect evolving regulatory expectations for P.B.M transparency, accountability, and fiduciary oversight; and

- For plan sponsors that are mid-term or approaching renewal with Caremark, the settlement may provide leverage to request amendments, compare existing contract terms against the Standard Offering, and document why any alternative approach remains appropriate for the plan and its participants.

More broadly, the Caremark settlement reinforces the federal government's increasing focus on P.B.M oversight. Fiduciaries should expect continued scrutiny of these service-provider relationships and should continue to evaluate and document P.B.M decisions as part of a prudent erisa fiduciary process.