Drug prices are high, and the Department of Labor is about to make things worse. By going after pharmacy benefit managers (PBMs), which negotiate prices down, the department risks causing unnecessary price spikes.

PBMs act as intermediaries between insurance firms and other health plans and drug companies. Their role, at least in theory, is to negotiate the lowest prices for their clients. Securing lower prices could become much more difficult when a push for transparency turns into regulatory overreach and bureaucracy.

In February, President Donald Trump signed the Consolidated Appropriations Act of 2026 into law. The act includes significant new federal requirements affecting PBMs in both Medicare and the commercial market. It was passed in the name of greater transparency, with provisions addressing PBMs’ relationships with drug companies, their financial arrangements, and how they are paid. That sounds well-intentioned, but the Department of Labor’s separate proposed transparency rule, issued before the act was signed, risks creating another wall of bureaucracy for PBMs unless the two sets of requirements are carefully aligned.

Living in the UK, I know a thing or two about bureaucracy introduced in the name of consumer protection. The goal is noble, but when too much legislation is put in front of the private sector, profitability can suffer. Extra paperwork brings an array of problems, not least rising compliance costs as companies hire expensive consultants to figure out how to provide all the additional information the government wants. This risk is especially salient in the drug industry. One bad audit or accusation of malpractice can leave a firm struggling to regain the industry’s trust.

One need not look to Britain for a cautionary tale of good intentions curdling into red tape. America’s health system offers warnings of its own. The No Surprises Act, passed in 2020 to protect patients from unexpected medical bills, established a federal arbitration process called Independent Dispute Resolution (IDR) to settle certain payment disputes between providers and insurers. The system was intended to resolve those disputes, but it has also generated backlogs, mounting costs, and operational strain for the parties involved.

Since the process began in 2022, it has received more than five million disputes, far exceeding what officials had planned for. The process has now paid out more than $15 billion to health providers, who typically win arbitration cases, driving up the amounts paid by insurers and, potentially, what they charge consumers. A well-intentioned protection became, in practice, a multiyear bureaucratic bottleneck. That is exactly the kind of wall the Department of Labor now risks building around PBMs, with consequences for drug prices.

Overregulation makes compliance harder, leaving projects delayed, prohibitively expensive, or canceled. In the drug industry, ordinary Americans cannot simply do without their medications. They suffer if treatments become too expensive, and they may suffer if added costs discourage firms from bringing new products or services to market.

Rather than making consumer exploitation harder, the combination of the act and the proposed Labor Department rule could leave PBMs with two similar but different compliance tasks. The PBM market is already highly concentrated, and vertical integration across the drug supply chain is common. By creating another wall of bureaucracy, the department risks raising barriers to entry and leaving the market in the hands of fewer companies. Rules meant to make drug prices more competitive could instead strengthen the largest players, leaving consumers worse off.

Small PBMs are likely to feel the greatest pressure to expand their compliance operations under the new law. It is unfair for the federal government to impose another set of demands without first making sure they do not duplicate what Congress has already required. Nor would the effects necessarily stop with PBMs. Employers and insurers could face higher costs, with consequences for health coverage and, ultimately, household budgets. If the department’s rule imposes earlier deadlines than the act, it should explain why that timetable is necessary.

America should avoid the trap of pursuing public protection without adequately considering its cost. As an entrepreneurial nation, it should be wary of legislation that stifles competition. A poorly designed rule that duplicates compliance work could make the market less dynamic. A free-market economy succeeds by encouraging competition and consumer choice, not by burdening the smallest firms with costs only the biggest can comfortably handle.

The federal government should look for ways to ensure greater competition while protecting consumers. When employers have more PBMs to choose from, those firms have a stronger incentive to offer better terms and retain clients. Fewer barriers to entry can mean greater competition. Trying to tackle high drug prices with rules that may entrench the largest companies is the sort of bureaucratic approach I have come to expect from British and European markets, not from the United States.

The Trump administration still has time to recognize that PBMs are not the whole problem. Some transparency rules make sense. But designing them in a way that only large, established PBMs can easily survive is the wrong approach. It risks reducing competition and making prices higher, not lower, for sick Americans.