You are correct, but it's for the purposes of preventing a quick pitch: stepping off then quickly stepping back on and pitching. In that case yes must drop arms.
There's commentary in the umpire bible/mlb umpire manual on this situation
MLB Umpire Interpretations & Jaksa/Roder (The PBUC / MLB Umpire Manual):
Professional umpire manuals (the Major League Baseball Umpire Manual and the Jaksa/Roder Rules of Professional Baseball) clarify the intent: the rule is strictly an anti-quick-pitch mechanism.
If a pitcher disengages while set, keeps their hands together, steps right back onto the rubber, and pitches immediately without resetting, they have bypassed the "come set" requirement and quick-pitched the batter. Therefore, dropping the hands to the sides is required to cleanly terminate the previous set position before engaging the rubber to pitch again. If the pitcher is throwing to a base, feinting a throw, or running toward a play, the hand-drop requirement does not apply.