Is Auditing My Pharmacy Benefit Manager (PBM) an Advantage or Disadvantage?

September 2025
Pharmacy Benefit Managers (PBMs) sit at the center of the prescription drug supply chain. They negotiate with manufacturers, manage pharmacy networks, and promise to help plan sponsors control pharmacy spend.

But with rising drug costs, opaque pricing models, and questions around rebate practices, many employers and health plan sponsors are asking the same question:

“Should I audit my PBM?”

The short answer: Yes. Auditing your PBM is overwhelmingly an advantage.

While it requires planning, resources, and sometimes a willingness to have tough conversations, the upside is significant. A well-structured audit can uncover hidden costs for your members. Verifying compliance ultimately protects both you and your organization from ERISA concerns.

Let’s break it down.

The Advantages of Auditing Your PBM

1. Financial Accuracy and Oversight
At its core, an audit ensures that your PBM is adhering to the terms of your contract. That means verifying details like:

• • • Correct application of pricing formulas
    • Full rebate pass-through (when contracted)
    • Dispensing fees, copay accumulations, and drug categorization

Even small misapplications can snowball into millions of dollars in excess spending. An audit not only recovers dollars already lost but also prevents those leaks from continuing in the future.

2. Increased Transparency
PBMs are often described as a “black box,” and for good reason. The potential for spread pricing, rebate retention, and opaque network arrangements can make it nearly impossible for plan sponsors to see where their dollars are really going.

An audit shines light on practices such as:

• • • Markups between what PBMs charge and what they reimburse pharmacies
    • Rebates that may not be fully passed on to the plan
    • In consistencies in pricing that may create hidden costs for the plan
    • Mistakes in a new plan set that would otherwise go unnoticed for the length of the contract

With this transparency, you gain real insight into whether your plan is performing as promised.

3. Stronger Contracts in the Future
Audit findings aren’t just about identifying what went wrong, they’re leverage for the future. They create a foundation for negotiating:

• • • Broader audit rights and better data access
    • Pass-through pricing models
    • Performance guarantees tied to measurable outcomes

Simply put, auditing makes you a smarter negotiator.

4. Fiduciary Responsibility
For self-funded plans, audits aren’t just optional, they’re best practice. As a fiduciary, you have a duty to ensure plan assets are managed responsibly.

Conducting regular audits demonstrates due diligence and strengthens governance, protecting your organization from risk.

Potential Disadvantages (and How to Overcome Them)
While the advantages are clear, some sponsors hesitate because of perceived drawbacks. Here’s what to expect and how to mitigate concerns.

1. PBM Pushback
Some PBMs resist full audits or limit access to claims-level data.
Solution: Before you sign, make sure your contract includes robust audit rights and third-party auditor provisions. If you don’t know if you have audit rights, check as soon as possible.

2. Resource Requirements
Audits require time, claims data, and coordination.
Solution: Partner with experienced third-party auditors who specialize in PBMs. Many offer turnkey services with minimal disruption to your team. While a full audit delivers accountability by confirming that the PBM is meeting its commitments, beginning with an initial data analysis is often the more cost-effective first step. This analysis can uncover potential issues early and help determine whether a comprehensive audit or additional action is warranted.

3. Vendor Relationship Concerns
Plan sponsors sometimes worry that auditing signals distrust.
Reality: A strong PBM should welcome audits as part of good governance. Think of it like routine maintenance on a car, it ensures everything is working as it should.

4. Limited Lookback Windows
PBM contracts often cap audit windows at 12-18 months.
Solution: Negotiate for at least 24 months of lookback rights and annual audit allowances before signing or renewing your PBM contract.

What to Audit

Not all audits are created equal. To get the most value, focus on:

• • • Claims accuracy (ingredient cost, copay, discount application)
    • Rebate reconciliation
    • Validation of plan set up
    • Formulary compliance
    • Pharmacy network discounts
    • Specialty drug classification and pricing
    • Brand vs. generic coding (DAW impact)
    • MAC list application
    • Prior authorization and utilization management outcomes

The Final Verdict

Auditing your PBM is not just a cost-control tactic, it’s a best practice. It protects your plan, ensures contractual compliance, and strengthens your negotiating position.

Yes, there are logistical hurdles, but the disadvantages are far outweighed by the financial, operational, and fiduciary benefits. In fact, the bigger risk may be choosing not to audit at all.

Pro Tip: Make audits or at least a financial analysis part of your annual routine and always negotiate strong audit rights into your PBM contract from the start.

CONTACT US to learn how we help plan sponsors protect their pharmacy benefit dollars.