What this checklist is for
For a self-funded or level-funded employer, the goal is straightforward: verify what the plan agreed to, compare it with the spend, pricing, and claims data you can access, and identify anything that requires explanation or correction.
A complete review answers three questions: did the PBM follow the contract, were claims administered correctly, and can you verify the money?
This checklist is for employers and plan sponsors reviewing their PBM. It is not a checklist for pharmacies preparing for an audit by a PBM.
Before you start
The best audit starts with line-level claims data, but many employers cannot get it. If you only have pharmacy spend and pricing data, you can still review the contract, guarantees, rebates, fees, and overall economics. Think of line-level claims as the strongest version of the audit, not the minimum requirement.
Gather your PBM contract and data
Before analyzing performance, collect the records that define both what should have happened and what actually happened.
Request
- The PBM agreement, amendments, and current pricing and fee schedules
- Performance and financial guarantees
- Pharmacy spend and pricing reports
- Line-level pharmacy claims data, if available
- Rebate reports and reconciliation statements
- PBM invoices
- Formulary, plan design, specialty, and utilization-management reports
Previous audit or guarantee reconciliation reports are worth requesting too. What you can obtain depends on your contract, TPA relationship, and plan structure.
Checklist
Do you have both the contract and the underlying records needed to test it?
Review audit rights and contractual guarantees
Two questions belong together here: what your agreement lets you inspect, and what it actually committed the PBM to deliver.
On audit rights, read the provisions covering access to claims data, rebate and fee detail, audit frequency and lookback periods, independent auditor access, data retention, dispute procedures, and recovery of amounts an audit identifies.
Then list every financial guarantee in the contract: ingredient-cost discounts for generic and brand, dispensing and administrative fees, rebate guarantees, specialty pricing terms, and any service or performance guarantees.
For each guarantee, document
- 1.The metric being measured
- 2.Which claims are included and excluded
- 3.The period being measured
- 4.How performance is calculated
- 5.What happens when the guarantee is missed
Pay particular attention to definitions and exclusions: two guarantees that look similar can produce very different results depending on which claims count. And a guarantee is worth little if the plan cannot obtain the data to check it.
Checklist
Can you verify how each major guarantee was calculated and whether it was met?
If you have claims data, test administration and pricing
Line-level claims data gives you the strongest view into whether prescriptions were adjudicated and priced according to the contract. Depending on the file, look for:
- Drug dispensed, drug identifiers, and brand or generic classification
- Date of service, quantity, and days supply
- Pharmacy or dispensing channel
- Member cost share and plan-paid amount
- Claim status, reversals, and adjustments
- Eligibility and benefit-design accuracy
Depending on scope, also test pricing formulas, dispensing fees, member copay and coinsurance calculations, duplicate payments, and contractual exclusions.
Do not treat every submitted claim as a completed prescription. Reversals, corrections, and resubmissions should be accounted for when measuring utilization and claim volume.
Checklist
Do the paid claims match the pricing and plan rules contained in the contract?
Reconcile rebates and PBM fees
These are the two places where money moves outside the claim itself, and both need to tie back to the contract.
Review
- How rebates are defined and which drugs are rebate eligible
- Rebates reported versus rebates actually credited to the plan
- Reconciliation timing and amounts deducted from rebate payments
- Administrative, claims-processing, and clinical-program fees
- Prior authorization, specialty, network, and mail-order fees
- Data, reporting, and implementation fees
For each fee, work out how it is calculated: fixed, per claim, per member, usage-based, or something else. Then compare contract, invoices, and whatever spend or claims data you have. And a large rebate number is not by itself evidence of low pharmacy cost.
Checklist
Can you reconcile rebates back to the contract and account for every fee the plan paid?
Analyze specialty and high-cost drug spend
Total claim count rarely tells you what is driving the pharmacy budget. A small number of drugs usually does.
Start by separating generic, brand, and specialty spend, then identify the drugs and therapeutic categories responsible for the largest costs. If you have claim-level data, go deeper on the largest specialty claims: what the plan paid, where the drug was dispensed, what rebates or credits applied, and whether an affiliated entity participated in the dispensing channel.
The objective is not to assume a channel is inappropriate, but to understand how the prescription was routed and whether its economics match the plan's terms.
Checklist
Can you explain what drove the largest share of spend, and why your most expensive drugs cost what they did?
Review spread and pharmacy reimbursement
Spread pricing generally refers to a difference between what a plan is charged for a prescription and what the dispensing pharmacy is reimbursed, with an intermediary retaining some or all of the difference.
Most employers will not have the pharmacy-side reimbursement data needed to test spread directly. Where those records are available, compare:
Amount charged to the plan
vs
Amount reimbursed to the pharmacy
A difference by itself does not establish that the PBM violated its agreement. The relevant question is whether the transaction is consistent with the pricing model in the contract.
Checklist
Can you determine how the PBM's pharmacy reimbursement model affects what the plan pays?
Review formulary, plan design, and utilization management
This step tests whether the pharmacy benefit was administered the way the employer approved it.
Check whether the formulary, member cost sharing, specialty and mail-order rules, prior authorization, appeals, and other utilization-management requirements match the benefit design the employer signed off on.
Pay closest attention to
- Formulary changes made during the audit period
- Prior authorization approval, denial, and appeal activity
- Whether clinical programs followed the plan's agreed design
The question is not whether prior authorization is good or bad, but whether these programs ran as agreed and whether their cost and member impact can be evaluated.
Checklist
Was the pharmacy benefit administered according to the plan design the employer approved?
Calculate net pharmacy cost and document discrepancies
After auditing the components, bring them together and compare the result with prior periods, budget, contractual guarantees, relevant benchmarks, and any alternative arrangement evaluated on comparable assumptions.
A simplified view looks like this:
- Gross pharmacy claim cost
- Rebates and other credits returned to the plan
- Applicable PBM and program fees
Then, for every material issue, document
- What you found and which claim or contract provision it relates to
- The financial impact, if known, and what information is still missing
- Who is responsible for answering the question
- Whether it should affect renewal or procurement
The exact math will vary by contract. The important thing is not to judge the PBM on one rebate number, discount, or admin fee in isolation.
Checklist
Can your team explain what the pharmacy benefit actually cost, and does every finding have an owner?
Five questions to ask your PBM before renewal
If you do not have time for a complete audit yet, start with these.
- 01Can we obtain our complete pharmacy claims data?
- 02Can we verify how our pricing and performance guarantees were calculated, and whether they were met?
- 03Can we reconcile rebates and other credits back to our plan?
- 04Can we account for every fee we paid?
- 05Do our audit rights give us enough information to independently verify PBM performance?
An unclear answer to any one of them is a logical place to start.
What should you have when the PBM audit is finished?
A useful PBM audit should leave you able to answer:
- What did our pharmacy benefit cost, and what drove that cost?
- Did the PBM follow the contract, and were our guarantees met?
- Were rebates reconciled correctly, and what fees did we pay?
- Which specialty claims deserve closer review?
- What can we independently verify, and what remains unresolved?
- What should change before renewal?
The purpose of an audit is not to begin with the assumption that the PBM did something wrong. The purpose is to determine what happened from records you can verify.
PBM audit FAQ
What is a PBM audit?
A PBM audit is a review of a pharmacy benefit manager's claims administration, pricing, rebates, fees, guarantees, plan design, and other contractual obligations. For employers and plan sponsors, the objective is to determine whether the pharmacy benefit was administered according to the agreement and to understand the plan's actual pharmacy economics.
What data do you need for a PBM audit?
The core inputs generally include the PBM contract, amendments, pharmacy claims data, pricing and fee schedules, rebate reports, invoices, plan design documents, and performance-guarantee reports. Additional data may be required depending on the scope of the audit.
What if I cannot get line-level pharmacy claims data?
You can still review the PBM without it. Start with the pharmacy spend and pricing data available to you, then compare it with your contract, rebate reports, fee schedules, guarantees, and other reporting. Line-level claims make the audit more precise, but they are not always available to employers.
Is a PBM audit the same as claims repricing?
No. A PBM audit tests the current arrangement against contracts, claims, rebates, fees, plan rules, and other records. Claims repricing applies alternative pricing assumptions to an existing claims population to estimate how that same utilization might perform under another arrangement.
Start with the data you have
You do not have to begin by replacing your PBM. Begin by understanding the pharmacy benefit you already have.
Have a claims file? Kanurra can reprice it line by line for self-funded and level-funded groups. If you only have spend and pricing data, start there and we can determine what can be reviewed.
If you are still determining whether your organization has direct exposure to pharmacy claims, read our guide to PBMs for level-funded employers.
Request a PBM audit
Send us what you have. If that is a claims file, we will reprice it line by line, so the first answer you get about your pharmacy benefit is one you can check.
Audit my claims