Contract terms and access to data
Pharmacy benefit managers administer prescription benefits. Their contract terms determine fees, pricing guarantees, rebate treatment and the information an employer can inspect. Review unexpected charges, termination provisions and any restrictions on sharing or independently auditing claims data.
Do not assume every PBM uses the same practices. Ask for plain definitions, complete disclosures and written audit rights. Federal law prohibits certain pharmacy gag clauses, so historical examples should not be treated as current permitted practice.
Spread pricing and pricing benchmarks
Spread pricing means charging the plan more than the PBM pays the pharmacy and retaining the difference. Ask whether the contract uses spread pricing or a transparent pass-through model, and how fees are disclosed.
Review Average Wholesale Price benchmarks, Maximum Allowable Cost lists, generic-versus-brand definitions, drug codes, days-supply calculations and reconciliation procedures. These definitions can change the apparent value of a pricing guarantee.
Rebates and incentives
Identify all rebate and related revenue categories, who receives them, when they are paid and whether third-party aggregators retain a share. A pass-through label is not a substitute for checking contract definitions.
Ask how formulary decisions are made and whether clinical value, total net cost and patient access are considered. Review rebate guarantees, exclusions, administrative fees and specialty-pharmacy arrangements.
Clinical oversight and pharmacy access
Review clinical oversight, high-cost medications, refill policies and steering to affiliated pharmacies. Examine whether these arrangements support appropriate treatment and practical patient access.
Request reporting that lets you evaluate utilization, net spending and outcomes. The goal is to identify the incentives and terms in your actual contract, not assume misconduct from a headline.
Practical safeguards
Require disclosure of fees, rebates and pricing methodology. Preserve independent audit rights and usable claims data. Review evidence-based formularies, employee access and alternative contracting options.
Track whether promised guarantees and rebates reach the plan, document the review and reassess the provider regularly. Engage qualified benefits and legal advisers when contract terms or compliance questions are unclear.
Sources and further reading
FTC: pharmacy benefit manager oversightGeneral education, not individual legal or tax advice. Eligibility, plan design and current requirements should be reviewed for your organization.