Pharmacy benefit managers (PBM) audits are becoming increasingly dangerous for independent pharmacies. While the role of the PBM was initially to reduce costs for all parties involved, abusive PBM practices have led to the opposite in many cases. The problem has become so significant that several states have adopted legislation aimed specifically at targeting abusive PBM practices, and the National Community Pharmacists Association (NCPA), National Pharmacy Associations, and other organizations have launched wide-reaching lobbying and advocacy campaigns in recent years.
Several PBMs are also facing pharmacy audit litigation related to the excessive price of insulin in the United States. This includes lawsuits from individual patients and families and a lawsuit filed by the U.S. Federal Trade Commission (FTC) in September 2024. Pharmacies implicated in alleged conspiracies with their PBMs could potentially be at risk as well; and, at the same time, if they don’t go along with their PBMs’ requirements, they could put themselves at risk for retractions, payment denials, contract termination, and other financial consequences.
Lack of Transparency: A Key Concern for Pharmacies and Patients Alike
One major issue that negatively impacts both pharmacies and patients is the lack of transparency. As the NCPA explains, “[a] lack of transparency in PBM practices has led several states to implement licensure/registration, fair pharmacy audit, or generic drug pricing legislation to level the playing field for pharmacies and patients.” In a white paper discussing PBM abuses, the NCPA also notes that “[w]hile PBMs claim audits are used to detect fraud, waste, and abuse, examples show they recoup payments based on small clerical errors rather than focusing on whether the correct patient received the correct dosage of the correct medication on the correct date.”
These considerations impact how pharmacies need to approach PBM audit findings. Rather than viewing these audits as neutral inquiries focused on ensuring accurate billing and payment, pharmacies must view them as adversarial proceedings. While a certain amount of cooperation may be warranted, pharmacies targeted in PBM audits need to take a defensive posture and be prepared to dispute false and abusive retraction demands during (and potentially after) the audit process. They must also ensure they do everything necessary to preserve all viable claims and defenses in potential PBM-initiated and PBM-related litigation.
“PBM audits present significant risks for pharmacies in 2025. When facing PBM audits, pharmacy executives and pharmacists-in-charge must be prepared to affirmatively demonstrate billing compliance. They should assume that they will be forced to dispute false and unsubstantiated allegations of billing fraud, and they must be careful to avoid implicating themselves in overpricing conspiracies and other forms of fraud.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
With this in mind, what can (and should) pharmacy executives and pharmacists in charge do to prepare for PBM audits?
10 Key PBM Audit Defense Strategies
Here are 10 key Pharmacy Benefit Manager audit defense strategies for pharmacies in 2025:
1. Prioritize Billing Compliance
First and foremost, pharmacies need to prioritize billing compliance. While there are many issues with PBM audits, these audits do serve their intended function of uncovering invalid requests for payment. The more legitimate issues on-site audits find, the deeper they will dig. By prioritizing billing compliance, pharmacies can not only avoid legitimate retractions but also mitigate their risk of facing enhanced PBM scrutiny.
This has implications for virtually all aspects of pharmacies’ operations. From managing prescriptions and patient records to ensuring accurate coding, pharmacies must thoroughly assess all potential causes of inaccurate billing and make changes as necessary.
2. Ensure Compliance Policies and Procedures are Updated
Similarly, pharmacies must ensure up-to-date compliance policies and procedures for 2025. PBMs and payors regularly update their rules and regulations, and they expect pharmacies to keep pace. Relying on an outdated compliance policy and procedure can be just as dangerous, in certain respects, as not relying on any compliance policies and procedures at all.
Evaluating a pharmacy’s compliance program requires an in-depth understanding of all pertinent legal, regulatory, and contractual requirements. If a review of the program reveals that any aspects are outdated, the pharmacy should address these deficiencies promptly and determine whether they have resulted in improper payment requests being sent to their PBMs.
3. Review Recordkeeping Practices
During a PBM audit, two main issues can lead to retractions: (i) records that reveal billing violations and (ii) records that are inadequate to substantiate the pharmacy’s billings. As a result, effective recordkeeping is imperative, and pharmacies must ensure they have the proper documentation to prove compliance when necessary.
With electronic prescriptions now commonplace and many pharmacies making efforts to go paperless, recordkeeping presents some unique challenges in 2025. But while these may be issues, they are not excuses, and PBM auditors are more than willing to impose retractions based on recordkeeping failures.
4. Maintain Ongoing Documentation of Billing Compliance
One aspect of recordkeeping that is particularly important with respect to PBM audit defense is maintaining ongoing documentation of billing compliance. Pharmacies should have procedures in place designed to (i) generate substantiating documentation for their billings automatically or as a matter of course and (ii) ensure storage of this substantiating documentation.
Broadly speaking, PBMs’ approach to auditing can best be described as “guilty until proven innocent.” If a pharmacy cannot affirmatively demonstrate that a billing request is compliant, then the assumption is that the billing request is non-compliant. By being prepared with substantiating documentation, pharmacies can streamline the PBM audit process and significantly reduce their risk of unwarranted retractions and other adverse outcomes.
5. Prepare a PBM Audit Response Protocol
Since pharmacies can expect to be audited by their PBMs, they should have PBM audit response protocols in place. By knowing what they need to do, when to do it, and how to do it, pharmacy executives and pharmacists-in-charge can avoid being caught off guard and needing to play catch-up while PBM auditors comb through their billing records.
An effective PBM response protocol will include step-by-step procedures for handling an audit from the moment of notification. Identifying and documenting these steps proactively ensures that pharmacy leadership can take the helm immediately and focus everyone’s energy on working strategically and systematically toward a favorable outcome. The alternative is an uncoordinated, haphazard response, which is virtually guaranteed to be ineffective.
6. Assemble and Prepare a PBM Audit Response Team
A pharmacy’s PBM audit response protocol should identify all individuals who will be a part of the pharmacy’s audit response team. This includes internal personnel as well as outside counsel and consultants. Internally, a PBM audit response team should generally include executives, the pharmacist-in-charge, supervisors, billing and IT specialists, and other personnel who can effectively contribute to the pharmacy’s defense.
Externally, pharmacies must engage defense counsel and consultants intimately familiar with the PBM audit process and routinely represent and advise pharmacies regarding billing compliance. Just as the pharmacy’s internal personnel need to follow the pharmacy’s PBM audit response protocol and hit the ground running, the pharmacy’s legal representation must also be able to hit the ground running.
7. Conduct an Internal Billing Compliance Audit (or “Practice Audit”)
Before facing scrutiny from their PBMs, pharmacies should conduct pharmacy audits focused on identifying any issues likely to be uncovered during a PBM audit. While these are often called “practice audits,” pharmacies should view these as much more than simple run-throughs. Instead, the goal should be to conduct a comprehensive and unbiased assessment of the pharmacy’s current risk exposure, and the pharmacy should use the information it obtains during its internal audit to make any necessary updates or changes to its practices, policies, and procedures.
8. Play an Active Role in the PBM Audit Process
Once PBM audit determinations begin, the pharmacy must intervene and play an active role. Pharmacy personnel must not let auditors take control or blindly follow the auditors’ instructions. Instead, they must make informed decisions based on the pharmacy’s response protocol and the advice of counsel and ensure that they are acting with the pharmacy’s best interests in mind.
The reason for this is simple: PBM auditors do not have the pharmacy’s best interests in mind. Their job is to recoup as much money as possible for private insurance companies, Tricare, and other payors—whether based on technical deficiencies, inadequate documentation, or true billing fraud. Playing an active role is the only way pharmacies can level the playing field and avoid unwarranted liability.
9. Proactively Challenge Auditors’ Flawed Methodologies and Assumptions
Pharmacy owners should proactively challenge auditors ' flawed methodologies and assumptions when actively participating in the PBM audit process. While PBM auditors should be unbiased experts in pharmacy billing compliance, many are not. Audit discrepancies are common, and it is up to pharmacies to identify and address them so that they do not result in retractions.
PBM auditor mistakes can range from miscalculating payment liability to applying outdated (or post-dated) rules and regulations. Given the complexity and volume of issues that can lead to unjustified retractions, most pharmacies must rely heavily on their defense counsel and compliance consultants to identify issues for them. Additionally, considering that PBMs have their best interests in mind, uncertainties will be resolved in favor of noncompliance, and, in some cases, pharmacies may need to fight to protect legitimate billings as well.
10. Preserve Evidence for Post-Audit Litigation
Finally, recognizing that even pharmacies’ best efforts won’t necessarily be enough to prevent an unjust outcome from a PBM audit, pharmacies’ audit defense strategies should also involve preserving evidence for post-audit litigation. This may involve seeking injunctive relief to prevent the imposition of retractions. At the same time, the pharmacy attempts to work out an amicable outcome, or it may involve pursuing statutory or contractual claims in court. In any case, preparation is also critical here, and showing that they are prepared to litigate if necessary can also be an effective strategy for pharmacies to mitigate the costs of aggressive PBM audits.
A Closer Look at PBMs’ Audit Tactics and Priorities in 2025
Understanding PBMs’ audit tactics is also a critical step toward implementing an effective audit defense strategy for pharmacy executives and pharmacists-in-charge. Likewise, by understanding PBMs’ priorities when conducting pharmacy audits, executives and pharmacists can ensure they are not overlooking any critical issues that present substantial risks not only during but also after the audit process.
As we discussed above, one of the key tactics PBMs deploy during the audit process is putting the onus on pharmacies to affirmatively demonstrate compliance. Thus, simply being compliant is not enough. Rather, pharmacies must be prepared to prove that their billings are compliant, and they must be prepared for probing questions about why they made particular compliance-related decisions and how they can justify any arguably questionable billing requests they have submitted.
Understanding PBMs’ audit priorities can be a bit more challenging. Generally speaking, the overarching goal of a PBM audit will be to ensure compliance and claw back as many improper payments as possible. However, PBMs may have other interests during the audit process as well.
For example, as we mentioned above, several PBMs are currently facing litigation related to their insulin billing practices, and PBMs’ billing practices have generally been under the microscope in recent years. The FTC also maintains a running list of its efforts to target and prosecute PBMs for various issues. As a result, in some cases, PBMs may be looking for ways to defend themselves or pass the blame on to pharmacies, and this can potentially present even greater risks than a PBM audit itself.
