Pharmacy Benefit Manager Sourcing and Contract Audit: Pricing Definitions, Rebates and Audit Rights

What does a PBM contract audit cover?

A PBM contract audit tests the terms that set what a plan pays and what it can check. In the Labor Department’s October 2026 fact sheet, PBMs develop formularies, negotiate rebates and fees with drugmakers, build pharmacy networks and process claims, and they can be paid by the plan, drugmakers, pharmacies and rebate aggregators. The audit must follow money that never appears on the plan's invoice.

In this guide's view, procurement and finance run the bid evidence; fiduciary and legal decisions stay with the plan's responsible fiduciary and benefits counsel. Category planning is covered in the Journal’s framework for indirect spend category strategy, and response design in the Journal’s guide to comparable supplier responses.

What must PBMs disclose under the November 2026 rule?

Under the final rule published on November 2, 2026, a covered PBM owes the responsible plan fiduciary written disclosures reasonably in advance of a new contract, with 90 calendar days deemed reasonable before a renewal or extension. Under the same November 2, 2026 rule, semiannual reports follow within 30 calendar days of each period, and compensation 5 percent or more above its estimate needs a reason. In the rule text of November 2, 2026, amounts must be in dollars, and undefined jargon lacks the required specificity. These dates belong in a contract lifecycle management operating model beside renewal notices.

In the Labor Department’s October 2026 fact sheet, the initial disclosure covers direct pay by service, drugmaker payments passed to the plan or kept, spread by drug and pharmacy channel, and policies steering patients to affiliated pharmacies. According to the same October 2026 summary, it also covers copay claw-backs, price protection deals, termination pay, formulary placement incentives, the net price per drug and audit rights.

How do spread pricing and pass-through pricing differ?

Spread pricing means the PBM bills the plan more for a drug than it pays the pharmacy and keeps the difference, the definition used in GAO’s July 2019 report on Medicare Part D, where officials from three PBMs said they earn more from it in commercial plans than in Part D. In this guide's view, pass-through means the plan pays the pharmacy's final amount after every later adjustment, plus stated PBM fees, with pharmacy recoupments credited to the plan; copay claw-backs are better prevented by charging the member the lower of the copay and the pharmacy's price.

In a 2025 journal perspective by Bernard and Sloan, the authors describe the maximum allowable cost a PBM pays a pharmacy as confidential, so insurers may not see when spread pricing occurs. According to a 2008 review by Calabrese, the contract should name one agreed price reference for average wholesale price on every claim, with full audit rights.

A pass-through label does not settle total cost. In the Congressional Budget Office’s December 5, 2024 cost estimate for S. 1339, a bill that would have barred spread pricing and required full rebate pass-through, CBO did not expect those terms to change what PBMs share with plans, because PBMs can recover lost amounts through higher fees. In this guide's view, any contract running into plan years covered by the rule or the Consolidated Appropriations Act, 2026 remittance duty (both dated in the FAQ) needs change-in-law terms limiting how the PBM may reprice fees once full remittance applies.

How should the contract define a rebate?

Not all drugmaker money is labeled as a rebate: according to GAO’s July 2019 Part D report, PBMs and plan sponsors in Part D also earned $516.5 million from drugmakers in 2016 for non-rebate services such as rebate program administration and prescriber education. The contract definition should therefore cover every payment type and paying entity, including rebate aggregators and affiliates.

In Calabrese’s 2008 review of PBM selection, the recommended rebate terms include disclosure of every drugmaker contract that pays the PBM, full pass-through of rebate earnings including administrative fees, audit rights over those payments and guarantees on how fast rebates reach the plan.

How do MAC lists and generic definitions change the price?

In the same 2025 perspective by Bernard and Sloan, maximum allowable cost (MAC) is the most a PBM agrees to pay a pharmacy for a generic drug. In the same 2008 review by Calabrese, buyers are told to ask how many MAC lists the PBM uses, how it defines a generic and how often the list changes, and to guarantee the overall generic effective rate rather than the MAC effective rate.

Reconciliation can move the price after a claim is paid: in GAO’s September 2026 report on Part D pharmacy contracts, effective-rate provisions adjust payments toward an average level after the sale, and one sponsor's contract set generic effective rates over 60 percentage points below the point-of-sale rate. In this guide's view, the contract should say whether each guarantee is tested per claim or in aggregate, and whether surpluses may offset shortfalls.

What should specialty and mail-order terms cover?

In the FTC’s January 14, 2025 release on its second interim staff report, staff found that the three PBMs studied paid their affiliated pharmacies at higher rates than unaffiliated ones on almost all of the specialty generic drugs the report covered for 2017 to 2022. According to the same FTC release, those affiliated pharmacies took in over $7.3 billion in dispensing revenue above estimated acquisition cost, measured against NADAC, the National Average Drug Acquisition Cost.

By contrast, in GAO’s September 2026 report on four large Part D plan sponsors, which covers different drugs, years and payers from the FTC's, payments at plan-owned pharmacies were lower for 94 percent of the 100 most-used drugs in 2023. In the same GAO report, owned pharmacies were paid up to 10 percent more for roughly half of the 20 drugs ranked highest by payment per 30-day supply among the 100 with the highest total payments, and these comparisons come before rebates and post-sale adjustments.

In this guide's view, neither result predicts an employer contract. Specialty terms should list covered drugs, apply the same definitions, pricing basis and audit terms in every channel, including affiliated pharmacies, while allowing separate price guarantees per channel, and require notice before a drug changes channel.

Which audit rights should the contract secure?

Under the audit paragraph of the November 2, 2026 rule, the plan may audit the PBM's disclosures at least once a year with an auditor its fiduciary chooses, and the PBM must supply claims and transaction-level data and its contracts with retail pharmacies, drugmakers and rebate aggregators, under reasonable confidentiality terms. Under the same rule, published November 2, 2026, the PBM confirms a request within 10 business days, delivers within 60 calendar days barring extraordinary circumstances and may not restrict the audit's period, location or number of records, though the audit covers only the disclosure period.

Since that audit checks the disclosures, in this guide's view the contract's own audit clause should reach every pricing, rebate and performance guarantee, with a lookback covering the contract term, full electronic claims rather than samples, no PBM veto over the auditor, repayment of overcharges and audit rights that survive termination.

How can a buyer test pricing definitions and audit rights?

How will AI agents change PBM contract audits?