Q&A: PBMs Use Audits to Generate Revenue Amid Unprecedented Scrutiny

On the surface, a pharmacy benefit manager (PBM) audit is conducted so that pharmacies are held accountable and have processes to avoid noncompliance in their day-to-day operations. However, many experts also argue that a PBM’s audit of a pharmacy practice is yet another revenue-generating tool these middlemen use to spruce up their balance sheets and establish greater profits.

“While yes, some audits are used mostly to generate revenue for the PBM, and of course that’s a revenue stream for PBMs, it’s certainly to be able to limit their pharmacy networks as well” Harini Bupathi, Esq, partner practicing in Frier Levitt’s Life Sciences practice group, told Drug Topics®. “Then, [PBMs] use those audits to consider steering patients to their sometimes wholly owned pharmacies.”

In the second part of our recent interview with Bupathi, we asked her about the true intentions behind PBM audits and how PBMs have been known to take advantage of these practices. Furthermore, she also discussed how future audits may be affected by federal PBM reform signed in February through the Consolidated Appropriations Act of 2026 (CAA 2026).

READ MORE: PBM Audits Target Pharmacies for Compliance, Revenue Recovery

Drug Topics: With significant talks about predatory PBM practices and reform for some of the industry’s biggest players in this space, where do audits fall in line with the rest of PBM practices? In other words, are audits used to improve operations in the drug supply chain or are they just another PBM tactic for generating greater revenue?

Harini Bupathi: I’d say it’s a combination of both, but certainly to generate greater revenue. That’s not just generally for the purposes of generating revenue from audit recoveries but also generating revenue from the patients that they could otherwise get from pharmacies that they decided to terminate over those baseless audit results. Very rarely are discrepancies in PBM audits related to actual issues of overpayments to pharmacies, which is really what the purpose of an audit is. It’s to be able to identify, yes, non-compliance, but [also] ‘Hey, did we pay the pharmacy more than we should have because they did X, Y, and Z?’ Very rarely is it an actual issue of overpayments.

Oftentimes, we’ll see discrepancies being alleged over super hyper-technical reasons, like a signature log looked like chicken scratch. I can tell you my signature looks like chicken scratch versus a real signature, but of course, no one’s taking the time to write out their name or sign it to look like that when they’re just picking up a quick prescription. Or the pharmacy purchased the medication a few months prior to the window that the PBM would otherwise accept. Again, those aren’t actual issues of overpayments to the pharmacy because the pharmacy did in fact purchase the medication, had a valid prescription, and dispensed the medication to the patient. But, because maybe the signature wasn’t exactly what the PBM wanted or the purchase wasn’t exactly in the same window that they wanted, they would otherwise allege, ‘Hey, there’s a discrepancy,’ [and] seek monetary recovery from the pharmacy and then potential network termination as well.

While yes, some audits are used mostly to generate revenue for the PBM, and of course that’s a revenue stream for PBMs, it’s certainly to be able to limit their pharmacy networks as well. Then, [PBMs] use those audits to consider steering patients to their sometimes wholly owned pharmacies. PBMs will send out notices to pharmacies that get terminated saying, ‘Hey, your pharmacy that [a patient usually goes to] is getting terminated. So [they tell] patients, why don’t you go to these 3 other pharmacies? It’s not a surprise if one of those is a wholly owned pharmacy for that PBM or one of their mail-order pharmacies as well. We see that there’s certainly tactics and reasons as to why audits happen beyond just generating revenue in a more straightforward manner.

Drug Topics: The Consolidated Appropriations Act of 2026, or CAA 2026, served as milestone legislation for the future of PBM-pharmacy relationships. How will PBM audits in the future be impacted by this legislation?

Harini Bupathi: There’s certainly a lot of scrutiny around PBMs right now. When we’re speaking about PBM audits of pharmacies in particular, CAA doesn’t necessarily federalize the on-ground conduct of PBM pharmacy audits—especially issues of notice to pharmacies, look-back periods, extrapolation, or appeals. The audits that PBMs otherwise initiate on network pharmacies, those mechanics, those terms, and how PBMs should otherwise initiate and conduct those audits on pharmacies still largely remain governed by state pharmacy audit laws and integrity laws, as well as the contractual terms that are identified in PBM provider agreements and manuals.

But what CAA 2026 does do is really put PBMs under new reoccurring audits by both plans and federal overseers. That upstream scrutiny could certainly cascade down into PBMs’ review of network pharmacies. While it doesn’t necessarily affect how a PBM audits a pharmacy, it could certainly affect how they’d otherwise decide to audit pharmacies in the future. For example, knowing that a PBM could be audited themselves by plans could cause more scrutiny on their relationships with pharmacies and cause PBMs to otherwise monitor their networks for compliance with their own terms and conditions, especially in the course of an audit.

CAA 2026 could also question whether or not PBMs are actually truly passing any of those overpayments that they collect from pharmacies back to their own clients and plans as well. That will certainly be something I expect to come about as well. The expectation is that when a PBM does an audit on a pharmacy, they’re taking this money back from the pharmacy, but then the question is what are they doing with it? They should really be passing it back off to their clients, and so I think there will be greater visibility as to whether that’s truly happening.

READ MORE: The Prodigious PBM Pivot: How Supply Chain Entities Will Move Forward After CAA 2026