Designing a pharmacy benefit plan is a lot like making a great pizza. Without the cheese, sauce, or pepperoni, the whole experience falls apart. Each ingredient plays a distinct role, and together they make something both satisfying and complete. The four essential ingredients of pharmacy benefit plan design form the base of every effective plan: access, cost-containment, outcomes and safety, and cost-shifting. Leave one out and your plan risks being costly, inefficient, or unsafe for members.

Access: Defining the Foundation

Just like the dough is the base of every pizza, access is the foundation of every pharmacy benefit. It defines what is and is not covered, how members access their prescriptions, and under what conditions. Access decisions determine:

• Which drugs are on the formulary and which are excluded
• Requirements for prior authorization
• Cost-sharing rules, including copays, deductibles, and benefit maximums
• Mail-order availability including international
• Quantity and frequency limits

Without clear access rules, members and providers face confusion and costs can quickly spiral. Properly managed access ensures fairness, consistency, and predictability in coverage.

Cost-Containment: Encouraging Smarter Choices

If access is the dough, cost-containment is the cheese. It binds the plan together and keeps expenses from spilling over. Cost-containment strategies guide members toward safe, effective, and lower-cost alternatives. This includes:

• Mandatory use of generics when available
• Incentivizing preferred products
• Encouraging over-the-counter substitutions where appropriate

A value-based formulary and generic-first approach help align prescriber behavior with the plan’s financial goals. Employers who neglect this ingredient often pay more for the same therapeutic outcomes.

Outcomes and Safety: Ensuring Quality

The sauce makes a pizza flavorful, but it also needs balance. In the same way, outcomes and safety ensure the plan is not just affordable but also effective and protective. This component excludes products that do not contribute to member health or pose risks of abuse, such as opioids, benzodiazepines, cosmetic drugs, or appetite suppressants in certain contexts.

Safety measures also include formulary design that avoids coverage of unnecessary or harmful therapies while prioritizing those that deliver proven health outcomes. This ingredient protects both the financial integrity of the plan and the health of the members.

Cost-Shifting: Sharing Responsibility

Pepperoni gives the pizza its punch, and cost-shifting gives plan sponsors the ability to align incentives. Members who choose higher-cost drugs when lower-cost alternatives exist bear more of the financial responsibility. For example:

• Higher copayments for branded drugs when generics are available
• Increased cost-sharing for non-preferred products

This is not about penalizing members. It is about fairness. When members opt for costlier care without added clinical value, they should share in the cost. Properly structured, cost-shifting encourages members to make value-conscious decisions.

Bringing It All Together

Access, cost-containment, outcomes and safety, and cost-shifting are the four essential ingredients of pharmacy benefit plan design. They must be present and balanced to protect both the financial health of the plan and the physical health of members.

Is your current plan missing one of these ingredients? If so, it may be costing your organization far more than you realize. Now is the time to evaluate your pharmacy benefit plan and ensure all four are baked into the design.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

The president of a midsize company sat across the table during a finalist presentation. He leaned forward, emphasizing one point again and again: the big PBM’s buying power. Their ability to secure deep manufacturer rebates and drug discounts, he insisted, was the only way to keep costs under control. Walking away from that leverage, he feared, would mean higher prices for his employees and his bottom line.

But when we shared the financial summary, the numbers told a different story. TransparentRx, without the Big Three’s “buying power,” delivered a lower Per Member Per Month (PMPM) and a reduced total cost of pharmacy care. The illusion of savings from big PBMs dissolved once the real math was applied.

Why Metrics Matter

Traditional PBM evaluations often highlight rebates and discount percentages. While these figures can look impressive, they do not always reflect the true cost of a pharmacy benefit program. A more accurate assessment comes from focusing on three key metrics:

1. PMPM (Per Member Per Month)

Formula: PMPM = Total Cost of Pharmacy Care / Number of Member Months

Ex. $10M / 120,000 = $83 PMPM (based on 10,000 members)

PMPM standardizes pharmacy spend across time, populations, and vendors, making it easier to compare results in a meaningful way.

2. Total Cost of Pharmacy Care (TCoPC)

This includes all plan expenses not only drug ingredient costs, but also:

• Administrative fees
• Manufacturer rebates
• Dispensing fees
• Claim management services
• Specialty carve-outs
• Clinical services

Looking at the full picture helps benefits leaders understand the true cost to the plan.

3. EACD (Earnings After Cash Disbursements)

Formula: Administrative Fees + DIR Fees + Ingredient Cost + Manufacturer Derived Revenue − Cash Disbursements

Ex. The PBM collects $10 million, pays $6 million to third-party pharmacies, and returns $2 million in manufacturer derived revenue (i.e., rebates) to the client. The remaining $2 million represents the PBM’s management fee.

This figure exposes the PBM’s retained revenue, which is their management fee. If a PBM claims to be pass-through, EACD is how you test it. Most employers never run this calculation, but it is the single best way to verify transparency.

Moving Beyond Discounts and Rebates

Research shows that typical PBM RFPs often focus on discounts off inflated list prices, aggregate rebate guarantees, and limited vendor pools. This can unintentionally bias the process toward higher-cost, higher-rebate drugs and make it difficult to measure net costs. By shifting focus to PMPM, total cost of care, and EACD, plan sponsors gain better visibility into the performance of their benefit program.

The Rebound Effect

Even when discounts are fully passed through, overall pharmacy spend often rises. Contributing factors include:

• Growth in chronic condition prevalence
• Manufacturer price increases, even with generics and biosimilars available
• Broader health trends that drive utilization

This underscores why drug discount or rebate guarantees alone cannot control long-term cost growth.

Investing in High-Value Strategies

Employers can strengthen their pharmacy benefit by proactively investing in strategies that yield sustained impact:

• Utilization management to reduce unnecessary prescriptions
• Formulary integrity to prioritize clinically effective, cost-efficient therapies
• Clinical audits to ensure plan rules are followed
• Real-time analytics to identify savings opportunities early
• Specialty carve outs redirecting high-cost specialty drugs

These initiatives may not carry the same immediate visibility as a rebate guarantee, but over time they deliver meaningful financial and clinical returns.

Takeaway: Evaluating PBM performance through PMPM, total cost of pharmacy care, and EACD provides a clearer picture than focusing on PBM buying power, rebate and discount guarantees. By applying this math, benefits leaders can make more informed decisions that align with both fiduciary responsibility and member health outcomes.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

Member engagement is the hinge on which every well-run pharmacy benefit turns. When employees understand their options and pick the right therapy or channel, waste falls, adherence rises, and total plan costs shrink. Disengaged workers do the opposite: they skip refills, use high-cost brands, and flood customer service with avoidable questions. Employers can shift that behavior by borrowing from choice architecture, the science of shaping decisions through how choices are presented.

Step 1: Set High-Value Defaults

People rarely change a pre-selected option. Make the default the most cost-effective and clinically sound path. Practical example: Auto-enroll new hires in 90-day mail for maintenance drugs while still letting them opt out online. Most will stay put, improving adherence and cutting dispensing fees.

Step 2: Trim the Menu

Too many options freeze decision-making. Offer a tight list that still meets clinical needs. Practical example: On the member portal, surface the top three therapeutically equivalent generics before listing higher-priced brands. Simpler screens mean quicker, better choices.

Step 3: Frame Out-of-Pocket Costs in Daily Terms

Monthly or annual figures feel abstract. Daily cost framing helps members grasp value. Practical example: Show “$15 per month ($0.50 a day)” next to a generic statin. For a brand-name statin, show “$120 per month ($4.00 a day).” The gap becomes obvious.

Step 4: Use Timely Prompts

A well-timed nudge beats a generic blast email. Practical example: Text a refill reminder three days before a maintenance drug is due, with a one-click refill link. Timeliness reduces gaps in therapy and call-center traffic.

Step 5: Chunk Complex Actions

Break multi-step tasks into short, ordered cues to reduce friction. Practical example: When a specialty prescription is approved, send a sequenced email series: (1) confirm delivery date, (2) outline side-effect tips, (3) link to nurse hotline. Members feel guided rather than overwhelmed.

Step 6: Close the Feedback Loop

Show members the payoff of their choices to reinforce good behavior. Practical example: After 90 days of continuous use, email members a quick health snapshot: “Your A1C dropped 0.7 points since starting therapy.” Positive feedback keeps them engaged.

TransparentRx applies these design principles while acting as a fiduciary PBM, aligning every incentive with the employer’s duty of care. If your current vendor relies on glossy engagement slogans but leaves members confused, it is time to rethink the structure of your benefit.

Call to action Ask your PBM three questions:

1. What defaults are in place today, and do they steer members toward high-value choices?
2. How are cost displays and prompts tested to prove they change behavior?
3. What is our Member Engagement Rate (active users divided by eligible employees) over the past 12 months, and what target will you commit to hit next quarter?

If the answers are vague, let’s talk. TransparentRx benchmarks this metric, by program, for every client and designs plan features that push the rate north of 70 percent, protecting plan dollars and improving outcomes.

Pharmacy benefit managers (PBMs) have mastered the art of hiding profits. One of the least discussed ways is PBMs are quietly funding your consultant. On the surface, it looks like a harmless relationship. In reality, it creates a dangerous conflict of interest where employers end up paying for both the subsidy and the inflated costs it produces.

Conflicted Advice

When consultants accept compensation from PBMs, whether it is direct payments, bonus programs, or referral incentives, they lose their independence. Instead of guiding employers toward the PBM that best serves the plan and its members, they are nudged toward the one that pays them the most.

This turns advice into a sales channel. Employers believe they are hiring a trusted advisor, but in many cases, the consultant is simply steering business to the PBM that keeps their personal revenue stream intact. The result: distorted decision-making that benefits the PBM and consultant, not the client.

Hidden Costs

PBMs do not hand out subsidies for free. Whatever they pay consultants is clawed back through higher drug costs, opaque contract terms, or inflated administrative fees. That means the “free” support from a consultant accepting PBM money is anything but free.

The amounts involved are significant. These PBM-to-consultant payments often range from $3 per member per month to $5 per member per month. On a 5,000-life group, that is $180,000 to $300,000 a year flowing directly to the consultant. To make matters worse, consultants frequently specify in agreements that these fees are not to be charged to the employer, but instead paid separately by the PBM. While that sounds protective, the employer still ends up funding the arrangement because the PBM builds those costs back into higher drug prices.

Employers unknowingly finance this arrangement every time they pay a claim. The PBM has already baked the consultant’s kickback into the pricing model. So while employers think they are saving money by leveraging their consultant’s guidance, they are actually footing the bill twice, once in the consultant’s fee and again in higher drug spend.

Erosion of Trust

The foundation of the employer-consultant relationship should be trust. When PBM money changes hands behind the scenes, that foundation cracks. Employers are left questioning whether recommendations are objective or tainted by hidden incentives.

This backchannel compensation undermines the fiduciary standard of care, a standard that requires consultants to put their client’s interests first. Without transparency, the process of procuring pharmacy benefits becomes less about outcomes for employees and more about profits for middlemen.

Preventive Action Steps

Employers do not have to accept this as the norm. There are practical steps to reduce risk and protect plan assets:

1. Demand full fee disclosure: Require consultants to provide written confirmation of every dollar they receive, both from you and from third parties like PBMs.
2. Add audit rights: Include language in your agreements that allows you to audit consultant compensation streams at any time.
3. Require fiduciary attestations: Hold consultants accountable by requiring a signed fiduciary pledge affirming they act solely in your best interest.
4. Tie compensation to outcomes: Pay consultants directly for performance measures you define, not indirect incentives from PBMs.
5. Engage independent reviewers: Use a third party to review PBM contracts and validate that recommendations are not conflicted.

Sample Consultant Agreement Language

To protect against PBM subsidies, employers should build safeguards directly into their consultant agreements. Consider adding questions or clauses such as:

• Disclosure Clause: “Please disclose all forms of direct or indirect compensation you receive from PBMs, drug manufacturers, or related vendors.”
• Conflict of Interest Statement: “Confirm whether your firm accepts any incentives, subsidies, or payments from PBMs. If yes, provide full details.”
• Fiduciary Requirement: “Consultant agrees to act as a fiduciary to the plan sponsor, representing only the interests of the employer and plan participants.”

It is fundamentally counterintuitive for a PBM to be charged with cost-containment, then turn around and pay a consultant who is supposed to hold that same PBM accountable. That arrangement does not encourage oversight. It encourages silence. If your consultant is being funded by the very entity they are tasked with monitoring, the game is rigged from the start. Employers must take control of the process, demand financial transparency, and refuse to let backdoor deals shape benefit decisions. Anything less is a disservice to the plan and the people who depend on it.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

Specialty drugs account for less than 2 percent of prescriptions but more than half of total pharmacy spend. Employers that fail to actively manage this category risk runaway costs, employee dissatisfaction, and fiduciary exposure. The good news is employers can regain control with a straightforward framework grounded in fiduciary responsibility.

1. Start with a PBM that Puts the Employer First

Too many pharmacy benefit managers operate with divided loyalties. They promise savings while quietly maximizing their own profit streams. Employers should demand contractual proof that the PBM is aligned with their interests. That means transparency in pricing, contract terms that eliminate hidden revenue, and a fiduciary standard of care written into the agreement, not just implied. If a PBM will not sign on the dotted line, that is a red flag.

2. Carve Out When the PBM Owns a Pharmacy

When PBMs own or are affiliated with specialty pharmacies, the conflict of interest is obvious. They control the formulary, dictate utilization management, and then direct prescriptions to their own pharmacy. Employers should not accept this setup. The solution is carving out formulary design and utilization management to an independent party. Doing so separates clinical decision-making from dispensing profit, ensuring drug selection is based on patient outcomes and plan value, not the PBM’s bottom line.

3. Avoid PBMs That Use CoverMyMeds for PAs

CoverMyMeds, a platform widely used for prior authorizations, is owned by McKesson, one of the largest drug wholesalers and a company with its own interests in drug distribution. When PBMs rely on CoverMyMeds, employers risk having a key utilization management function tied to an entity that profits from higher drug sales. Employers should press their PBMs on what systems are being used for PAs and avoid arrangements that create this type of conflict.

4. Reject Rebate-Driven Formularies

Formularies designed around rebates look good on the surface but often drive up net cost. PBMs and their aggregator partners structure them to capture rebate revenue while keeping high-priced drugs on the plan. Employers should instead push for lowest-net-cost formularies, where clinical outcomes guide placement, not rebate checks. A simple question can uncover conflicts: was the formulary designed and managed in-house by the PBM, or is it controlled by a rebate aggregator? If it is the latter, the employer should assume the design serves the aggregator’s financial interests first.

5. Close the Knowledge Gap

Employers do not lose control of specialty drug spend because they are careless. They lose because the system is complex by design. PBMs, consultants, and aggregators rely on this knowledge gap to maintain leverage. Employers who invest in education, whether through fiduciary-aligned partners or internal training, level the playing field. Without closing this gap, employers will always be outmaneuvered by those paid to advise them.

Final Thought

Specialty drug management does not require complex algorithms or endless vendor meetings. It requires discipline, independence, and a fiduciary mindset. Employers who follow these five principles can break free from conflicted arrangements and reclaim control of their pharmacy spend.

Employers and plan sponsors aiming to take control of drug costs and protect patient health should explore the proven advantages of closed formularies. By carefully curating which drugs are covered, closed formularies strengthen cost management, increase transparency, and support better health outcomes, making them a smart, forward-thinking choice for any benefits plan.

How the Best PBMs Manage Their Programs

The most effective pharmacy benefit managers operate with a clear set of priorities:

1. Safety – Every covered drug must first meet the highest safety standards, protecting participants from unnecessary risks or harmful side effects.
2. Outcomes – Drugs are chosen based on their ability to deliver meaningful health improvements, supported by credible clinical evidence.
3. Cost-Effectiveness – Even when a drug is safe and effective, it must provide value for the money, ensuring resources are used wisely.
4. Participant Satisfaction – A sustainable program also considers the patient experience, aiming for access to appropriate medications, reasonable costs, and minimal disruption to therapy.

Closed formularies align perfectly with this priority sequence. They ensure that only medications meeting these criteria are covered, fostering trust between employers, PBMs, and participants.

Stronger Cost Management

Closed formularies cover only clinically vetted, cost-effective drugs. This approach forces manufacturers to compete for placement, which increases rebates and lowers net costs. It also ensures that high-cost brand-name drugs are only used when no equally effective, lower-cost alternatives exist. Specialty drugs, the fastest-growing cost driver, are monitored and managed more effectively.

The results speak for themselves:

• Lower per-member-per-month (PMPM) drug spend
• Greater negotiating leverage with manufacturers and wholesalers
• Stronger control over specialty drug use

Greater Transparency

With a closed formulary, employers can easily see which drugs are covered, where exceptions are granted, and how those decisions impact spending. This clarity helps identify trends, spot potential waste, and maintain accountability across the supply chain.

Better Patient Outcomes

Closed formularies promote the use of first-line therapies that are safe, effective, and affordable. Patients benefit from standardized treatment protocols, which help ensure they receive the most appropriate care. Lower costs also reduce out-of-pocket expenses, which can improve adherence and overall health.

The Takeaway

A closed formulary is not about limiting care; it is about ensuring the right care at the right cost. By aligning clinical best practices with financial stewardship, closed formularies protect both budgets and patient well-being. For any plan committed to sustainable, high-quality care, the choice is clear.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

It’s easy to assume that a medical degree signals trustworthy intent. But when you’re footing the bill for a pharmacy benefit plan, blind trust is expensive. Some prescribers don’t just treat patients. They also treat themselves to a slice of your pharmacy spend.

When Prescribing Becomes a Profit Center

Let’s get this out of the way: most physicians act with integrity. But “most” doesn’t cover your risk. Physician-driven FWA often hides in plain sight and can take many forms:

• Unnecessary brand prescribing: Choosing high-cost brand-name drugs when a clinically equivalent generic is available.
• Off-label prescribing of specialty medications: Using drugs outside of FDA-approved indications, often encouraged by aggressive pharma reps or financial arrangements with specialty pharmacies.
• Script mills: Prescribers linked to telehealth or compounding pharmacy operations that churn out high-cost, low-value scripts for the same handful of drugs.
• Financial entanglements: Kickbacks, referral fees, or ownership stakes in pharmacies create a direct conflict of interest that drives wasteful prescribing.
• Therapy changes based on DTC influence: Some prescribers switch patients to expensive medications simply because the patient saw a TV commercial or social media ad, even when the current therapy, or a lower-cost alternative, is clinically sound and cost-effective.

And all of it is being billed to your plan.

Credentials Don’t Equal Clinical Prudence

The white coat carries weight. But that credibility can be weaponized. A prescription from a licensed MD looks authoritative to patients and even PBMs. Yet if no one is looking behind the script pad, plan sponsors can be left paying for treatments that lack clinical justification or economic sense.

It’s not just about medical integrity. It is about financial discipline. That is something plan sponsors can’t afford to assume is baked into every prescription.

A Fiduciary Lens: Auditing Prescribers Like You Audit Claims

Your duty as a plan sponsor isn’t just to trust. It is to verify. That means:

• Prescriber-level audits: Identify outlier physicians whose prescribing patterns deviate from clinical norms.
• Utilization controls: Flag suspect behaviors like excessive use of certain drug classes or unusual prescribing volumes.
• Tighter prior authorization policies: Especially for high-cost brands or specialty meds, ensure there’s a legitimate medical need before plan dollars are spent.

These controls aren’t punitive. They are protective of your plan assets, your fiduciary responsibilities, and your members’ health.

Look Past the Lab Coat

Fraud, waste, and abuse don’t always look like fraud. Sometimes they look like “care.” But when prescribing decisions are driven by economics or marketing instead of evidence, the plan and the patient lose.

Don’t just audit claims. Audit intent.

If you’re not scrutinizing prescribers, you’re not protecting your plan. Reach out to TransparentRx to learn how prescriber-level oversight can stop financial leakage before it starts.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

Most employees use their pharmacy benefit correctly, but a small group exploits loopholes. Their actions inflate drug spend, strain plan reserves, and jeopardize the fiduciary duty employers owe to every participant. Keep reading to learn how to identify and prevent patient-driven pharmacy fraud.

Spotting the Tactics

Prescription or doctor shopping is the classic red flag. A member visits several prescribers (primary care, urgent care clinics, and telehealth services) without disclosing prior fills. The goal is to obtain overlapping scripts for controlled substances, high-demand GLP-1s, or brand-name drugs that should have been substituted.

Pharmacy hopping follows the same playbook on the dispensing end. Instead of returning to the same network pharmacy, the member fills each claim at a different location and hopes no single pharmacist sees the refill pattern. Because claims adjudicate cleanly in real time, the abuse can continue until analytics catch it.

Card sharing and identity fraud surface when a friend or relative presents another member’s ID at the counter or online portal. Claims history no longer aligns with the true patient, which skews drug-to-drug interaction checks and safety edits.

Resale or diversion of high-cost therapies often involves hepatitis C antivirals, weight-loss injectables, or oncology support drugs. After shipment, the member sells unused doses through gray-market channels or returns them for cash. Plan dollars fund inventory that never benefits the covered population.

Manipulating prior authorization takes two forms. Some members look for prescribers known to write non-preferred brands on thin clinical justification. Others flood the appeals desk with emotional narratives rather than clinical evidence or push HR and leadership to override a denial. Both moves bypass the formulary’s intent and erode fairness for every participant.

Why It Matters

Prevention Playbook

• Real-time claims edits reject duplicate prescribers, early refills, or conflicting therapies and route exceptions to a clinical pharmacist the same day.
• Refill and quantity limits keep new starts on 30-day supplies and require partial fills for high-risk drugs until adherence and safety are confirmed.
• Lock-in programs assign confirmed abusers to one prescriber and one pharmacy. The written notice cites patient safety and fiduciary duty as the rationale.
• Hard PA stops with third-party review require an independent clinician to sign off before any override. Every approval is documented with medical evidence, not anecdotes.
• Pattern-recognition analytics flag members who visit multiple pharmacies or providers, repeatedly reversing or returning claims for high-cost specialty drugs, or sit in the top one percentile for spend. Quarterly reviews feed case management and compliance teams.
• Member and provider education puts PA rules and formulary logic front and center in welcome kits, open-enrollment webinars, and provider newsletters.
• Zero-tolerance language in the plan document states that benefit misuse triggers investigation and possible disciplinary action, including removal from coverage or legal escalation.

How to Identify and Prevent Patient-Driven Pharmacy Fraud

Fraud prevention is not about punishment; it is about stewardship. When plan administrators insist on accurate prescribing, transparent appeals, and data-driven oversight, everyone wins when costs drop, outcomes improve, and fiduciary risk shrinks. Put controls in place before misuse becomes newsworthy, communicate them often, and hold the line.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

Not all pharmacy benefit waste is driven by PBMs or patients. And for larger self-funded employers or public entities, unmonitored pharmacy claims can quietly drain seven figures from the budget over time. In some cases, this can exceed $2 million in avoidable waste, depending on the scale and structure of the plan. Sometimes, it’s coming straight from the dispensing counter.

Whether it’s a neighborhood retail pharmacy, a compounding operation, or a specialty outlet working behind a white-glove reputation, pharmacy-driven fraud, waste, and abuse (FWA) is very real and very expensive.

The worst part? Most of it looks legitimate on the surface. If you’re relying on clean adjudication reports or vendor-provided summaries to spot problems, you’re missing the real story.

Pharmacy-Driven FWA: What It Looks Like

Let’s be clear: many pharmacies operate ethically. But the bad actors, and even the opportunistic ones, exploit the blind spots in your oversight structure.

Here’s how:

1. Overdispensing and Auto-Refills

Some pharmacies routinely refill medications without member requests, even when adherence or clinical need doesn’t support it. The result: stockpiled drugs, increased cost, and unnecessary waste. These refills are often masked as “member convenience,” but they’re really just revenue padding.

2. Compounded Medication Abuse

Compound pharmacies have become creative billing engines, stacking high-cost ingredients into topical creams and pain gels that offer little to no added therapeutic benefit. These compounds often bypass formulary controls and rack up thousands per script—usually without clear documentation or peer-reviewed justification.

3. Upcharging and Repackaging

Some pharmacies, including mail-order, game the system by billing for higher-priced NDCs (National Drug Codes) that represent the same drug in different packaging. For example, a 30-day supply of a generic might have five different NDCs, with wildly different reimbursement rates. Guess which one they pick?

4. Split Billing and Code Stacking

Split billing is the tactic of breaking apart a prescription into multiple claim lines to maximize reimbursement especially in specialty or infusion pharmacy settings. It’s technical, hard to detect, and completely unnecessary from a care perspective.

Code stacking is a billing practice where a provider or in the pharmacy context, often a specialty or infusion pharmacy, breaks up a service or product into multiple billing codes to maximize reimbursement, even when a single bundled code would be more appropriate.

In pharmacy benefits, code stacking can look like:

• Billing each ingredient of a compounded medication separately, rather than as a bundled compound claim.
• Submitting multiple procedure codes (often J-codes under the medical benefit) for a single therapy session, such as a biologic infusion.
• Separately billing for ancillary services like mixing, administration, and drug waste disposal when those costs should already be included in the primary service fee.

Why it’s a problem:

• It inflates claim costs artificially, driving up plan spend without delivering any additional value.
• It bypasses utilization controls that may be in place for bundled services or therapies.
• It can expose plan sponsors to compliance and audit risks, especially if the billing crosses into the medical benefit side where CMS or other regulators are watching.

Code stacking is a form of waste sometimes even fraud. And unless you’re specifically auditing for it, you may never see it happening. It often flies under the radar because the claims appear legitimate in isolation, but together they reveal a pattern of overbilling for fragmented services.

5. eVouchers, and “Incentive” Programs

Increasingly, pharmacies are also using electronic vouchers (eVouchers) at the point of sale to help members bypass plan design restrictions on high-cost brand drugs. These vouchers, typically funded by the drug manufacturer, reduce the member’s out-of-pocket costs artificially, making expensive drugs appear affordable while undermining formulary controls and driving up plan costs.

Pharmacies collect a fee from the manufacturer for processing these transactions, creating a profit loop that benefits everyone except the plan sponsor. Others collaborate with prescribers or telehealth vendors in ways that blur the line between partnership and profit scheme.

How to Stop Pharmacy-Driven Waste

• Audit early, often, and deeply. Don’t settle for annual summary audits. Use targeted claims audits that flag unusual quantities, billing codes, and refill patterns.
• Demand transparency in your network agreements. Pharmacies that want access to your members should meet specific documentation, pricing, and utilization standards.
• Carve out compound and specialty oversight. If your PBM is rubber-stamping these claims, you need an external check. Consider third-party prior auth or medical necessity reviews.
• Use real-time claims analytics. Retrospective audits are helpful but catching abuse as it happens saves more money and builds accountability into your program structure.
• Prevent the opportunity. Implement value-driven, closed formularies and pair them with tight utilization management programs. Limiting access to high-cost, low-value drugs up front eliminates the need to chase abuse after the fact.

Just Because It Paid Doesn’t Mean It’s Appropriate

One of the biggest missed opportunities in pharmacy benefit management is the use of value-driven formularies and well-executed utilization management programs. These tools can dramatically reduce waste and low-value prescribing, but only when your PBM is aligned with your best interest.

Employers also need to understand that doing this right means tolerating some disruption. Brokers call it noise, but it’s really just friction created by accountability. Expect that around 0.25% of your population, roughly 2.5 members per 1,000, may complain each month. That’s not failure. That’s progress with a feedback loop.

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.

If you’re a plan sponsor still looking at fraud, waste, and abuse (FWA) through the lens of member misuse or doctor shopping, you’re only seeing the surface. The most damaging form of FWA, in pharmacy benefits today isn’t being driven by patients, prescribers, or even pharmacies. It’s baked into your non-fiduciary PBM contract. When the gatekeeper is the problem, the entire system breaks.

When Misaligned Incentives Become a Business Model

Most employers assume their PBM partner is working on their behalf. After all, they’re the ones “managing” your plan. But when your PBM profits more when you spend more, that’s not plan management. It’s margin extraction.

This is FWA at the structural level.

Five Ways Non-Fiduciary PBMs Exploit the System (and Your Budget)

1. Spread Pricing The PBM bills your plan $120 for a generic drug and pays the pharmacy $6. That $114 spread? It stays with the PBM. Multiply that across millions of claims and you start to understand why this is a preferred revenue stream. Unless your contract explicitly bans it, it’s happening.

2. Rebate Chasing Non-fiduciary PBMs often favor high-rebate drugs even when lower-cost alternatives are clinically equal or superior. Why? Because they retain a portion of the rebate, often undisclosed, and build formularies to maximize rebate revenue, not member outcomes or net cost efficiency.

3. Specialty and Mail-Order Steering PBMs own pharmacies and they profit by steering members toward their own dispensing channels, often for drugs with low clinical value. These internal referrals frequently bypass lower-cost, clinically appropriate alternatives, increasing plan costs and leaving members to pay more out of pocket for medications that offer little added benefit.

4. Vague Contract Terms “Pass-through pricing,” “rebates,” and “guarantees” sound good until you realize none of those terms are precisely defined. Loopholes allow PBMs to reclassify revenue, exclude certain drugs, or apply creative accounting to reduce what gets passed through.

5. Data Obstruction If you don’t have full visibility into claims-level data, including the amount paid to the dispensing pharmacy, you’re operating blind. And that’s exactly how your non-fiduciary PBM wants it.

FWA by Design, Not Mistake

This isn’t accidental. It’s not a bad actor. It’s a system that’s been carefully engineered to enrich PBMs under the radar of plan sponsors. Many employers don’t even realize they’re being taken for a ride until an audit uncovers millions in avoidable spend.

And even then, most plans settle for minor corrections instead of a total structural reset.

How to Fight Back

• Demand a fiduciary-standard contract: Clear terms. No spread. 100% rebate pass-through. Auditable.
• Control the formulary: Don’t allow a non-fiduciary PBM choose your drug list without scrutiny.
• Build in oversight: Require monthly reporting and quarterly audits, not just vague performance guarantees.
• Benchmark everything: Ingredient costs, dispensing fees, and rebates down to the claim level.

Bottom Line

PBM-driven FWA isn’t a footnote. It’s the headline. If you don’t fix this first, you’re just rearranging deck chairs on the Titanic.

Coming up next: Part 2 – What Pharmacies Don’t Want You to Audit

Elevate your expertise in pharmacy benefits management with the Certified Pharmacy Benefits Specialist® (CPBS) program, sponsored by the UNC-Chapel Hill Eshelman School of Pharmacy. Whether you’re an HR leader, finance executive, consultant, or pharmacist, this certification provides the in-depth knowledge and strategic insight needed to manage pharmacy benefits with confidence and cost efficiency. Gain up to twenty continuing education credits, enhance your career prospects, and help your organization take control of pharmacy spend. Register today to join a growing network of professionals shaping the future of pharmacy benefits management. Learn more at the Pharmacy Benefit Institute of America.