Checklist · Healthcare

Auditing a Pharmacy Benefit Arrangement or Appealing a Drug Denial: A Practical Checklist

29 U.S.C. § 1104

Type
Checklist
Jurisdiction
National
Date
2025-06-29
Topic
Healthcare

This checklist works a pharmacy benefit matter from three seats: the plan sponsor, the pharmacy, and the patient. It opens with the six contract provisions that determine the economics and the definitional traps inside each, then the pricing exhibit and the claim-level data rights that make verification possible. It covers the fiduciary governance record that defends a plan sponsor and the disclosure and attestation obligations that force the contract to be read. It provides the pharmacy sequence for maximum allowable cost appeals and for audit defense, where procedure decides most outcomes. It sets out the appeal maps for commercial, Part D, and Medicaid managed care coverage, the preemption analysis after the Supreme Court reopened state regulation, and the federal program interactions that produce results nobody designed.

Auditing a Pharmacy Benefit Arrangement or Appealing a Drug Denial: A Practical Checklist

Healthcare > Pharmacy Benefit Managers and Drug Pricing | Published 29 June 2025 - Updated 7 April 2026 | UpLaw - uplaw.us

Part 0 — Establish the frame

☐ Is the plan self-funded or insured? ☐ This determines which body of law applies and is the first question in every matter. ☐ Which seat are you in: plan sponsor ☐ pharmacy ☐ patient ☐ manufacturer ☐ state regulator ☐ ☐ Pricing model identified: pass-through ☐ traditional spread ☐ hybrid ☐ ☐ Affiliation map drawn: PBM ☐ insurer ☐ mail pharmacy ☐ specialty pharmacy ☐ rebate-negotiating entity ☐ group purchasing organization ☐ ☐ ⚠️ Which of the eight prices is at issue? ☐ wholesale acquisition cost ☐ average wholesale price ☐ acquisition cost ☐ maximum allowable cost ☐ negotiated rate ☐ average manufacturer price or best price ☐ 340B ceiling ☐ patient cost-share ☐ ☐ In most disputes the parties are arguing about different numbers and do not know it.

Part 1 — The six provisions that decide the economics

☐ Definition of "generic" ☐ Classification source fixed ☐ Classification date fixed ☐ Unilateral reclassification prohibited ☐ ⚠️ The most consequential definition in the agreement. ☐ Definition of "rebate" ☐ Reaches all manufacturer-derived revenue ☐ From any affiliate ☐ In any form: administrative, data, formulary management, purchase discounts, purchasing-entity fees ☐ Reported by category ☐ ☐ Pricing model ☐ Pass-through with a disclosed fee ☐ Or contracted rate with retained spread ☐ Both can be reasonable; only one can be verified. ☐ Guarantee reconciliation methodology ☐ By channel, not aggregate ☐ Excluded claims defined narrowly and exhaustively ☐ Reconciliation date ☐ True-up mechanism ☐ Interest on late payment ☐ ☐ Audit rights ☐ Frequency ☐ Auditor of your choosing ☐ Raw claim-level data in a specified format ☐ Cost allocation ☐ Repricing remedy ☐ No confidentiality term barring use in a later procurement ☐ ☐ Termination and transition ☐ Notice period ☐ Data return obligation with deadline and format ☐ Mid-year feasibility ☐ ⚠️ A plan that cannot leave has no leverage.

Part 2 — The pricing exhibit

☐ Benchmark identified: publisher ☐ version ☐ what happens if methodology changes or publication ceases ☐ ☐ Channels separated: retail 30 ☐ retail 90 ☐ mail ☐ specialty ☐ limited distribution ☐ ☐ Dispensing fee by channel ☐ Escalation ☐ ☐ Administrative fee: per claim ☐ per member per month ☐ both ☐ ☐ Guarantee language read, not just the number ☐ Floor versus aggregate target ☐ Shortfall paid in cash or credited ☐ Interest ☐ Treatment on termination before reconciliation ☐ ☐ Exclusion list reviewed ☐ Compounds ☐ over-the-counter ☐ vaccines ☐ limited distribution ☐ defined drug lists ☐ claims below a threshold ☐ usual and customary claims ☐ ☐ ⚠️ Unilateral amendment of the exclusion list converts every guarantee into an estimate ☐ ☐ Rebate guarantee: per brand claim ☐ per member ☐ percentage ☐ Payment timing ☐ A guarantee paid nine months in arrears is a financing arrangement. ☐ True-up timing, data source, preparer, and dispute rights ☐

Part 3 — Data rights

☐ Claim-level detail required: date of service ☐ national drug code ☐ quantity ☐ days supply ☐ brand/generic as applied ☐ ingredient cost ☐ dispensing fee ☐ member cost-share ☐ plan paid ☐ pharmacy identifier ☐ channel ☐ rebate flag ☐ ☐ Format specified in the contract ☐ A data right with no format specification produces summary reports. ☐ Delivery schedule: monthly, plus an annual reconciliation file ☐ ☐ Permitted recipients: your auditor ☐ your consultant ☐ successor vendors ☐ ☐ ⚠️ No confidentiality clause preventing you from sharing your own claims data with a competing bidder ☐ ☐ Termination data return: full term, same format, defined deadline ☐ ☐ Pharmacy side: remittances in machine-readable form ☐ applicable MAC list where the state requires disclosure ☐ metric detail underlying retrospective fees ☐

Part 4 — Fiduciary governance

☐ Named committee ☐ Written charter ☐ Defined membership ☐ ☐ Quarterly meetings with minutes recording analysis, not attendance ☐ ☐ Annual review: compensation disclosure ☐ guarantee reconciliation ☐ audit findings ☐ formulary changes affecting participants ☐ denial and overturn rates ☐ participant complaints ☐ ☐ Written rationale for benefit design changes that shift cost to participants ☐ ☐ Fiduciary liability insurance confirmed to cover health plan claims, not only retirement plan claims ☐ ☐ Independent advice where the broker's compensation depends on the outcome ☐ ⚠️ A consultant paid by the vendors it recommends is the fact pattern that makes these cases. ☐ Committee training on the eight prices and on what the contract definitions do ☐ ☐ Duty framework — 29 U.S.C. § 1104 ☐ Definitions 29 U.S.C. § 1002 ☐ Regulations 29 C.F.R. Part 2550 ☐ Exemptions 29 U.S.C. § 1108 ☐ Purposes 29 U.S.C. § 1001 ☐ ☐ ⚠️ In fiduciary litigation the process is the defense. Document it contemporaneously.

Part 5 — Disclosure and attestation

☐ Service provider compensation disclosure received ☐ Reviewed ☐ Acted upon ☐ A plan that cannot obtain it has a prohibited transaction problem. ☐ Direct and indirect compensation identified for brokers and consultants ☐ ☐ Gag clause attestation made ☐ ⚠️ Only after someone has actually read the contract. Treat it as a governance event, not a form. ☐ Group health plan requirements — 29 U.S.C. § 1185d ☐ Definitions 29 U.S.C. § 1191 ☐ Regulations 29 C.F.R. Part 2590 ☐ ☐ Participant disclosure obligations — 29 U.S.C. § 1024; 29 C.F.R. Part 2520 ☐ ☐ Excise tax exposure for failures — 26 U.S.C. § 4980D ☐ Self-reported and frequently forgotten. ☐ PBM transparency provisions in federally connected markets — 42 U.S.C. § 1320b-23 ☐ ☐ Transparency in coverage files — 45 C.F.R. Part 147; 45 C.F.R. Part 149; 45 C.F.R. Part 156 ☐ Used for benchmarking ☐

Part 6 — Procurement sequence

☐ Issue your own definitions of generic, rebate, specialty, mail, and excluded claim; require all bidders to price against them ☐ A bid priced against the bidder's definitions is not comparable to anything. ☐ Require the full compensation picture including affiliate and purchasing-entity revenue ☐ ☐ Model against your own claims, with an auditable repricing file ☐ ☐ Fix guarantee measurement by channel ☐ ☐ Negotiate the audit right before the rates ☐ ☐ Build in a mid-term market check with a right to require the incumbent to match ☐ ☐ Document the process: charter, minutes, analysis, alternatives, basis for decision ☐ ☐ Calendar: attestation ☐ disclosure review ☐ reconciliation ☐ market check ☐

Part 7 — Pharmacy: MAC appeals

☐ State MAC appeal statute identified ☐ Window ☐ Required documentation ☐ Response deadline ☐ Remedy ☐ ☐ Wholesaler invoice attached to every appeal establishing acquisition cost ☐ ☐ Appeals filed systematically, not selectively ☐ ☐ Outcomes tracked; a pattern supports a regulatory complaint ☐ ☐ Below-acquisition reimbursement documented over time ☐ ☐ Statutory basis for state authority confirmed — Rutledge v. Pharmaceutical Care Management Association ☐

Part 8 — Pharmacy: audit defense

☐ Notice date logged ☐ Statutory notice requirements checked ☐ ☐ Response period computed and preserved ☐ ☐ Every procedural requirement asserted before responding substantively ☐ ⚠️ Most audit disputes are decided on procedure. ☐ Extrapolation contested where the statute limits it ☐ ☐ Deficiencies that the statute makes non-recoupable identified ☐ ☐ Documentation produced in the format demanded: signature logs ☐ day-supply calculations ☐ prescriber records ☐ dispensing documentation ☐ ☐ Appeal rights and deadlines calendared ☐ ☐ Regulatory complaint route evaluated ☐ Sometimes faster than litigation. ☐ Arbitration clause and class waiver checked before any collective strategy — AT&T Mobility LLC v. Concepcion ☐

Part 9 — Pharmacy: network and retrospective fees

☐ Network agreement read and the provider manual it incorporates ☐ Amendment mechanism identified ☐ ☐ Any-willing-pharmacy and network adequacy rights under state law ☐ ☐ Anti-steering protections against affiliated pharmacies ☐ ☐ Termination and appeal rights ☐ ☐ Every remittance reconciled against expected reimbursement ☐ ☐ Retrospective fees tracked claim by claim ☐ Metric definitions obtained ☐ Measurement period identified ☐ Influenceability assessed ☐ ☐ 340B contract pharmacy arrangements: patient definition ☐ duplicate-discount safeguards ☐ audit risk allocation ☐ 42 U.S.C. § 256b ☐

Part 10 — Appeals: commercial coverage

☐ Obtain the written coverage criteria before anything is submitted ☐ ⚠️ The criteria decide the outcome, not the denial letter. ☐ Prior authorization or formulary exception request prepared by the prescriber ☐ Each criterion element addressed explicitly ☐ ☐ Where a criterion is clinically inapplicable, an exception requested on that basis rather than on the merits of the therapy ☐ ☐ Internal appeal filed within the deadline ☐ ☐ External review pursued where state or federal law provides it ☐ ☐ Expedited review requested in writing where health requires ☐ ☐ ⚠️ Where ERISA governs, the record built at the first submission is usually the entire record on judicial review ☐ ☐ Standard of review assessed — Firestone Tire & Rubber Co. v. Bruch ☐ Does the plan grant discretion ☐ ☐ Parallel state claims analyzed — Aetna Health Inc. v. Davila ☐ Plan-terms supremacy — Egelhoff v. Egelhoff ☐ ☐ Available relief mapped — 29 U.S.C. § 1132; Great-West Life & Annuity Insurance Co. v. Knudson; Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan ☐ ☐ Remand posture considered — Conkright v. Frommert ☐ Fiduciary scope — Varity Corp. v. Howe; Pegram v. Herdrich ☐

Part 11 — Appeals: Medicare Part D

☐ Coverage determination requested ☐ Date logged ☐ ☐ Plan redetermination ☐ Independent entity reconsideration ☐ Administrative law judge ☐ Appeals council ☐ Judicial review ☐ ☐ Expedited timelines invoked where the enrollee's health requires ☐ ☐ ⚠️ Each missed step forfeits the next. Calendar every deadline on receipt. ☐ Formulary requirements, protected classes, and transition fills checked — 42 U.S.C. § 1395w-104; 42 C.F.R. Part 423 ☐ ☐ Benefit and subsidy framework — 42 U.S.C. § 1395w-101; 42 U.S.C. § 1395w-102; 42 U.S.C. § 1395w-103 ☐ ☐ Managed care overlay — 42 C.F.R. Part 422; 42 C.F.R. Part 417 ☐ ☐ Post-point-of-sale price concessions and their effect on the enrollee's cost-share understood ☐

Part 12 — Appeals: Medicaid managed care

☐ Plan grievance and appeal exhausted — 42 C.F.R. Part 438 ☐ ☐ State fair hearing requested within the deadline ☐ ☐ Continuation of benefits pending appeal requested where available ☐ ☐ Payment and coverage framework — 42 U.S.C. § 1396a; 42 U.S.C. § 1396b; 42 C.F.R. Part 447 ☐ ☐ Rebate program interaction — 42 U.S.C. § 1396r-8 ☐ ☐ Whether the state has carved the pharmacy benefit out of managed care ☐

Part 13 — Preemption analysis

☐ Statute characterized: rate regulation ☐ or plan administration ☐ ☐ Rate regulation of a service provider generally survives — Rutledge v. Pharmaceutical Care Management Association ☐ ☐ Reporting and administration mandates generally preempted — Gobeille v. Liberty Mutual Insurance Co. ☐ ☐ Preemption clause applied — 29 U.S.C. § 1144 ☐ ☐ Self-funded versus insured distinction applied ☐ Insured plans face state insurance regulation regardless. ☐ ⚠️ Answer provision by provision, never statute by statute ☐ ☐ Provisions dictating benefit design flagged as the vulnerable category ☐

Part 14 — Federal program interactions

☐ 340B contract pharmacy in a PBM network — four parties, four contracts, no shared view ☐ No third-party beneficiary claim against manufacturers — Astra USA, Inc. v. Santa Clara County ☐ Differential reimbursement on 340B claims ☐ Duplicate discount exposure ☐ ☐ Medicaid managed care with spread pricing — state dollars funding an unobservable margin ☐ Carve-out and actual-acquisition-cost models ☐ ☐ Part D post-point-of-sale concessions — cost-share computed on the higher number ☐ ☐ Self-funded plan in a PBM-regulating state — some provisions apply, some do not ☐ ☐ Accumulator plus high-deductible plan plus manufacturer assistance — disclosure adequacy is a live question ☐ ☐ Anti-kickback and safe harbor posture — 42 U.S.C. § 1320a-7b; 42 C.F.R. Part 1001 ☐ Program definitions 42 U.S.C. § 1301 ☐ ☐ Product approval and biosimilar context — 21 U.S.C. § 355; 21 C.F.R. Part 314; 42 U.S.C. § 262 ☐ ☐ Competition theories where relevant — 15 U.S.C. § 1; 15 U.S.C. § 45 ☐

Part 15 — Specialty drug review

☐ Restricted distribution identified; whether the plan can move the business at all ☐ ☐ Medical versus pharmacy benefit split analyzed for each high-cost drug ☐ Site-of-care differential quantified ☐ ☐ Biosimilar formulary decisions reviewed against net cost ☐ ⚠️ Preferring the more expensive reference product is the rebate incentive in its purest form. ☐ Copay assistance, accumulator, and maximizer programs documented ☐ Participant disclosure reviewed for intelligibility ☐ ☐ Utilization management appeal paths mapped for each program ☐

Part 16 — Errors to avoid

☐ Comparing bids without normalizing definitions ☐ ☐ Treating "100 percent rebate pass-through" as meaningful without a full definition ☐ ☐ Accepting aggregate guarantee measurement ☐ ☐ Signing an audit clause that cannot produce a usable audit ☐ ☐ Attesting to the gag clause prohibition without reading the contract ☐ ☐ Receiving the compensation disclosure and filing it unread ☐ ☐ Assuming the PBM is a fiduciary, or assuming the plan sponsor is not ☐ ☐ Appealing on the therapy rather than on the criteria ☐ ☐ Missing a Part D deadline ☐ ☐ Responding substantively to a pharmacy audit before asserting procedural defenses ☐ ☐ Answering a preemption question at the statute level ☐ ☐ Designing a collective strategy without checking for arbitration clauses ☐ ☐ Believing that an advertised discount corresponds to what anyone pays ☐

Part 17 — The definitional trap table

Read each definition against what you assumed it meant.

Term What you assume What it may say Check
Generic A non-branded drug Whatever the classification source says on a date the PBM controls ☐
Brand A branded drug A residual category that absorbs reclassified generics ☐
Rebate All manufacturer money Only payments styled as rebates, excluding fees ☐
Affiliate A corporate subsidiary Defined narrowly enough to exclude the purchasing entity ☐
Specialty drug A recognized clinical category A list the PBM maintains and amends ☐
Excluded claim Rare edge cases A growing list that removes claims from the guarantee ☐
Ingredient cost What the drug cost A contract construct unrelated to acquisition ☐
Usual and customary The cash price A defined term with its own exclusion from guarantees ☐
Aggregate Across the whole plan Across channels, letting one offset another ☐
Audit An examination of the books A sample review on formatted data with no remedy ☐
Confidential Protecting trade secrets Barring you from using your own data to shop ☐

☐ ⚠️ Every one of these has moved money in a real engagement. Read the definitions section before the pricing section.

Part 18 — Building a plan-side fiduciary claim

☐ Contract, all amendments, and every schedule, including pricing exhibits kept separate ☐ ☐ Compensation disclosure and every version of it ☐ ☐ Committee minutes, procurement file, and consultant reports ☐ ☐ Claims repriced against alternative arrangements to establish injury ☐ ☐ What a prudent fiduciary would have asked, and when, established through practice evidence ☐ ☐ Standing and loss causation addressed directly; participant injury traced to plan spending ☐ ☐ Relief pleaded that the statute actually authorizes ☐ ☐ Anticipate the defense: process record, market-reasonableness at the time, the counterfactual, limits on fiduciary status for arm's-length contracting ☐

Part 19 — What to watch

☐ Delinking compensation from list price ☐ The single change that would most alter incentives. ☐ Point-of-sale rebates ☐ Simple in concept; shifts cost from well to sick within a plan ☐ ☐ Safe harbor withdrawal for federal program rebates ☐ ☐ Fiduciary litigation outcomes ☐ If courts accept the theory, governance changes fast. ☐ State expansion after Rutledge into network and formulary design ☐ ☐ Transparency files becoming usable for independent benchmarking ☐ ☐ Medicaid carve-outs establishing a workable pass-through model ☐ ☐ Biosimilar formulary decisions as evidence of the rebate incentive ☐

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