If you can't answer the first five, you don't have a transparent contract.
If you can't answer the next ten, you're almost certainly overpaying.
01–05
The Fast Five
If your PBM can't answer these in plain English — that is the answer.
01
Is the contract fully pass-through, or does the PBM keep spread?
Spread pricing means the PBM charges the plan more than it pays the pharmacy and keeps the difference. Pass-through means the plan pays exactly what the pharmacy is paid, plus a disclosed admin fee.
02
What percentage of manufacturer rebates is passed through to the plan?
100% pass-through is the standard you should benchmark against. Anything less — and any rebate retained under "administrative fees," "manufacturer service fees," or "data fees" — is margin the PBM is keeping.
03
How is the admin fee structured — flat PMPM or percentage of spend?
A flat per-member-per-month fee aligns the PBM with the plan. A percentage of spend rewards the PBM when your costs go up.
04
Are mail-order and specialty pharmacy required to use the PBM's own pharmacy?
Most major PBMs own their own mail-order and specialty pharmacies. Mandatory steering means you're buying drugs at a price your PBM sets from a pharmacy your PBM owns.
05
Can you audit the contract — with no restrictions on auditor, scope, or frequency?
Standard PBM contracts heavily restrict audits: approved auditor lists, limited claim samples, no specialty drugs, one audit per term. If you can't audit freely, you can't verify anything else on this list.
A PBM contract that resists transparency isn't a contract. It's a permission slip.
06–15
The Deeper Ten
Where the real money hides.
06
What is the definition of "generic" and "brand" in your contract?
PBMs reclassify drugs between categories to hit discount guarantees. The definition itself is the loophole.
07
Are AWP discount guarantees calculated in aggregate or by claim?
Aggregate guarantees let the PBM lose on high-cost drugs and make it up on cheap ones — and still "hit" the guarantee on paper.
08
What is the specialty drug list, and who controls additions to it?
Specialty drugs carry the highest margins. If the PBM controls the list, the list will grow.
09
Are clinical programs (prior auth, step therapy, formulary management) paid separately or bundled?
Bundled clinical fees often duplicate what the plan is already paying through the medical TPA. Unbundle and audit.
10
What is the formulary methodology — clinical effectiveness or rebate value?
Most national formularies favor high-rebate drugs over equally effective lower-cost alternatives. Ask for the methodology in writing.
11
How are 340B-eligible claims handled, and who captures the savings?
If you have employees using 340B-covered entities, savings should flow to the plan — not the PBM or the contract pharmacy.
12
What performance guarantees exist, and what are the financial penalties for missing them?
Guarantees without meaningful financial penalties are marketing copy, not commitments.
13
What is the termination clause — notice period, runout obligations, data return?
Long notice periods and restrictive data-return clauses are designed to make switching painful. They're negotiable.
14
Does the PBM own — or have ownership interest in — the GPO that negotiates your rebates?
The three largest PBMs all use affiliated rebate aggregators. Money moves between corporate siblings; transparency does not.
15
When was the last independent market check or RFP — and what were the results?
PBM contracts that auto-renew without market checks routinely run 15–25% above current market. The number is knowable. Find it.
How to Use This Audit
Score your contract — then score your broker.
Run this list with your current PBM. Note where they answer cleanly, where they hedge, and where they refuse. Then run the same list with your broker. If neither can answer the first five in writing, you don't have a contract — you have an expense. Bring this audit to your next renewal conversation. The questions don't change. Your answers should.