How health plans monitor PBM performance

Pharmacy benefit manager (PBM) oversight is the practice of independently verifying that a pharmacy benefit manager is adjudicating claims in accordance with a health plan's contract terms, benefit design, and regulatory requirements. Health plans approach this through a combination of internal analytics, consultant reviews, periodic PBM audits, and continuous claims monitoring. Each method gives the pharmacy team a different kind of visibility into whether what was negotiated is what gets paid.

This article maps the four primary approaches, where each one's coverage ends, and how pharmacy teams are building oversight models that match what stakeholders now expect.

Why PBM oversight is a health plan function

The PBM controls claim adjudication, formulary management, and pharmacy network contracting. The health plan carries the financial and regulatory risk. The plan receives adjudicated claims data and has access to its own contract and benefit design documents, so the information needed to verify PBM execution exists within the plan's reach. The challenge is operational: systematically verifying that every claim was processed correctly, across millions of transactions in every adjudication cycle, requires infrastructure that goes beyond what most pharmacy teams have in place today.

The core constraint is straightforward: most pharmacy leaders have the intent, and what they lack is scale. A team reviewing claims manually will always be working a sample, and systemic issues do not reliably surface in small data sets. The discipline requires infrastructure that operates at a scale no manual process can match.

The expectation for what pharmacy teams can demonstrate about their PBM's execution is rising. CFOs want documented evidence of spend oversight. Employer ASO clients ask how the plan verifies PBM performance beyond the standard audit. State regulators are requiring more granular PBM reporting. And federal PBM reform legislation is raising the baseline for what plans should be able to show about how their pharmacy benefits are administered. PBM transparency requirements are increasing the volume of data PBMs must disclose, but more disclosed data increases the need for systematic verification of how that data maps to the plan's actual terms.

Four approaches to PBM oversight

Health plan pharmacy teams typically draw from some combination of internal analytics, consultant reviews, periodic audits, and continuous monitoring. The right combination depends on what the team is being asked to demonstrate, what level of claim-level specificity stakeholders expect, and what resources the pharmacy operation has available.

Internal analytics and PBM reporting

Health plans receive periodic reporting from their PBM, including trend data, utilization summaries, rebate information, and formulary performance metrics. The plan also receives adjudicated claims data, giving the pharmacy team access to the underlying transactions. The internal team uses this data to track spending patterns, flag outliers, and investigate areas of concern. This is often the pharmacy team's primary day-to-day oversight tool because the data is already part of their workflow.

The limitation is not in access to information. The pharmacy team can pull individual claims and check whether the right pricing was applied. The limitation is doing that verification systematically. Trend-level reports surface spending patterns but do not flag individual adjudication errors. Manual claim review can confirm what happened on a specific transaction, but a team working manually will always be sampling, and systemic errors affecting a narrow drug class or a specific configuration rule may not appear in that sample. The team has the data and the expertise. The gap is in the infrastructure to run verification at the scale the problem requires.

PBM consultant reviews

Outside PBM consultants bring independent perspective, market benchmarking, and contract expertise that internal teams may not have. Engagement scope varies: some consultants evaluate contract competitiveness and vendor strategy, others conduct operational assessments that include claim sampling, and a few provide ongoing advisory that blends benchmarking with performance evaluation.

Consultant reviews tend to be periodic, conducted at contract renewal or annually, and they produce recommendations and market context. Identifying that a specific contracted rate is being applied incorrectly to a subset of claims requires systematic analysis across every adjudication cycle, which falls outside what most consulting engagements are scoped to deliver.

Periodic PBM audits

The PBM audit is the most established form of independent pharmacy oversight. An audit firm samples claims from a historical window, applies a contract interpretation, identifies discrepancies, and produces a findings report the plan uses to pursue recoveries.

Audits produce documented findings and specific recovery amounts, which makes them the most tangible oversight output. But the limitations are well understood by the pharmacy teams who use them. Reviews typically cover claims from 12 to 24 months prior, and sampling means that systemic errors affecting narrow drug classes or specific member segments may not surface. Rivera's primary research with pharmacy executives across 19 health plans found that leaders consistently describe audit engagement fees as approaching or exceeding what they ultimately recover. For a more detailed look at where audits fall short, see why the annual PBM audit is no longer enough.

Continuous pharmacy claims monitoring

Continuous monitoring reviews every adjudicated claim on an ongoing basis against the plan's contract terms, benefit design, and regulatory requirements. The monitoring runs in every adjudication cycle, testing each claim against the rules that should govern it. Discrepancies are flagged, documented with root cause analysis, and quantified so the plan can pursue resolution with the PBM.

Where auditing reviews a historical sample, continuous monitoring covers 100% of claims in every cycle. Configuration errors introduced mid-year are identified in the cycle they occur. Because findings include the root cause, the underlying issue can be corrected to prevent the same error from recurring on future claims. That recurrence prevention is where the long-term financial value compounds, because it stops overpayment going forward rather than only recovering what has already been paid. For a detailed look at how this works operationally, see how continuous pharmacy claims monitoring works in practice.

Where current oversight tools fall short

Health plan pharmacy teams are actively overseeing PBM performance. The data exists within the plan's reach: adjudicated claims, contract documents, benefit design specifications. The pharmacy team has the expertise to review that data and the intent to hold the PBM accountable.

The constraint is infrastructure, not information or effort. A pharmacy team can pull a claim and verify whether the correct pricing was applied. It can investigate an anomaly in the trend data and trace it to a potential adjudication issue. What no team can do manually is run that same verification across every claim in every adjudication cycle, testing each transaction against the full set of contract terms, benefit design rules, and regulatory requirements that should govern it.

Across health plans using continuous monitoring, the most common source of overpayment is a configuration error introduced during a routine operational event: a formulary update, a plan year build, a system migration. The pharmacy team may see the financial impact appear in their reporting and investigate. What manual processes cannot provide is the scale to catch these errors systematically across millions of claims, quantify the full impact, and document the root cause in the format needed to pursue a correction with the PBM. By the time a periodic audit surfaces them, the plan has been overpaying for a year or more.

Consultant reviews address market positioning and contract strategy, but their scope does not extend to verifying whether contracted terms are being applied correctly to every claim in every adjudication cycle.

The gap is in the infrastructure available to the pharmacy team, not in the team's diligence or intent. Closing that gap requires layering in a verification method that operates continuously across 100% of claims, which is the operational rationale for adding continuous monitoring alongside the audit rather than replacing it.

How oversight changes the pharmacy team's role

A common concern when health plans consider continuous monitoring is whether the internal pharmacy team's role narrows. If a technology platform is reviewing every claim, does the team become less relevant?

The experience of plans that have adopted continuous monitoring points the other way. The technology handles systematic claim-level review across millions of transactions, work that requires a scale no team can achieve manually. With that layer in place, the pharmacy team shifts toward evaluating findings in clinical context, leading recovery conversations with the PBM, and using ongoing claims data to inform benefit design decisions and contract negotiations.

Pharmacy leaders who have made this transition describe it as an evolution of their function. The team's scope does not shrink. In Rivera's experience working with health plans across all lines of business, the workload typically increases because the team now has a stream of actionable findings and performance data that did not previously exist. What changes is the nature of the work and the team's ability to demonstrate, with claim-level specificity, what its oversight function is producing. That changes how the pharmacy operation is perceived internally, particularly at the CFO and board level.

What to evaluate in a PBM oversight model

Five criteria help pharmacy teams assess whether their oversight model matches what stakeholders now expect: independence from the PBM, meaning no financial or operational relationship with the entity being monitored; claim-level verification rather than aggregate reporting; coverage of both contract terms and benefit design execution; continuous operation rather than periodic snapshots; and root cause identification that enables recurrence prevention.

A model that meets all five gives pharmacy teams the documented, ongoing evidence of PBM oversight that plan executives, employer clients, regulators, and boards are increasingly asking to see. For a walkthrough of what implementation and ongoing operations look like, see what to expect from an independent pharmacy payment integrity program.

Frequently asked questions

What is PBM oversight?

PBM oversight is the practice of independently verifying that a pharmacy benefit manager is adjudicating claims in accordance with a health plan's contract terms, benefit design, and regulatory requirements. Health plans typically use a combination of internal analytics, consultant reviews, periodic audits, and continuous claims monitoring. The function exists because the scale of verification required to check every claim against every applicable rule in every adjudication cycle exceeds what manual processes can deliver, even when the pharmacy team has the data and expertise to review individual claims.

What is the difference between a PBM audit and continuous claims monitoring?

A PBM audit samples claims from a historical window, typically 12 to 24 months prior, and produces a point-in-time findings report with recovery amounts. Continuous claims monitoring reviews 100% of adjudicated claims on an ongoing basis, in every adjudication cycle, and produces findings with root cause analysis that enables both recovery and recurrence prevention. Health plans benefit from both: the audit provides a documented compliance exercise, and continuous monitoring provides the ongoing claim-level verification that the audit cannot deliver between review cycles.

Why can't health plans rely solely on PBM-supplied reporting for oversight?

Health plans receive both summary reports and adjudicated claims data from their PBM, and the pharmacy team actively uses this data to monitor performance. The limitation is that summary reports reflect how the PBM categorizes its own activity, and manual claim-level review, while possible, is constrained by the scale of the data. A pharmacy team can investigate individual claims, but systematically verifying every transaction against the full set of applicable rules requires infrastructure that most pharmacy operations do not have in place. PBM transparency requirements are increasing the volume of data PBMs disclose, but more data increases the need for systematic verification rather than reducing it.

How does continuous monitoring affect health plan pharmacy team staffing?

Health plans that implement continuous monitoring describe the impact on their pharmacy team as an evolution. The technology handles systematic claim-level review at a scale no manual process can match, which frees the internal team for higher-value work: evaluating findings in clinical context, leading PBM recovery conversations, and using ongoing claims data to inform benefit design and contract negotiations. In Rivera's experience, the workload typically increases because the team now has actionable data that did not previously exist. What changes is the nature of the work and the team's ability to point to specific, quantified results from its oversight function.

What should a health plan look for in a PBM oversight program?

Five criteria distinguish a comprehensive PBM oversight program: independence from the PBM, claim-level verification, coverage of both contract terms and benefit design execution, continuous operation, and root cause identification that prevents recurrence.