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. Because the plan cannot see inside the PBM's adjudication engine to confirm, transaction by transaction, that its contracted terms are being applied, it relies on the PBM to process claims and also to report on how accurately those claims were processed.

PBMs operate at enormous scale, and the adjudication complexity involved is real. But the structure creates a verification challenge: the plan needs to confirm that what the PBM executed matches what the plan designed and contracted for, and the primary source of information about that execution is the PBM itself. Independent oversight exists to close that verification gap.

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 the data a PBM reports about its own execution does not tell the plan whether every claim was adjudicated correctly. Independent verification requires a separate approach.

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 internal pharmacy team uses this data to track spending patterns, flag outliers, and monitor overall program performance. 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 in the data source, not in the team's analysis. PBM-supplied reports reflect how the PBM categorizes and aggregates its own activity. If a pricing rule is being misapplied across a class of claims, the trend data will show the resulting spend but not the underlying adjudication error. The pharmacy team may recognize that something looks off in the numbers. What internal analytics alone cannot provide is claim-level confirmation of what went wrong and the specificity needed to quantify the impact and pursue a recovery with the PBM.

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 annual or biennial 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.

Rivera delivers continuous monitoring as part of an independent pharmacy payment integrity program. The monitoring is built on a proprietary algorithm library encoded from each plan's actual contract and benefit design documents. The library compounds across Rivera's full client base: findings from one engagement inform the algorithms applied to all others, which means the monitoring grows more comprehensive with every plan Rivera onboards. Rivera covers approximately 10 million lives across commercial, Medicare, and Medicaid health plans, and has identified more than $100 million in savings since inception.

Where current oversight tools fall short

Health plan pharmacy teams are actively overseeing PBM performance with the tools available to them. As Rivera noted in its PBM legislation brief: 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 tools available to pharmacy teams today were designed for a period when benefit structures were simpler, mid-year changes were less frequent, and the standard of evidence for PBM oversight was lower. PBM-supplied reporting gives the team trend-level visibility, but it comes from the PBM. Consultant reviews provide market context and contract expertise, but their scope typically does not extend to ongoing claim-level verification. The periodic audit is independent, but it covers a sample of historical claims and the findings arrive months after the issues occurred.

What Rivera sees across its client base is that 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. These are not unusual occurrences. They happen as part of normal PBM operations, and they affect how claims are adjudicated going forward. The pharmacy team may see the financial impact show up in their trend data. What the available tools cannot provide is the ability to trace that impact to a specific adjudication misconfiguration, quantify it at the claim level, and produce the documented root cause analysis needed to pursue a correction with the PBM. That level of verification requires infrastructure that operates continuously across 100% of claims, which is the gap continuous monitoring was designed to address.

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 CFOs, 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 PBM controls the adjudication system while the health plan carries the financial and regulatory risk, creating a need for someone other than the PBM to verify that what was negotiated is what gets paid.

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, independent claim-level verification that the audit cannot deliver between review cycles.

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

PBM-supplied reports reflect how the PBM categorizes and presents its own activity. They provide trend data and utilization metrics, but they do not offer independent, claim-level verification that adjudication logic matches the plan's contract terms and benefit design. The pharmacy team can use this data to identify anomalies and monitor spending trends, and that work is valuable. What PBM-supplied data alone cannot provide is independent confirmation of what went wrong at the claim level and the specificity needed to quantify the impact and pursue a correction. PBM transparency requirements are increasing the volume of data PBMs disclose, but more data from the PBM does not replace independent verification of what the PBM is doing.

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. A program meeting all five provides the ongoing, documented evidence of oversight that pharmacy teams need for CFOs, employer clients, regulators, and board-level reporting.