FEHB Pharmacy Benefit Audits: Did the Plan Receive Every Discount?

An FEHB PBM audit tests rebate pass-through by comparing what the contract promised with what the federal employee health plan received. In the Federal Employees Health Benefits program, that means following the money through the pharmacy benefit manager to the carrier providing health care coverage.

Compass Rose is the carrier in this audit, Express Scripts administered its pharmacy benefits, and Ascent collected manufacturer rebates. The Office of Personnel Management’s inspector general questioned retail discounts, transaction credits, inventory discounts and those rebates. If you work with pharmacy pricing or rebate accounts, the distinction matters: a report showing rebates credited to the plan can leave other money owed under the contract out of view.

What the Office of Personnel Management Requires From Carriers and PBMs

The Office of Personnel Management’s transparency standards connect what a carrier pays to the underlying pharmacy and manufacturer transactions. Its carrier letter issued in January 2024 and updated in January 2025 applies to fee-for-service and experience-rated HMO carriers in the Federal Employees Health Benefits and Postal Service Health Benefits programs. The Compass Rose audit examined the contract for its earlier audit period.

For unaffiliated pharmacies, the updated letter calls for pass-through pricing based on the negotiated pharmacy-agreement price plus a dispensing fee. For affiliated pharmacies, it calls for actual acquisition cost plus a dispensing fee, with acquisition-cost reporting at both claim and aggregate levels. The price charged to the plan and the cost of buying the drug are different measurements.

The letter also makes the administrative fee the pharmacy benefit manager’s sole source of profit under its standards, requires specified transaction fees to be credited, and calls for quarterly true-ups against pricing commitments. Those adjustments reconcile the promised pricing with actual performance. Manufacturer-payment pass-through reaches the letter’s broader categories, including aggregators and group purchasing organizations. That manufacturer-payment requirement has a specific exception for contracted Medicare Part D prescription drug plans and Medicare Advantage prescription drug arrangements where the sponsor bears the risk.

The letter also requires disclosure of maximum allowable cost price lists and an explanation when multiple lists are used. For a pricing employee, knowing which list supplied the claim price helps connect the pharmacy’s reimbursement terms to the carrier’s charge. The list and the later pricing adjustment belong in the same comparison.

Audit Access Has to Reach the Money

The updated carrier letter requires access to pharmacy contracts, claims, manufacturer payments, invoices and coverage criteria, extending to rebate processors. Supporting charge records must be available without redaction within 30 days. The pharmacy benefit manager cannot dictate who performs the audit or how often it occurs.

That access matters because the carrier’s bill shows only part of the transaction. The pharmacy agreement supplies the reimbursement terms. Acquisition records show what an affiliated pharmacy paid for inventory. The manufacturer’s payment and the rebate processor’s accounts show another stream. We want to see how those records connect to the amount credited to the plan.

What Does 100 Percent Pass-Through Cover?

A 100 percent pass-through promise covers the receipts its contract defines. The definition decides whether a particular manufacturer payment, affiliate receipt or purchasing discount belongs in that promise.

A useful comparison appears in Minnesota’s Caremark agreement. It includes specified formulary, market-share, price-protection, administrative and program payments in its rebate definition, including defined rebates received by an affiliate. It separately excludes described mail-order and specialty purchasing discounts and specified specialty service revenues.

The percentage alone tells an insider so little. The definition does the work.

Spread pricing adds another comparison: what the sponsor pays the pharmacy benefit manager against what the manager pays the pharmacy. A later adjustment under a pricing commitment can change the final result, while an affiliated pharmacy has its own acquisition and operating costs. For the carrier, the useful question is what it ultimately paid after the applicable credits, rebates, fees and adjustments. We measure transparency by whether that reconciliation can be checked.

Cigna, whose Evernorth business includes Express Scripts, describes in its 2025 filing how clients choose the greater of a minimum rebate commitment or a contractually agreed share. Eligible claims, excluded products, formulary conditions and permitted offsets determine the value of that promise. A minimum rebate payment and the actual manufacturer receipts therefore belong beside each other when we examine the final amount due.

What the Compass Rose Audit Examined

The November 14, 2024 report from the Office of Personnel Management’s inspector general examined Compass Rose’s Express Scripts-administered pharmacy operations for 2017 through 2022. The inspector general questioned $18,443,118, including lost investment income, across the separate payment categories below.

Retail Pharmacy Discounts

The inspector general questioned $6,555,372 in retail discounts, including investment income, saying the carrier was owed negotiated network discounts. The carrier said it received actual pharmacy prices and negotiated pricing commitments. The dispute therefore reached both the underlying pharmacy price and how the contractual pricing commitments affected the carrier’s bill.

For someone working in pricing, that is a recognizable comparison. The claim charge, the pharmacy payment and the pricing reconciliation each answer part of it. A summary saying a pricing commitment was met leaves the transaction-level pricing question to be answered.

Retail Transaction Credits

The inspector general separately questioned $1,045,333 in transaction credits attributable to the carrier. A pharmacy price and a transaction credit are separate entries: the audit examined whether the credits owed to the carrier reached its accounts.

This is why transaction-credit statements belong beside claims pricing in an FEHB pharmacy audit. The drug price answers what was charged for the prescription. The credit answers what adjustment was owed back. We examine where that adjustment entered the carrier’s accounting and what the contract required the pharmacy benefit manager to credit.

Affiliated-Pharmacy Inventory Discounts

Inventory discounts reduce what an affiliated pharmacy pays to acquire drugs. The audit questioned $248,194 in those discounts, moving the inquiry to the purchasing side of the pharmacy operation.

The distinction is familiar in mail-order and specialty contracts, where purchasing discounts can have their own treatment apart from manufacturer rebates. The manufacturer’s rebate report and the pharmacy’s acquisition-cost records answer different questions. When the obligation turns on acquisition cost, the purchasing discount belongs in the comparison with what the carrier was charged.

Manufacturer Rebates Collected Through Ascent

The audit’s manufacturer-rebate finding was $10,594,219, including lost investment income. Its contract excerpt reached other entities negotiating and collecting manufacturer payments attributable to the plan.

Ascent’s receipts therefore mattered alongside what reached Compass Rose. Express Scripts disputed the audit’s sister-company characterization, pointing to Ascent’s co-owners. The contractual question remained which payments the agreement required to reach the carrier. Corporate labels cannot do that accounting for us.

The Ascent Rebate Reconciliation

For June 2019 through December 2021, the inspector general reported that Ascent collected $70,382,646 against $60,343,427 passed through to the plan. The audit credited $514,274 in payments under rebate commitments against the difference. Its calculation left $9,524,945 in questioned rebate principal.

The inspector general separately recommended $1,069,274 in lost investment income through June 2024. Principal and investment income describe different parts of the finding: the rebate money itself and the income attributed to the delay in returning it.

The carrier’s response confirmed a March 2024 wire returning the rebate principal to the federal employee program. The inspector general recommended further confirmation and an adjustment to the investment-income calculation. The reported wire addresses the principal in this rebate finding. The retail discounts, transaction credits and inventory discounts remain separate entries in the audit.

Cigna’s December 2024 supplemental response described the rebate payment as resolving a contract-interpretation dispute. Cigna also described its Ascent service arrangement as running through December 2020, while the audit’s calculation used the longer period above. Those different endpoints matter to the reconciliation: the agreement, receipt and credit have to concern the same service period.

When a Rebate Becomes a Service Fee on Paper

A separate Medicare Part D case involving Elixir shows why healthcare payment labels deserve scrutiny. The whistleblower’s complaint calls the pharmacy benefit manager EPS and alleges:

In the Elixir settlement agreement announced in July 2024, the government alleged that retained manufacturer rebates were classified as service fees and excluded from annual rebate reporting to Medicare. The alleged classification changed the program’s payment reconciliation.

For that case, the manufacturer service agreement, the services actually performed, the retained money and the sponsor’s report supplied the comparison. For Compass Rose, the focus is the FEHB carrier’s contract and the amounts credited under it. Both show why we follow a payment through the recipient’s books to the report that determines what the program pays.

What an FEHB Carrier or PBM Insider Can Show

An insider can connect the contract’s promise to the pricing, purchasing or rebate record that shows how the money was treated. That connection is the value of knowing the work from inside.

A carrier auditor may know which contracts and supporting charge records were available for review. A pricing employee may understand how pharmacy reimbursement and true-ups against pricing commitments reached the carrier’s bill. Someone handling rebate or acquisition accounts may know which entity received a payment, how it was classified and where it appeared in the carrier’s statements.

We work through those connections with you: the payment the contract covered, the report used to account for it, and the decisions behind any missing credit. Your knowledge of a changed classification or an omitted receipt can give meaning to figures that otherwise look like an accounting disagreement. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Where the Credit Went

If you work for an FEHB carrier, pharmacy benefit manager or rebate processor and know why money owed to the plan never reached its accounts, speak with our whistleblower experts about that missing credit. We work with you to build your strongest case around the contract, the payment and the decisions you know firsthand, bringing in PBM fraud whistleblower lawyers who understand federal employee health benefit contracts. We stay beside you through the whole case, with expertise in the money trail and advocates who understand the work you do.