Why It Matters
A federal audit accusing a CVS Health subsidiary of overbilling a government health program by hundreds of millions of dollars is drawing renewed attention to pharmacy benefit managers — and to Ohio, where a nearly identical billing scheme was uncovered nearly a decade ago. The case highlights growing concerns about transparency and accountability in the pharmaceutical supply chain, a system that affects millions of Americans who rely on employer-sponsored and government health coverage.
For Ohio residents and policymakers, the latest federal findings carry particular significance. The state was among the first to document this type of alleged overbilling, and its earlier audit findings laid groundwork for the national conversation now unfolding around PBM reform.
What Happened
The federal government on Friday accused CVS Caremark — the pharmacy benefit manager arm of CVS Health — of overbilling a health program covering approximately 9 million federal employees by $615 million over a four-year period. The audit was conducted by the inspector general of the Office of Personnel Management, which oversees the Federal Employees Health Benefits Program.
CVS Caremark was managing drug transactions on behalf of Blue Cross and Blue Shield, the insurer administering the federal employees’ health plan. The audit covered transactions that took place between 2018 and 2021, and the inspector general recommended that OPM demand repayment of approximately $600 million from CVS.
CVS pushed back on the findings, with spokeswoman Shelly Bendit characterizing the audit as “fundamentally a retroactive contract dispute” that arose after OPM updated its transparency guidelines for PBMs. Bendit noted that the audit raised no concerns about patient safety, drug access, fraud, pharmacy reimbursements, or drug rebates.
The findings closely mirror those from an Ohio Department of Medicaid audit conducted in 2018. That investigation found that pharmacy benefit managers owned by CVS and UnitedHealth had billed Ohio’s Medicaid program $224 million more for drugs in 2017 than the amount the companies actually paid to pharmacists — a practice known as “spread pricing.”
By the Numbers
- $615 million: The amount the federal inspector general says CVS Caremark overbilled the Federal Employees Health Benefits Program.
- $600 million: The approximate repayment amount the inspector general recommended OPM demand from CVS.
- $224 million: The excess amount Ohio’s Medicaid program was billed by CVS- and UnitedHealth-owned PBMs in a single year, 2017, according to a state audit.
- 9 million: The number of federal employees and their dependents covered under the Federal Employees Health Benefits Program affected by the alleged overbilling.
- ~80%: The share of insured drug transactions in the United States controlled by the three largest PBMs — CVS Caremark, UnitedHealth’s Optum Rx, and Cigna’s Express Scripts.
Zoom Out
The latest federal audit arrives amid intensifying national scrutiny of pharmacy benefit managers, which act as intermediaries between drug manufacturers, insurers, and pharmacies. CVS Health, UnitedHealth Group, and Cigna-Express Scripts each rank among the 15 largest corporations in the United States, and their PBM subsidiaries collectively handle the vast majority of insured prescription drug transactions.
Critics have long argued that the concentrated PBM market creates structural incentives for opaque billing practices. PBMs negotiate rebates with drug manufacturers in exchange for favorable formulary placement — a practice researchers have linked to higher list prices for medications. They also set reimbursement rates for pharmacies, and because the parent companies of the major PBMs also operate their own pharmacy chains, critics contend there is a built-in conflict of interest.
Ohio was an early flashpoint in the national debate. The 2018 state Medicaid audit helped spur legislative action in Ohio and contributed to broader federal interest in PBM reform. Several states have since passed laws requiring greater PBM transparency, and Congress has held multiple hearings on the issue in recent years.
What’s Next
The Office of Personnel Management will review the inspector general’s recommendation and determine whether to formally demand repayment from CVS. CVS has indicated it intends to contest the findings and continues to maintain that the audit reflects a retroactive reinterpretation of contract terms rather than improper conduct.
Separately, federal legislative efforts to reform PBM practices remain active in Congress, with proposals focused on increasing price transparency, prohibiting certain spread pricing arrangements, and limiting the vertical integration of PBMs with insurers and pharmacy chains. The outcome of the federal audit against CVS could add momentum to those efforts and potentially influence how other states approach PBM oversight going forward.