Pharmacy Benefit Managers and Pharmacies Face Mounting Legal Scrutiny

In a significant shift within the healthcare enforcement landscape, pharmacy benefit managers (PBMs) and pharmacies have emerged as primary targets of federal False Claims Act (FCA) investigations in 2025, marking a notable evolution in how regulators view these once-background players in the prescription drug ecosystem.

PBMs, which arose in the late 1960s as employer-sponsored drug coverage expanded, have traditionally served as intermediaries managing prescription coverage for health plans and large employers. They determine which medications receive coverage, negotiate discounts with pharmaceutical manufacturers, and establish reimbursement rates for pharmacies. While initially created to centralize purchasing power and streamline administrative processes, their growing influence has attracted increased regulatory scrutiny.

The Department of Justice (DOJ) has dramatically intensified its focus on these entities, reflected in a series of high-profile enforcement actions this year that collectively signal a new enforcement priority.

In April, Walgreens agreed to a $350 million settlement over allegations it illegally filled opioid prescriptions and submitted false reimbursement claims to Medicare and other federal healthcare programs. Just two months later, a Philadelphia federal judge found CVS Caremark liable under the FCA for knowingly causing health insurers to submit claims with inflated prescription drug prices to Medicare Part D. The court initially assessed $95 million in damages before adding penalties that brought CVS Caremark’s total liability to nearly $290 million.

“These cases demonstrate the government’s commitment to holding accountable every link in the pharmaceutical supply chain,” said a senior DOJ official familiar with the enforcement strategy.

The enforcement trend extends beyond major corporations. In August, the DOJ reached an $825,000 FCA settlement with a single-location pharmacy in Allentown, Pennsylvania, for allegedly billing Medicare for drugs it never dispensed. This settlement underscores that even small independent pharmacies face significant scrutiny under the agency’s expanded enforcement vision.

Further cementing this shift, the DOJ and Department of Health and Human Services Office of Inspector General (HHS-OIG) announced a new False Claims Act Working Group in July, which explicitly listed “drug, device or biologics pricing” among its six enforcement priorities.

Industry analysts note this represents a strategic pivot from the DOJ’s historical focus on pharmaceutical manufacturers. During the early 2000s, DOJ secured major settlements with companies like Pfizer and GlaxoSmithKline over off-label marketing and kickback allegations. Today’s enforcement landscape treats PBMs and pharmacies as influential gatekeepers whose pricing, formulary, and dispensing decisions directly impact government spending, particularly in Medicare Part D.

The CVS Caremark case exemplifies this new approach. Following an eight-day bench trial, the court determined that from 2010 to 2016, Caremark submitted inflated prescription drug pricing data to Medicare Part D. Central to this finding was evidence that Caremark maximized profits through “spread pricing” – charging insurers more for drugs than they reimbursed to pharmacies. The court relied on company contracts, internal emails, and employee testimony to conclude that Caremark understood CMS rules yet deliberately designed and concealed strategies to earn hidden spreads on Part D claims. CVS Caremark has contested these findings and is appealing the judgment.

Industry experts suggest these cases reflect broader tensions in pharmaceutical pricing transparency. “PBMs have operated in relative obscurity for decades, but their pricing practices and market influence have come under increasing scrutiny from regulators, lawmakers, and consumer advocates,” explains Dr. Eleanor Martinez, a healthcare policy researcher at the University of Michigan.

The enforcement actions align with parallel efforts by the Federal Trade Commission and bipartisan congressional initiatives focused on drug pricing transparency. This multi-pronged approach suggests a coordinated effort to address concerns about rising prescription costs and pricing opacity throughout the pharmaceutical supply chain.

For pharmacies and PBMs, the compliance implications are significant. Industry analysts recommend strengthening data controls, enhancing dispensing protocols (especially for controlled substances), conducting regular compliance audits, and anticipating further enforcement actions. Companies should treat pricing data submissions as high-risk functions requiring rigorous governance and meaningful oversight, not merely technical back-office tasks.

As the DOJ continues its enforcement push into 2026, industry observers expect additional investigations focused on rebate structures, pharmacy contract arrangements, prior-authorization rules, and algorithmic pricing and dispensing controls. With penalties potentially reaching hundreds of millions of dollars, the stakes for compliance failure have never been higher in this sector.

“This is no longer just about isolated billing errors,” noted healthcare attorney Jessica Reynolds. “The government is examining fundamental business models and program designs, which represents a much more existential risk for many companies in this space.”