If You Didn’t Write the Contract, You’d Better Rewrite the Rules.
Most health plan contracts come pre-written—by brokers, vendors, or consultants.
But when things go wrong, you’re the one with your name on the line.
Under ERISA and the CAA, fiduciaries are legally responsible for what’s buried in the fine print—even if they didn’t negotiate a word of it.
If your contract includes gag clauses, audit restrictions, or vague pricing terms you may already be out of bounds.
And courts are starting to notice.
The good news?
You don’t need to be a lawyer. You need a better checklist.
Whether you’re cleaning up an old contract or screening new PBMs, this 15-point checklist helps you identify red flags, demand changes, and protect your plan—and yourself.
Executive Brief: The Risks Are Buried in the Fine Print
Opaque health plan contracts aren’t just frustrating—they’re dangerous. Hidden markups. Vague rebate terms. Audit restrictions. Most of it favors the vendor—not you.
And too often, fiduciaries inherit contracts they didn’t negotiate or fully understand. That’s no excuse under ERISA.
And now, plaintiffs’ attorneys are watching (and actively looking for cases).
This 15-point checklist is your practical tool for identifying fiduciary red flags and demanding vendor accountability.
If you don’t write the terms, you’ll inherit the consequences.
Navigating contract minefield
What to Watch For
If your PBM contract has any of the following, you’re exposed:
Spread pricing (you’re charged more than the pharmacy is paid)
Rebate retention or vague passthrough language
Audit restrictions or data access delays
Gag clauses or coercive pharmacy steering
Misclassified generics labeled as “specialty”
No performance guarantees or termination rights
Most of these issues conflict with ERISA and the CAA—and violate basic fiduciary duty.
15-Point PBM Contract Checklist
Use this fiduciary-aligned checklist to fix your current contract—or benchmark transparent PBM alternatives.
Pricing and Revenue Integrity
Spread Pricing Prohibition Plan pays exactly what the PBM pays the pharmacy—no markup.
Unrestricted Audit Access Auditor of plan’s choice with 30-day data delivery and no PBM veto.
Real-Time Claims Access Full claims and pricing data, de-identified, machine-readable.
Data Portability Right to integrate with third-party tools and analytics platforms.
Fiduciary Compliance and Enforcement
Termination for Cause or Convenience Contract termination must be allowed without excessive penalties.
Performance Guarantees With Clawbacks Missed targets are compensated with money back not future credits.
Participant-First Clinical Oversight Plan retains authority over care access and affordability decisions.
Formulary and Clinical Integrity
Generic Drug Classification Generics must not be reclassified as specialty.
Formulary Review and Approval Rights Plan has final say on what’s covered—and how it’s classified.
The Only Safe Way Through a Fiduciary Minefield? A Map Like This Checklist. Download it. Use it. Protect your plan.
What Happens If You Don’t?
Multiple lawsuits show where this leads:
J&J – Allegedly failed to prevent inflated drug pricing
JPMorgan Chase – Accused of conflicts of interest and self-dealing
Albertsons – Sued for signing PBM contracts without transparency
These aren’t mom-and-pop employers. They had consultants. Advisors. Brokers. And still missed the mark.
Don’t follow their example. Fiduciary failure isn’t just doing the wrong thing. It’s doing nothing at all.”
Now What? Here’s What to Do Next
Use the checklist to move from compliance review to contract control:
Send It to Your Current Vendor → Ask for a written response on each item and schedule a discussion with your account manager. Pro tip: Include your legal team or fiduciary advisor in the meeting.
Include It in a Pre-RFP RFI → Use the checklist to pre-screen vendors before you even start an RFP. Require them to affirm these terms as a condition for moving forward.
Attach It to Your RFP as a Model Contract → Flip the script: you set the terms. Ask vendors to redline your model agreement instead of starting with theirs.
Use It to Educate Your Committee → Walk through each item with your fiduciary committee or benefits team to build internal alignment and document your oversight process.
Track Responses and Update Regularly → Treat the checklist as a living document. Record vendor positions, set reminders for re-evaluation, and share updates with your fiduciary team.
Put The Checklist to Work
Key Takeaways
Most PBM contracts fail basic fiduciary standards
Use the checklist to fix your contract or guide vendor selection
Each clause matters—especially in court
Fiduciary duty means oversight, documentation, and enforcement
This checklist turns passive plan sponsors into active stewards
The biggest risk? Doing nothing.
You can’t control who sues. But you can control what they find when they open your contract.
The PBM Field Guide Is Coming
The tools to operationalize PBM reform are on the way.
This summer, Nautilus is launching the PBM Field Guide at RosettaFest 2025 in Denver—a practical roadmap to apply the best of state reform, align with fiduciary principles, and take back control of your pharmacy benefits.
The guide is structured around the Six Pillars of Fiduciary-Aligned PBMs:
Clinical stewardship
Full financial transparency
Unconflicted procurement
Data ownership & protection
Local access & provider fairness
Attestation & oversight
Advisers and employers will be able to:
Make confident, compliant decisions in the best interest of plan participants
Use open-source RFP language, contract terms, and transparent pricing standards
Avoid hidden fees, audit obstacles, and rebate distortions
Build oversight systems that keep vendors honest—and participants protected
RosettaFest 2025
Join the Brightest Minds, Leaders, and Change Makers.
Tired of the dark? Join us at RosettaFest 2025—and help build the future of pharmacy benefits. You’ll never look at PBMs the same way again.
💸 SPECIAL OFFER: Newsletter subscribers receive 10% off any Validation Institute service. Use code FIDUCIARY10 at checkout.
validationinstitute.com
📬 PAY IT FORWARD: Feel free to forward this offer to your broker, PBM, or other vendors. Don’t hesitate to tell them you will favor validated vendors as part of your modernized procurement processes. Strong compliance and better benefits begin with validation.
Don’t be a bystander. Change the status quo and reap the benefits of The Health Plan Compliance Advantage.
