Several states, including West Virginia, have heightened scrutiny regarding reimbursement practices, rebate administration and relationships with pharmacies and health plans.
On March 2, 2026, West Virginia’s insurance commissioner entered an administrative order, agreed to by Express Scripts Administrators LLC, assessing a $1.5 million administrative penalty against the pharmacy benefit manager (PBM). The order followed a market conduct examination that identified multiple violations of West Virginia laws governing PBMs. The enforcement action reflects increasing regulatory scrutiny of PBMs by state authorities. Several states, including West Virginia, have heightened scrutiny regarding reimbursement practices, rebate administration and relationships with pharmacies and health plans.
The administrative order follows a detailed market conduct examination conducted by the West Virginia Offices of the Insurance Commissioner that reviewed Express Scripts’ compliance with state law. Express Scripts was investigated for conduct taking place between January 1, 2023, through June 1, 2024.
The examination analyzed multiple aspects of the company’s PBM operations including, but not limited to, pharmacy reimbursement, pharmacy audits, network adequacy, complaint handling, rebate administration and formulary design.
After reviewing the examination findings and Express Scripts’ responses, the insurance commissioner determined that several practices violated state statutes regulating PBMs. Although Express Scripts disputed certain findings, the company agreed to resolve the matter without admitting liability to avoid extended litigation and administrative proceedings.
Pharmacy Reimbursement Violations
A central focus of the findings involved pharmacy reimbursement practices. West Virginia law requires PBMs to reimburse pharmacies for filling prescription medications at the National Average Drug Acquisition Cost (NADAC) plus a professional dispensing fee of $10.49, or alternatively, the wholesale acquisition cost plus the same dispensing fee when NADAC data is unavailable.
The examination concluded that Express Scripts failed to reimburse pharmacies at the required statutory level for a substantial number of claims. Regulators determined that more than 19,500 claims in 2023 and nearly 10,000 claims during the first half of 2024 were reimbursed below the state-mandated level. According to the examination report, these practices resulted in significant underpayments to West Virginia pharmacies.
Preferential Reimbursement to PBM-Affiliated Pharmacies
The examination also found that Express Scripts reimbursed affiliated pharmacies (those pharmacies which Express Scripts owns or has a financial interest in) at higher rates than nonaffiliated pharmacies for numerous prescription drugs. West Virginia law prohibits PBMs from favoring affiliated pharmacies within their networks when reimbursing claims.
Regulators concluded that Express Scripts used a reimbursement methodology for affiliated entities, such as Express Scripts’ mail-order and specialty pharmacies, that substantially differed from the methodology applied to other retail pharmacies in the state, greatly favoring Express Scripts. This practice violates statutory requirements and could lead to higher overall costs for health plans and consumers when prescriptions are filled through PBM-affiliated pharmacies rather than independent pharmacies.
Rebate Pass-Through and 340B Issues
The commissioner also identified compliance issues related to manufacturer rebate administration. Under West Virginia law, PBMs are required to pass through 100 percent of manufacturer rebates, discounts and other remuneration received in connection with prescription drug dispensing. This means consumers must see the entire benefit of manufacture rebates, and PBMs cannot use the rebates to boost their bottom line. The examination found that Express Scripts failed to demonstrate that all rebates were passed through at the point of sale as required by state statute.
In addition, Express Scripts used contractual provisions excluding certain rebates when prescriptions were dispensed through 340B pharmacies, even when the claims themselves were not 340B transactions. West Virginia law requires 340B pharmacy providers that bill claims using pharmaceutical inventory purchased under Section 340B pricing to identify the claims using National Council for Prescription Drug Programs values. The report concluded that Express Scripts’ Network Provider Manual outlines specific details related to general claims submission and the requirements to submit a 340B drug that do not align with West Virginia code. These actions could prevent patients from receiving the full benefit of manufacturer rebates—and could actually disadvantage pharmacies participating in the federal 340B program.
Pharmacy Audit Practices
Another significant component of the examination involved the PBM’s pharmacy audit procedures. West Virginia law permits PBMs to recoup funds from pharmacies when claims are improperly submitted, but limits recoupments to the amount of actual financial harm associated with the claim.
Regulators determined that Express Scripts maintained audit policies allowing recoupments that exceeded the actual financial harm related to the dispensed prescription. The report also found that the PBM assessed noncompliance fees and initiated recoupments before pharmacies had completed the appeal process for audit findings. According to the commissioner, these practices violated statutory limitations governing pharmacy audit procedures.
Fees Charged to Pharmacies
The examination also focused on fees assessed against pharmacy providers. The report found that Express Scripts required independent pharmacies to pay credentialing and recredentialing fees to participate in certain health plan networks. The fee assessed was nonrefundable regardless of denial or approval of the application. Furthermore, every three years independent pharmacies were required to pay additional fees to Express Scripts based on the timeline to recredential. Express Scripts also assessed transaction fees for the use of its claims transmission system.
West Virginia law explicitly prohibits PBMs from deriving revenue from pharmacies in connection with the performance of PBM services. Regulators concluded that these fees violated statutory provisions governing PBM compensation and pharmacy network participation.
Consumer Cost-Sharing Violations
The examination further identified violations affecting health plan members, particularly with respect to insulin cost-sharing. West Virginia law caps cost-sharing for insulin at $35 per 30-day supply, regardless of the type or quantity of insulin prescribed.
The commissioner found that Express Scripts assessed cost-sharing amounts exceeding the statutory limit in 191 claims affecting 79 members, resulting in more than $10,000 in overpayments by consumers. The report also noted that refunds to affected members were issued months after the prescriptions were dispensed and did not adequately explain the reason for the payment.
Network Adequacy and Transparency Issues
The examination also identified deficiencies related to network adequacy and pharmacy directory transparency. West Virginia law requires PBMs to maintain accurate provider directories and update those directories regularly.
Regulators determined that Express Scripts failed to demonstrate that its pharmacy directories were updated monthly and failed to provide evidence that periodic audits of the directories were conducted. The report further concluded that the PBM did not provide required written notice to pharmacies regarding new health benefit plans entering certain geographic areas, potentially limiting pharmacies’ ability to participate in those networks.
Corrective Action and Enforcement Measures
To resolve the matter, Express Scripts agreed to an administrative penalty of $1.5 million and to implement corrective measures designed to bring its operations into compliance with each of the above components of West Virginia law. In addition, the PBM must review affected claims and reimburse pharmacies for underpayments identified during the examination, including interest.
The order also requires the company to submit a corrective action plan detailing changes to its internal policies and procedures to address the violations identified in the examination. The plan must be submitted to the commissioner for approval and implemented after regulatory review.
What This Means for PBMs, Pharmacies and Health Plans
The West Virginia enforcement action reflects the increasing willingness of state regulators to scrutinize PBM practices through detailed conduct examinations. The order highlights several compliance issues that regulators are likely to continue focusing on across jurisdictions:
- Compliance with state pharmacy reimbursement formulas, particularly NADAC-based reimbursement requirements
- Rebate transparency and statutory obligations to pass-through manufacturer rebates
- Pharmacy audit practices and limitations on recoupment amounts
- PBM relationships with affiliated pharmacies and potential preferential reimbursement structures
- Compliance with statutory caps on patient cost-sharing for certain medications
- Transparency and accuracy of pharmacy network design
As state regulation continues to expand, enforcement actions such as this one illustrate the growing regulatory attention directed at PBMs. Of interest to independent and community pharmacies, the West Virginia action highlights the increasing willingness of state regulators to investigate PBM conduct and enforce statutory protections.
Pharmacies operating in jurisdictions with robust PBM regulatory frameworks should remain attentive to these developments and may wish to review whether their contracts, reimbursement arrangements and audit interactions with PBMs to ensure compliance with applicable state laws. Increased regulatory scrutiny may also provide pharmacies with additional avenues to raise compliance concerns with regulators when PBM practices appear inconsistent with state statutory requirements.
For More Information
If you have any questions about this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Nikki Baniewicz, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.