The Fallout of Inflated Usual & Customary Pricing

According to a March 27, 2025 U.S. Department of Justice press release, Walgreens has agreed to pay over $2.8 million to settle allegations of overbilling Medicaid Programs in Massachusetts and Georgia. Allegedly, Walgreens was submitting a higher usual and customary (U&C) price on certain generic drugs billed to these Medicaid programs which caused Medicaid to pay more than they should have. This comes on the heels of their 2019 $60 million settlement with the U.S. Government for violating the False Claims Act after it was discovered that they overbilled 39 State Medicaid programs by failing to disclose to, and charge, Medicaid the lower drug prices that Walgreens offered the public through a discount program.

As the Walgreens settlements illuminate, a discount club for cash-paying patients does not eliminate the threat of U&C violations. Not convinced yet? How about another example with CVS. Blue Cross Blue Shield filed a lawsuit against CVS in 2020 alleging that CVS overcharge the plan for generic drugs by way of an inflated U&C all stemming from the CVS Health Savings Pass and subsequent Value Prescription Savings Card. CVS purportedly used these programs to hide the cash price for patients paying out of pocket in order to “protect”/bill the higher U&C prices to third-party payors.

While Walgreens and CVS are “big fish”, it is important to note that the obligation to submit accurate U&C pricing is applicable to all pharmacies when billing. Consider OptumRx’s definition of Usual and Customary found on page 19 of the 2025 Provider Manual Version 2.1:

Price charged by Network Pharmacy Provider to the general public at the time of dispensing for the same Drug Product including all applicable customer discounts, such as advertised or sale prices, special customer, senior citizen, frequent shopper, coupons or other discounts, a cash paying customer pays Network Pharmacy Provider for Drug Products, devices, products and/or supplies. Network Pharmacy Provider must supply proof of a cash Prescription (i.e. without any disclosure of PHI) when necessary to evaluate the appropriate adjudication of the Transaction. Alteration of the U&C price to attempt to increase Claim payment without a true change to the cash price being offered to the general public will be considered non-compliance and a violation of the Agreement. The Network Pharmacy Provider must be able to communicate the U&C price to Administrator upon inquiry, failure to disclose this information may be considered noncompliance.

Just like OptumRx, other major PBMs also make attempts to validate the price submitted to the plan is the same price offered to a cash paying customer and the same price submitted to any other payor for the same quantity of the same drug during the same period of time. This is frequently seen with Humana on-site audits where they may request the U&C of several medications.

If a third-party payor discovers your pharmacy is submitting inflated U&C prices to them, you may receive a cease and desist letter, be warned of a contract violation, and potentially face contract termination. Additionally, false claims against the government are no joke. You could be looking at treble (triple) damages and anywhere from $14,000 to $28,000 per claim in penalties!

Additionally, …

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Did you know there is much more to your audit assistance membership than just help with audits? The PAAS Member Portal contains a wealth of information and resources to assist you with audits and member service questions. Below is a list of 6 pages found on the Audit Assistance section of the PAAS Member Portal to assist you and your pharmacy staff to be proactive when it comes to audits.

  • Access Services
    • Audit Documentation Submission Guidance
    • An online form to submit safe filling and billing questions
    • Your PAAS Membership Manual
  • Newsline
    • Monthly newsletter articles, written by our expert PAAS analyst team, provide safe filling and billing tips and relays relevant/current PBM trends to be help prevent audits
    • Search the Newsline Archive to get PAAS tips at the click of a button
    • Special Edition Newslines including: Top 10 articles of the prior year, DMEPOS Article Series and a Self-Audit Article Series
    • Ability to print monthly issues or individual articles
  • Proactive Tips
    • Audit flags – list of various claim attributes the PBMs use to select claims for audit
    • Billing insulin vials – flowchart to assist whether you should bill Medicare Part B vs Part D
    • DAW Codes Explained – use to understand when to effectively use DAW codes, their definitions and why claims may be flagged for audit if a DAW code is used incorrectly
    • Basic DMEPOS documentation guidance
    • Onsite Credentialing Checklist and expanded definitions of policies and procedures
    • Proof of refill request and affirmative response form for DMEPOS items
    • Steps on how to prepare for an onsite audit
    • And more!
  • Days’ Supply Charts
    • Utilize the days’ supply charts for inhalers, insulins, nasal sprays, eye drops and topicals to aid you in calculating the correct days’ supply
    • Guidance on overbilled quantities and incorrect days’ supply account for a sizable portion of audit chargebacks
    • Additional miscellaneous charts, which include: Dispense in Original Container and Return to Stock
  • Forms
    • Signature Logbook for print
    • Signature Trifold Mailer
    • Fax and Email Coversheet
    • Patient Attestation for over-the-counter COVID-19 test kits
  • On-Demand Webinars
    • Short webinars on hot topics in the PBM industry. Here are a few examples:
      • USP 800 Compliance
      • Cultural Competency Training
      • Dispensing Prescriptions Off-Label
      • Biologic Medications and Interchangeability
      • Continuous Glucose Monitor Requirements for Medicare Part B

PAAS Tips:

  • MORE AUDITS, MORE INSIGHT – PAAS National® is the industry-leading defender of community pharmacy dealings with Prescription Benefit Programs, including Caremark, Express Scripts, Humana, Medicaid, OptumRx, Prime Therapeutics., and more. PAAS assists on all third-party audits, including: desktop audits, onsite audits, invoice audits, OIG/Medicaid audits, Medicare B audits. The PAAS team is dedicated to helping you! We have five pharmacists and a complement of technician analysts with over 50 years of dedicated audit assistance experience. PAAS continuously updates their database with every audit received — in fact, we even keep a scorecard on individual auditors.
  • Get answers to your questions on days’ supply calculations, drug substitutions, billing practices, required documentation, prior authorization requirements, record retention, and internal audit procedures – just to name a few. As a trusted partner, we will provide tailored guidance to help you proactively prevent audits. Remember, the prescription claims you submit today are the audits of the future.
  • Keep your employees engaged and help lower audit risk by adding all employees to the portal and giving them permission to access these tools, resources and eNewsline. For more information review September 2019 Newsline article, What Are You Waiting For? Make Sure ALL of Your Employees are Added to the PAAS Portal!
  • Contact PAAS at (608) 873-1342, if you would like a tour of your PAAS Member Portal, so you can reap all the benefits of your PAAS Audit Assistance. We appreciate you being a member.

Sara Hathaway, PharmD
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