If you’re a payer, chances are you already know you’re losing money. But the real question is where.
Over the last two years, I’ve had hundreds of conversations with pharmacy operations leaders across the country. Everyone is focused on drug costs, rebates, and specialty pharmacy. Those are real issues. But there’s a more immediate, more solvable source of waste that rarely makes headlines:
We’re still paying pharmacy claims for people we don’t even cover.
Whether it’s retroactive terminations or uncoordinated benefits, the result is the same: money out the door that should never have left. And unlike GLP-1 spend or 340B disputes, we already know how to fix it.
How bad is it? Worse than you think.
Let’s start with retro term, short for retroactive terminations. This is when a member is no longer eligible for coverage, but your system hasn’t caught up. So, when the pharmacy submits a claim, the system approves it. Days, weeks, or even months later, someone realizes the member shouldn’t have been eligible.
In theory, this should be rare. In practice, it’s alarmingly common.
In our work across payers, we regularly see retro term overpayments accounting for up to 50 basis points of a plan’s total pharmacy spend. That may not sound like much until you do the math. For a plan with $1 billion in pharmacy benefits, that’s $5 million in avoidable loss every year.
Then there’s coordination of benefits (COB). This is where another payer—Medicare, Medicaid, a commercial plan—should be primary. But you pay the claim anyway because the system didn’t have the right data at the right time.
For Medicaid populations, it’s not unusual to see COB overlap rates above 10%. In every one of those cases, Medicaid is the payer of last resort. Every one of those claims is a leak.
Why this keeps happening
So why are payers, many of whom have invested millions in payment integrity, still hemorrhaging dollars to eligibility and COB issues?
There are three core reasons:
1. Eligibility data is fragmented and lagging
Most payer systems are built to process claims, not to make eligibility decisions in real time. They rely on upstream data feeds from employers, exchanges, or government agencies. If a member changes jobs, gets divorced, turns 65, or moves to a different policy, that change may not be reflected for weeks.
By then, the claims have already been paid.
2. Pharmacy claims move fast
Medical claims often have days or weeks of lag time. Pharmacy claims? They’re adjudicated at the point of sale, often in seconds. That speed is great for member experience, but it leaves little time to assess eligibility or payer primacy.
That’s why many of the most impactful COB and retro term solutions live in post-pay, not prepay. They require thoughtful, fast, and scalable post-adjudication review, not just real-time denial.
3. Most internal teams are stretched thin
Even the best payment integrity teams often lack deep pharmacy domain expertise. Pharmacy benefit managers (PBMs) aren’t built for recovery. And pharmacy-specific COB nuances, like Medicare Part D rules or state-specific Medicaid eligibility quirks, require a specialized knowledge base.
Without it, high-dollar opportunities get missed or miscategorized.
What the numbers say
In 2024, we launched a Medicare Part D COB recovery services for a national prescription drug plan (PDP). In the first 12 months, we recovered over $46 million of pharmacy claim overpayments. This wasn’t buried in obscure policies. These were straightforward opportunities to coordinate with a primary payer.
In another case, we helped an employer identify $3.5 million in COB and retro term overpayments incurred by their group health plan, amounting to $33 per member.
These aren’t outliers. They’re representative of the scale of the problem when pharmacy ops isn’t purpose-built to find and fix these issues.
The downstream effects
Lost money is only one consequence. COB and retro term failures can also:
- Distort financial forecasting
- Drive up medical loss ratios (MLRs)
- Delay member reimbursements
- Erode trust with pharmacy networks
- Trigger compliance risk, especially in Medicaid and Medicare Advantage
When payers don’t have confidence in eligibility data, they can’t make sound strategic decisions about benefit design, PBM negotiation, or risk adjustment. And when providers see inconsistent enforcement of primacy, abrasion increases.
You can't automate what you don't understand
Let’s talk solutions.
The good news is that pharmacy COB and retro term aren’t unsolvable problems. But they are deceptively complex. You can’t just throw automation at them and hope it sticks.
During our implementation, we evaluate core aspects of eligibility management, such as:
- What processes or sources generate indications of other coverage used in the plan’s adjudication?
- How is other coverage communicated to the PBM and how is this information used in point-of-sale pharmacy transactions?
- How does your eligibility system affect retrospective changes in eligibility, such as voiding a policy?
- Which groups or member populations are subject to unique plan terms or order of benefits?
- How are you recovering pharmacy claims today?
From there, we apply a combination of:
- Advanced data mining to identify suspect claims
- Enrichment tools (e.g., CAQH, CMS, ISO, proprietary databases)
- Rules-based engines to validate primacy based on NAIC and statutory guidelines
- Human oversight to handle ambiguous or legally complex cases
For you, this means fewer overpayments, more accurate COB enforcement, and faster identification of members who require post-pay reprocessing.
What payers can do right now
If you’re serious about pharmacy cost containment, start here:
- Audit your last 12 months of pharmacy claims for retro term errors. What did they cost you?
- Evaluate your COB workflows. Are you able to prevent COB-related overpayments for all lines of business?
- Assess your recovery capabilities. If you identify a pharmacy claim overpayment, are you able to recover it? What is your recovery rate?
Then ask if you have the right partners, processes, and platform in place to close these gaps?
The ROI is immediate
The industry spends a lot of time chasing unicorns like predictive analytics, real-time claims intelligence, and next-gen formularies.
Those are exciting. But the biggest return on investment still comes from the basics. Clean eligibility. Accurate coordination. Timely recovery.
A well-executed pharmacy COB and retro term program can:
- Deliver ROI in <120 days
- Achieve 5X ROI in the first year
- Reduce provider abrasion by clarifying payment responsibility upstream
- Enable prepay actionability for high-confidence opportunities
These metrics are real, and the results are achievable with a system that works and a payer that prioritizes pharmacy savings as a strategic lever.
A final thought
The industry talks a lot about fraud. If you’re like most payers, however, you don’t have a fraud problem. You have a leakage problem. And much of that leakage is happening in pharmacy. It’s silent, systemic, and solvable.
Until we treat pharmacy payment integrity like a strategic priority, not a side task, we’ll keep missing the fastest route to measurable savings.
Every strong PI program includes pharmacy COB and retro term, but few realize how quickly these interventions pay back. Those who do are already capturing meaningful value and clearer operational insight. The rest are giving up savings they could claim today.
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