The pharmaceutical supply chain has long been characterized by complex relationships among drug manufacturers, distributors, pharmacy benefit managers (PBMs), and retail pharmacies. In recent years, state attorneys general have increasingly turned their attention to the practices of PBMs, which serve as intermediaries between insurers and pharmacies, often wielding significant influence over drug pricing and pharmacy reimbursement. A recent enforcement action by the Rhode Island Attorney General’s Office against Prime Therapeutics offers a compelling example of how state regulators are leveraging existing statutory frameworks, and strategic enforcement tools, to protect independent pharmacies from potentially abusive audit practices.
Background and Enforcement
On October 27, 2025, Prime Therapeutics, a PBM and subsidiary of the Blue Cross Blue Shield Association, initiated unannounced on-site audits of three independent Rhode Island pharmacies, each of which was owned by members of the same family. Shortly thereafter, Rhode Island Attorney General Peter F. Neronha filed a complaint in Providence Superior Court alleging that Prime Therapeutics violated Rhode Island’s Pharmacy Audit Act (R.I. Gen. Laws § 5-19.1-35).
Rhode Island’s Pharmacy Audit Act establishes procedural protections for pharmacies subject to PBM audits, including: (1) requirements for 14 days’ advance notice; (2) limitation of audit scope to a two-year period; (3) restriction to one audit per pharmacy per year absent suspected fraud; and (4) prohibition on compensating auditors based on recouped amounts.
The Attorney General alleged that Prime Therapeutics violated these provisions by: (1) conducting unannounced audits without proper notice; (2) auditing beyond the permitted timeframe; and (3) refusing to allow rescheduling.
Rather than pursuing the lawsuit to a final judgment, the Attorney General’s Office resolved the matter in early February 2026 (less than four months from the initial audit date) through an Assurance of Voluntary Compliance (AVC) filed in court. Under the terms of the AVC, Prime Therapeutics agreed to terminate the audits initiated in October 2025, and to conduct all future audits in compliance with Rhode Island law. Prime Therapeutics also agreed to additional prospective compliance measures, including the production of memoranda detailing the basis for future audits and a commitment not to use common ownership as the sole justification for expanding an exempt audit from one pharmacy to other related locations.
The decision to resolve the matter with an AVC reflects a pragmatic approach to regulatory enforcement. Several factors likely influenced this choice. First, the primary objective of the enforcement action was to stop the allegedly unlawful audits and prevent future violations. By securing an AVC, the Attorney General achieved immediate cessation of harmful conduct, protecting the three independent pharmacies from continued administrative burden and disruption, without the delays inherent in protracted litigation.
Second, the AVC allowed the Attorney General to negotiate enhanced prospective compliance measures that may not have been available through a court judgment focused solely on past liability related to the three audits specifically at issue. The requirement that Prime Therapeutics document the reasons for conducting an exempt audit and update the record when seeking to widen the audit’s scope creates a more robust compliance framework than a simple finding of past liability would have provided. These forward-looking provisions are designed to help ensure the company’s future adherence to the law, an outcome that should benefit all independent pharmacies in Rhode Island.
Third, pursuing litigation to judgment would have required significant time and resources from the Attorney General’s Office. Since the Pharmacy Audit Act was recently strengthened, settling via an AVC allowed the office to establish a precedent for enforcement without the expense and uncertainty of a full trial, freeing up resources for other priorities (including the office’s larger 2025 lawsuit against CVS Caremark, Express Scripts, and OptumRx for their alleged role in unfairly increasing prescription drug costs).
Fourth, the nature of the alleged violations favored a compliance-oriented resolution. These were procedural violations rather than allegations of fraud or intentional misconduct that might warrant punitive damages, further limiting the benefit of protracted litigation. An AVC was well-suited to address procedural compliance issues where the goal is corrective action rather than punishment.
Broader Implications for PBM Oversight and Practical Guidance for Pharmacies
The Prime Therapeutics enforcement action is emblematic of a broader trend in state-level regulation of PBMs. Independent pharmacies have long argued that PBMs engage in practices that increase administrative costs and reduce reimbursement rates, putting independent operators at a competitive disadvantage relative to pharmacies affiliated with the PBMs themselves. State legislatures have responded by enacting pharmacy audit laws and other protections, and attorneys general are increasingly willing to enforce these statutes.
Attorney General Neronha’s public statement upon announcing the resolution of the enforcement action underscored the policy rationale for aggressive oversight: “This kind of behavior can drive up pharmacy costs, limit care choices, and harm local businesses if left unchecked. So, we checked it.” The swift resolution of the Prime Therapeutics matter demonstrates the state’s willingness and ability to act, which may deter future violations by other industry actors without the need for protracted litigation.
The Prime Therapeutics case provides a roadmap for pharmacies seeking to leverage state enforcement mechanisms when confronted with potentially unlawful PBM conduct. It is critical that pharmacies know their rights under the Pharmacy Audit Act or similar laws in their home state. Do not assume you must handle audits alone. While pharmacies may be reluctant to challenge powerful PBMs for fear of retaliation or network exclusion, the existence of statutory protections and the demonstrated willingness of the Attorney General’s Office to enforce them creates a shield against such concerns.
How Frier Levitt Can Help
With experience navigating the varying state regulations governing retail pharmacy services and PBMs, Frier Levitt is uniquely positioned to counsel pharmacies nationwide. If you have questions about any recent statutory developments in your state or require assistance with an ongoing dispute with a PBM, the attorneys at Frier Levitt would be happy to assist.
