High Drug Prices Targeted

Most of us have all seen those pharmaceutical ads targeting the Pharmacy Benefit Managers, or PBMs. One major employer is now being sued for allowing the cost of its pharmacy benefit plan to inflate dramatically because of its arrangement with a PBM. Ironically, the employer is Johnson & Johnson, and the plaintiff is one of their employees – a “healthcare and advocacy director”. Their arrangement with a mail-order pharmacy owned by their PBM led to drastic inflation in the prices of some of their covered drugs – in at least one case by as much as a factor of 250. A number of VBS partners remember the struggle to comply with the so-called RxDC reporting last year. That was part of the “No Surprises Act,” which was supposed to help control drug prices by submitting their prescription plan data to the Centers for Medicare and Medicaid Services. Unfortunately, that act did NOT cover PBMs. 

The case is still pending, but the possibility that the employer neglected their fiduciary duty under ERISA looms over many more than just J&J. According to NFP, Plan fiduciaries have a dual responsibility: the “duty of loyalty” (to watch out for the best interests of plan participants and beneficiaries) and the duty of prudence (to exercise the care in decision-making that would be expected of any fiduciary). The latter includes documenting the decision-making process to ensure that it is indeed for the benefit of the participants. Under both of those duties, sponsors are obligated to monitor other individuals or organizations involved in providing the benefit, such as third-party administrators (TPAs), PBMs or other vendors. That is where J&J allegedly failed. 

NFP also points out that for fully-insured plans, the fiduciary obligation is shared by the carrier and the sponsor, while under self-insured plans, the sponsor carries most of the entire load.