Marsh McLennan Agency

A recent lawsuit on behalf of Ann Lewandowski filed in New Jersey federal court on 2/5/24 against employer defendant Johnson and Johnson (J&J) is a wake-up call for all of us managing employee health benefits.

The suit alleges J&J breached their duty under the Employee Retirement Income Security Act of 1974 (ERISA) which requires prudent management as a fiduciary of its employee benefits. The lack of this duty cost their plan and employees millions of higher costs for prescriptions. Costs compounded with higher copayments, deductibles and premiums creating limited and lower wage growth.

Cited in the lawsuit, J&J’s plan paid $10,239.69 for a 90-pill of teriflunomide for multiple sclerosis (generic form of Aubagio). A plan member realized they could fill that prescription without going through the J&J employee benefit plan. Noted examples: Wegmans for $40.55, ShopRite at $41.05, Walmart for $76.41 and Rite Aid for $77.41.

Running the health plan as a prudent fiduciary comes into serious question when one drug is 250x higher than the price available to a patient without group coverage walking off the street into a pharmacy.

The suit has implications for pharmacy benefits in fully insured and self-funded benefit plans. States oversee fully insured benefit plans. I would expect to see movement or litigation by State Attorneys General. Self-funded employers with gaps in their oversight need more from their brokers and consultants to evaluate their exposure.

My passion for pharmacy transparency and resolving conflicts of financial interest for my employer clients is personal and based on my past experiences. HR and C-Suites have individual liability for the decisions they make, yet our industry has been intentionally opaque for decades.

"Running the health plan as a prudent fiduciary comes into serious question when one drug is 250x higher than the price available to a patient without group coverage walking off the street into a pharmacy."

I realized at one point my employer used Rx benefits as a profit center. This was not illegal but contradicted my values. Our company chose to retain large rebates plus script fees without adding clinical or clear financial value.

I chose to work in at one of the best firms focused on playing offense in the pharmacy industry. Here firms reinvest and hire inside pharmacy consultants, leverage their analytic talent to produce root cause analysis to Rx spend. You can expect to have conflicts of financial interest resolved for financial accountability. When consulting partners layer in clinical programs that remove obstacles for managing chronic and expensive diseases, medication adherence and clinical outcomes also improve.

Prior to COVID, HR leaders were strained with growing obligations. However, the J&J litigation should not be a wait and see approach.

Here is a comprehensive list of actions plan sponsors should oversee. You should not be on your own. These best practices should be in partnership with your broker or consultant and PBM:

• Verify you have a Fidelity Bond which covers at least 10% of the benefit plan assets just like their 401k plan. • Verify your current Fiduciary Liability policy extends to the health and welfare benefits and covers the individual plan sponsors including defense costs.

• Receive a copy of your PBM contract and have an ERISA attorney and or benefit broker analyze the: o Contract language

- Rebate arrangement

• Annually reprice your pharmacy over your last 12 months vs. other PBMs not limited to the big 3 (CVS Caremark, Express Scripts, Optum). Navitus is a good example. This includes your generics, brand name and specialty pharmacy.

• Include a J-code analysis, which looks at non oral drugs filled as medical expenses vs. within the Rx spend. J codes impact your rebates and may cost than the Rx side.

What does the Johnson & Johnson Employee Lawsuit Mean for Us?

• Independent Prior Authorization with your current PBM may resolve financial alarms.

- During the time of Hepatitis C vaccinations ($90k+), I experienced at least one PBM authorizing fills for patients without a reasonable expectation they would ever develop Hepatitis C. The vaccine was worthless on those patients. A blood test determined this. The PBM gained a $40k rebate but they fell short on clinical protocols.

• Drug formulary evaluation identifies whether limited value drugs exist on your formulary. o Example - Duexis is Pepcid and Ibuprofen but costs on average $3,087 a month.

• Drug sourcing review, which looks at the various drug channels to determine improvements. o An example - sourcing costly specialty therapies found in your plan from Canada.

• Other cost avoidance strategies

- Clinical protocols for semaglutide injections for obesity vs. diabetes

• You may choose to cover this drug class known as GLP-1 for morbid obesity or other diseases impacted by obesity. You might disallow it for patients who have lesser amounts of weight to lose through BMI.