The Employer's Guide Blog for Overseeing PBMs

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Breaking: Employees Hit Johnson & Johnson with a Major Lawsuit Over Sky-High Drug Costs

In this legal dispute, employees hit Johnson & Johnson with a major lawsuit. Ann Lewandowski and other plaintiffs are suing Johnson & Johnson for allegedly mismanaging their prescription-drug benefits, resulting in significant financial losses for participants in the company’s ERISA plans. The complaint asserts that Johnson & Johnson and its benefits committee failed in their fiduciary duties by allowing the plans to overpay for prescription drugs, notably generic medications, through arrangements with their Pharmacy Benefits Manager (PBM).

This purported mismanagement led to inflated costs for the plan participants, including higher premiums, deductibles, and out-of-pocket expenses, while potentially costing the plans and their beneficiaries millions of dollars. The case underscores the complex interplay of corporate practices, legal responsibilities, and the financial well-being of employees in the healthcare benefits landscape.

Pharmacy Benefit Managers (PBMs) play a critical role in the healthcare system by acting as intermediaries between employers or health plans and the pharmaceutical world. Their primary functions include negotiating discounts with drug manufacturers, determining the list of covered medications (formulary management), and setting the amount pharmacies are reimbursed for drugs. PBMs aim to reduce prescription drug costs and improve convenience and safety for patients, but their practices and the transparency of their operations have been subjects of debate and scrutiny in the context of overall healthcare affordability and access.

Employers can mitigate the risk of litigation like the Johnson & Johnson case by investing in education around Pharmacy Benefit Managers (PBMs), specifically through Certified Pharmacy Benefit Specialist (CPBS) training. CPBS training equips employers with comprehensive knowledge on how PBMs operate, strategies to ensure that their PBM contracts are cost-effective, and insights into maintaining transparency and accountability in their pharmacy benefits management. By understanding the intricacies of PBM operations and learning to navigate the complex healthcare landscape effectively, employers can safeguard against excessive prescription drug costs and ensure that their benefits plans are managed in the best interest of their employees.

Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

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