Legal Action Aims to Challenge Pharmacy Benefit Managers' Influence on Drug Pricing
In a notable legal development, Ann Lewandowski, a former policy advocate at a major pharmaceutical company, has initiated a lawsuit against her ex-employer, Johnson & Johnson (J&J), asserting that the company failed to fulfill its obligations regarding the management of employee health benefits. The lawsuit targets J&J's contract with pharmacy benefit manager (PBM) Express Scripts, which is affiliated with Cigna, claiming that this partnership has led to excessive costs for employees, including inflated prescription prices and increased out-of-pocket expenses.
Lewandowski contends that J&J's actions effectively cost its employees millions through higher premiums, deductibles, coinsurance, and copayments, alongside stagnant wage growth. Her motivation for filing the lawsuit stems from her personal experience as a health plan user, advocating for a more transparent and cost-effective approach to employee health benefits.
The lawsuit highlights a growing concern over the practices of PBMs, which have come under scrutiny for their role in escalating drug prices in the United States. Recent investigations by the Federal Trade Commission (FTC) into the largest PBMs have revealed a pattern of behavior that may contribute to inflated costs for essential medications, such as insulin.
Legislative efforts are underway to regulate PBMs more effectively, with bipartisan support emerging in Congress. Additionally, new market entrants like Mark Cuban's Cost Plus Drugs are challenging traditional PBM models by promoting transparency and offering lower prices for medications.
Lewandowski's legal action is particularly significant due to its reliance on a revised provision in the Employee Retirement Income Security Act (ERISA), which now mandates prudent management practices for health benefits, not just retirement plans. This legal framework suggests that employers may have a fiduciary duty to manage health care spending responsibly, potentially opening the door for further lawsuits against companies perceived to be mismanaging health benefits.
As dissatisfaction with the current PBM model grows, some employers are beginning to explore alternatives. A recent survey indicates that many U.S. employers are considering switching from traditional PBMs to more transparent options that offer clearer pricing structures and eliminate unclear financial practices.
The shift away from dominant PBMs could lead to significant savings for employers and employees alike. For instance, states like Connecticut have successfully negotiated more transparent contracts that pass savings directly to employees, cutting costs by millions.
As the landscape of pharmacy benefit management evolves, it remains to be seen how Lewandowski's lawsuit and similar legal actions will impact the relationship between employers, PBMs, and drug pricing in the United States. Experts argue that the outcomes could reshape how health benefits are structured and managed across various industries, potentially leading to a more equitable system for employees seeking affordable access to medications.
