J&J Pharmacy Lawsuit - Don't shy away from PBMs, ask for Data & Transparency

What allegedly happened to spark legal action

The Johnson & Johnson ERISA lawsuit brought attention to the importance of understanding pharmacy benefit manager (PBM) relationships. It highlighted the need for transparency in pricing, formulary management, and potential conflicts of interest. The lawsuit underscores the significance of employers comprehending their PBM relationships to effectively manage pharmacy costs and ensure employee satisfaction.

"An alleged analysis of average drug costs cited by the lawsuit found that J&J agreed to a 498% markup for drugs when compared to pharmacy acquisition costs. It also agreed to a plan under which beneficiaries were incentivized to get prescriptions from the PBM’s own pharmacy, which would cost less for beneficiaries but cost the ERISA plans thousands more, the complaint said."

The lawsuit used as an example the generic drug teriflunomide, which is used to treat multiple sclerosis. While a 90-pill prescription could be filled at a variety of common drugstores for prices ranging from around $28 to about $77, the complaint alleged, J&J “agreed to make their ERISA plans and their beneficiaries pay $10,239.69 — not a typo — for each 90-pill teriflunomide prescription.”

What comes next for companies that self-fund with a PBM

The lawsuit highlights the need for organizations to thoroughly comprehend their PBM relationships and contractual obligations. By doing so, companies can better navigate the intricacies of pharmacy costs, safeguard their employees' interests, and foster transparent partnerships.

Transparency should be a guiding principle in these relationships. Employers should actively seek clarity on drug pricing, formulary management, and potential conflicts of interest. By focusing on pricing transparency, employers can proactively manage costs, enhance employee satisfaction, and ensure optimal health outcomes.

But...

Self-funding can result in extremely positive outcomes

While this lawsuit paints a potentially ugly picture, there are major benefits to self-funding in partnership with a strong benefits advisor with data-backed decision making and transparency around administrative, actuarial and pharmacy benefit manager parnterships!

RogersGray self-funded our medical plan with a carve-out pharmacy benefit manager along with an additional partner for specialty drugs, we not only saw fantastic financial results, it was a major win for employees out of pocket costs.

"From an HR leader that rolled a new PBM out to our population and then had to manage the employee experience, I found it to be a wonderful tool. There was a transition, but once we were up and running, the savings were substantial for our colleagues." - RG Chief People Officer, Allison McEachern

When considering prescriptions represented almost 24% of our overall spend on health insurance, a 67% decrease represented substantial savings.

Considerations moving forward

1. Review PBM Contracts: Evaluate existing PBM contracts to ensure transparency, fairness, and appropriate oversight. Companies should understand the terms, pricing structures, rebates, and potential conflicts of interest within their agreements.

2. Explore Alternative PBM Models: Consider alternative approaches to PBMs such as direct contracts with pharmacies or working with specialty pharmacies directly. This can provide more control over drug pricing, formulary management, and enhance transparency.

3. Emphasize Cost Transparency: Demand greater transparency in PBM pricing, including the disclosure of rebates, spread pricing, and other fees. Transparency will help companies understand the true cost of medications and identify opportunities for cost savings.

4. Evaluate Formulary Design: Assess the formulary design to ensure it promotes access to cost-effective medications while satisfying employees' healthcare needs. Collaborate with PBMs to ensure the formulary aligns with the company's cost-saving goals and employees' health requirements.

5. Enhance Employee Communication: Communicate transparently with employees about the company's efforts to manage healthcare costs effectively. Educate employees on how prescription drug pricing works, the role of PBMs, and steps taken to ensure their best interests are prioritized.

In need of a PBM audit

The team at BRP can help make sure you don't end up with ERISA problems surrounding the fiduciary responsibilites with your PBM! Below is a quick snapshot of what you should be expecting as part of the process:

1. Define Audit Objectives

2. Review Contractual Agreements

3. Request Relevant Data and Documentation

4. Evaluate PBM Performance

5. Compare Benchmark Data

6. Report Findings and Recommendations

7. Implementation of Improvements

Remember, an independent PBM audit ensures that your company's pharmacy costs are adequately managed, promotes transparency, and ensures the best interests of your employees are met. Reach out today [email protected]