What’s Really Going on with PBMs, and the Johnson & Johnson and Wells Fargo Lawsuits?

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Presented by The Medical Link

Let’s dive into the healthcare lawsuits that have been making waves lately—specifically, those involving PBMs, Johnson & Johnson, and Wells Fargo. They seem reminiscent of the 401(k) issues employers faced in recent years. It feels like everywhere you look another company is facing a lawsuit over questionable practices. But what’s really going on, and how can other businesses avoid finding themselves in the same situation?

Pharmacy Benefit Managers (PBMs) may not be widely recognized, but they play a crucial role in negotiating drug prices between insurance providers and pharmacies. Companies rely on PBMs to manage pharmacy benefits in their employees’ health plans. Three major PBMs—CVS Caremark, OptumRx, and Express Scripts—cover 85% of healthcare plans. Recent lawsuits allege that big companies, including Johnson & Johnson and Wells Fargo, have violated their fiduciary duties by mismanaging their prescription drug programs, particularly regarding how they vet the PBM market and their contracts. This mismanagement has reportedly led to higher prescription costs and increased insurance premiums for employees. Let’s take a look at what the lawsuit against Wells Fargo (Wells Fargo PBM Lawsuit: Key Lessons For Employer Fiduciary Responsibility | PSG (psgconsults.com)) is alleging: 

1.  Allegations of Fund Mismanagement: The bank is accused of improperly managing funds associated with PBM contracts, potentially resulting in higher costs for clients and patients.
2. Lack of Fee Disclosure: Claims have been made that Wells Fargo failed to adequately reveal hidden fees and revenue-sharing agreements within their PBM services, compromising transparency and client trust.
3. Breach of Fiduciary Responsibility: The lawsuits contend that Wells Fargo violated its fiduciary duties regarding their ERISA protected plans by not prioritizing the financial interests of their employees and plan participants leading to negative impacts for them.

Fiduciary responsibilities (Understanding Your Fiduciary Responsibilities Under a Group Health Plan) under the Employee Retirement Income Security Act (ERISA) for insurance plans mean that those in charge have to look out for the best interests of plan participants and beneficiaries. Fiduciaries need to make informed choices about insurance coverage, ensuring the policies offered are a good fit and well-managed to meet participants’ needs. They must always act in the best interest of participants and beneficiaries, steering clear of conflicts of interest, especially when choosing insurance providers and products.  Fiduciaries should provide straightforward information about the insurance plan, including benefits and any fees, so participants can easily understand their options and make informed decisions.

Due to these issues, the lawsuit claims that participants faced harm through rising premium rates and cost-sharing. Increased prescription drug costs led to higher premiums that employees must pay. The complaint also suggests that the failure to negotiate better drug rates forced participants to overpay through higher copayments and cost-sharing. Even when some medications were available at lower prices from pharmacies, but plan participants ended up paying more through the PBM’s contract.

So, what can employers do to avoid situations like this? Here are some proactive steps to consider:

1. Regularly Issue RFPs: Frequently conduct requests for proposals (RFPs) to assess PBM services and ensure competitive pricing, which promotes transparency and can help uncover better options.
2. Explore Non-Traditional PBMs: Investigate non-traditional PBMs that utilize pass-through pricing instead of spread pricing and rebates for greater transparency and potentially lower costs.
3. Negotiate Terms and Pricing: Actively negotiate contract terms and pricing with PBMs, and don’t hesitate to seek better deals or clarify any ambiguous terms.
4. Monitor Formulary Changes: Stay engaged with the management of the drug formulary by regularly reviewing the list of covered medications to ensure a good balance of cost and quality.
5. Consider Specialty Pharmacy Options: Think about using independent vendors for carve-out specialty pharmacy services to avoid being directed toward pricier PBM-owned drugs.
6. Analyze Claims Data: Regularly review claims data to identify trends in drug costs and usage, allowing for early detection of issues that can inform negotiations.
7. Educate Employees: Provide resources and information for employees about their prescription options, including the advantages of using independent pharmacies when available.
8. Implement Cost-Sharing Strategies: Explore methods to manage cost-sharing, such as adjusting copayment tiers to encourage the use of generics and lower-cost alternatives.
9. Consult Experts: Work with a benefits consultant or legal expert who understands PBM contracts and compliance to ensure the plan is effectively designed.
10. Stay Updated on Regulations: Keep informed about changes in healthcare regulations and PBM practices to adjust strategies as necessary.

By taking these proactive steps, employers can navigate the complexities of PBMs more effectively and avoid the legal challenges faced by others. 

Bottom Line
In summary, the complexities surrounding PBMs can create significant challenges for employers and their employees. By adopting a proactive approach, employers can better manage prescription drug costs and ensure their employees receive top-notch care. As the healthcare landscape continues to change, remaining vigilant and informed not only helps protect organizations from potential pitfalls but also enhances the overall well-being of their workforce. Investing time and resources into understanding and optimizing PBM relationships can lead to improved health outcomes and a healthier bottom line.

Interested in learning more? Visit our website at www.medicallink.com today!