Johnson & Johnson Class Action Lawsuit
In early February, a federal class action lawsuit was filed against Johnson & Johnson (JNJ) and its plan fiduciaries, alleging overpayment for prescription drugs within its prescription drug plan. The complaint alleges that under the Employee Retirement Income Security Act of 1974 (ERISA), JNJ’s plan fiduciaries are obligated to diligently compare service providers, seek cost-effective options, and monitor expenses. It is claimed that the plan fiduciaries failed to act prudently by agreeing to terms with a pharmacy benefit manager (PBM) that resulted in excessive costs for numerous drugs compared to other market options.
The lawsuit highlights the importance of transparency in facilitating comparisons between prescription drug prices across different plans or pharmacies and underscored significant risks faced by health and welfare plan fiduciaries. Publicly available information on drug prices enables individuals – including class action plaintiff attorneys – to scrutinize plan expenses, further emphasizing the need for prudent fiduciary actions.
Employer Considerations
Given the evolving landscape and heightened litigation risks, health plan fiduciaries should take proactive steps to mitigate litigation exposure and safeguard the interests of plan participants:
- Establish a fiduciary committee dedicated to health and welfare benefits and delegate responsibilities accordingly.
- Engage qualified consultants to assess PBMs and prescription drug arrangements, ensuring impartiality.
- Review and negotiate terms of PBM agreements, fee structures, and formularies to ensure reasonability.
- Collect and analyze benchmark information from various sources to evaluate vendor agreements.
- Scrutinize compensation arrangements for reasonability and conflicts of interest.
- Periodically solicit proposals from PBMs and vendors to reassess market competitiveness.
- Document all policies, procedures, and decisions regarding vendor selection and performance monitoring to demonstrate procedural prudence.
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