The Fiduciary and CAA Compliance Issues at Stake in the Ann Lewandowski v. Johnson & Johnson Case

Why the Suit was Filed

Did you know that in the United States, the cost of insulin, a vital medication for millions of diabetics, has nearly tripled over the past decade, forcing some patients to choose between managing their health or paying for other essentials like food and rent? This is why Johnson & Johnson employee Ann Lewandowski has filed a lawsuit against her employer for breach of both their fiduciary duties and compliance infractions under the Consolidated Appropriations Act (CAA) due to making employees overpay for medications. She says the higher costs of health premiums and medication copays are lowering employee wages.

As a self-funded plan, Johnson & Johnson falls under the Employee Retirement Income Security Act of 1974 (ERISA) rules that describe the employer’s fiduciary responsibility. This case is receiving a lot of attention because of what it could mean for health care reform and drug pricing transparency, not to mention the recent transparency laws imposed under the CAA that put greater scrutiny on the reasonableness of drug and other health plan costs. However, it should be noted that Johnson & Johnson uses a consultant to help them select the best pharmacy benefit manager (PBM) for their employees. That consultant is Aon, and their PBM is Express Scripts. Ultimately, Lewandowski’s suit has the potential to shift the entire health care landscape, creating a lasting precedent for future health care cases.

What’s at Stake?

In the past, Congress has discussed heavier regulations on PBMs. However, passing legislation lowering drug costs has proved challenging due to the deep pockets of special interest groups. Numerous members of Congress have received large campaign contributions from pharmaceutical companies, weakening the ability of compromised lawmakers to negotiate drug prices. Lewandowski’s lawsuit has the potential to change the policies of self-insured companies, forcing them to act as fiduciaries that must ensure the lowest possible drug prices for their employees.

After all, high drug costs can significantly impact both individuals and businesses, leading to challenging financial circumstances. For example, a small business owner could find that their company’s health care expenses are skyrocketing due to the increasing cost of prescription drugs. This surge might force them to make tough decisions between maintaining health benefits for their employees or cutting back on other critical areas of their business.

Fiduciary Responsibility

CAA compliance allows plan fiduciaries to delegate investment and administrative responsibilities to consultants, providing them greater flexibility while managing their plans. However, it’s important to note that while this act puts trust in the hands of consultants, it also places responsibility within the hands of the plan fiduciaries.

Under the act, plan fiduciaries are responsible for selecting and monitoring the consultants they hire. They must ensure that the consultants they hire are qualified and have the necessary experience to provide the services they are being hired for. Additionally, fiduciaries must ensure that the consultants they hire are following the appropriate procedures and guidelines.

In other words, while the act gives a fiduciary greater flexibility to manage its plans, it also places the responsibility of ensuring that its plans are managed properly squarely on its shoulders. This is an important reminder that although fiduciaries can delegate certain responsibilities, they cannot delegate their overall responsibility for the plan. It’s crucial for fiduciaries to carefully select and monitor any consultants they hire to ensure that their plans are being managed properly and in compliance with all applicable laws and regulations.

PBMs and Transparency

Employers, who bear a significant responsibility in ensuring the well-being of their employees, have found themselves at a disadvantage due to the opacity of access to data analytics from traditional PBMs. These PBMs have been notorious for their tight grip on member data, leaving employers in the dark when making informed health care and cost-benefit decisions.

PBMs like AffirmedRx are on a mission to transform the industry by providing unparalleled transparency and data analytics, empowering employers with the tools they need to make impactful decisions for their employees and their families.

Traditional PBMs have been notorious for their reluctance to share this data with employers, leaving them in the dark about health care trends and the needs of their employees. Without access to this critical information, employers cannot craft well-informed health care strategies that reduce costs and enhance the continuity of care for their members, thus compromising the pharmacy benefit solution that members deserve.

What to Look for in a PBM

Working with a PBM that is dedicated to the lowest net cost and highest clinical value formulary management structure is crucial to both business and employee satisfaction. A PBM that prioritizes transparency can help reduce patient costs and ultimately improve their health outcomes. Employers should always try to ask several questions of potential PBMs during the selection process. These questions should include:

1. Will I have access to my pharmacy benefits data?
2. What strategies do you employ to manage drug spending and cost containment for your clients?
3. Can you explain your formulary management process and how you ensure access to necessary medications for members?
4. How do you handle specialty pharmacy management, and what programs do you offer to support patients requiring specialty medications?

AffirmedRx is committed to serving its clients’ best interests. They work with health care organizations to create formularies that are based on the most effective and cost-efficient medications. They also provide complete data access to their clients, allowing them to make informed decisions about their prescription drug benefits. By working with AffirmedRx, businesses can rest assured that they receive the best possible care for their employees while reducing costs.

Moving Forward

Companies like Mark Cuban’s Cost Plus Drugs are another viable option in the fight against high drug prices. Currently, his company offers generic and non-branded medications. However, Cuban is also exploring the need for specialty pharmacy offerings for various treatments.

With any luck, this case will address the issue of unnecessary health care inflation due to middlemen who add complexity and inflate costs. And although it’s doubtful that this lawsuit will be the final word regarding an employer’s fiduciary and CAA compliance responsibilities under ERISA, it may help set a positive precedent for consumers moving forward.

If Lewandowski is successful, just imagine what the future of PBMs could look like. In the future, an increase in PBM drug pricing transparency could revolutionize the health care industry, creating a more equitable and efficient system. With full disclosure of drug prices, fees and rebates, PBMs could shift from entities shrouded in secrecy to beacons of clarity, fostering competition and driving down costs. Patients might no longer be left in the dark about the true cost of their medications, potentially seeing significant reductions in out-of-pocket expenses.

This transparency could also empower health care providers to make more informed prescribing decisions, choosing the most cost-effective treatments without compromising care quality. Moreover, the role of PBMs could evolve to focus more on patient care and less on profit margins, with value-based contracts that tie reimbursement to patient outcomes rather than the volume of prescriptions. This shift could lead to a healthier population and a more sustainable health care system where decisions are made with the patient’s best interest in mind.