Viewpoints from Craig Hasday
Employees pay greater than 20% of the cost of their employer-sponsored healthcare premiums.
In addition to those premiums, the average American family spends more than $4,000 per year on their out-of-pocket medical costs. Healthcare costs, after a COVID-driven pause, are continuing to escalate and consumers are feeling the pain. Employee Retirement Income Security Act (ERISA) rules afford some protection to employers regarding traditional plan management if they document a continual process to work in the best interest of the participant. Today there is much more for a business to worry about. Under the 2020 Consolidated Appropriations Act (CAA), employers have a fiduciary responsibility to ensure that their health plan is cost-effective and offers quality care. And monitoring costs and quality has gotten more complex because CAA requires the removal of gag clauses from service provider contracts. As a result, many employers will have access to claims data and can be more analytic than ever before. But are they doing all they can with this new power?
One prominent case that has garnered attention is the lawsuit against Johnson & Johnson (J&J), a multinational pharmaceutical company, regarding a breach of fiduciary duty in their employee plan’s pharmacy cost management.
The lawsuit accuses the company of failing to negotiate lower prices for prescription drugs for its employee health plans – which allegedly resulted in millions of dollars in overpayments for generic drugs. One example cited in the formal complaint alleges that the J&J plan paid $10,200 for a generic multiple sclerosis drug called Teriflunomide, which costs no more than $77 at retail pharmacies. The suit alleges that J&J was negligent in monitoring the activities of their pharmacy benefit manager (PBM), which contracted to pay unreasonable drug costs at the expense of the plan participants and beneficiaries without securing corresponding benefits for them. The complaint asserts that J&J failed to negotiate favorable contract terms or evaluate other PBMs that might provide lower costs to plan beneficiaries. The lawsuit seeks unspecified damages and statutory penalties for the ERISA violation. In addition, the plaintiff is seeking class-action status to represent other similarly damaged J&J health plan members.
The J&J lawsuit highlights the importance of employers retraining their attention to manage employee healthcare costs.
At EPIC, we work closely with employers to help monitor the financial performance of their self-insured health plans. Our data warehouse provides needed insight into actionable cost drivers. EPIC Pharmacy Solutions, powered by Pharmaceutical Strategies Group (our in-house pharmaceutical consultant) helps you to achieve superior financial results with established market checks and cost benchmarking – allowing your company to be confident that the steps taken to mitigate liability are documented. The imperative to work with a proactive benefit consultant has never been clearer.
Download our EPIC Pharmacy Case Study through the form on this page to learn more, and contact EPIC today to help you determine whether you are meeting your obligations!
EPIC offers this material for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this document and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.
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