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Uncategorized

J&J Sued Over Contracting with PBM that Overcharged Health Plan, Enrollees

by Inoventive Solutions
March 19, 2024

A new area of potential liability for employers was recently opened when a class-action suit was filed against Johnson & Johnson, accusing it of mismanaging its pharmacy benefit manager plan, resulting in the health plan and its enrollees overspending millions of dollars on medications.

Health plans contract with PBMs to tamp down pharmaceutical costs, but reports have shown that they often send enrollees to pharmacies they own and which overcharge for medications sometimes by thousands of percent.

PBMs have been drawing increasing flak from states attorneys general as well as Congress and state houses, where multiple measures that would rein them in are in play.

If the lawsuit is successful, it could leave both self-insured and insured employers exposed to lawsuits by disgruntled employees who are forking out significantly more than they should.

The case

The class action, filed Feb. 5 in the US District Court for the District of New Jersey, accuses J&J of breaching its fiduciary duty under ERISA when it mismanaged its employee health plan by paying its PBM, Express Scripts Inc., inflated prices for generic specialty drugs that are widely available at a much lower cost.

The employees suing J&J cite a number of examples of how the company’s plan overpaid for prescription drugs. One of the most egregious examples cited in the lawsuit was an instance when the plan paid more than $10,000 for a 90-pill generic drug to treat multiple sclerosis, which can be purchased without insurance on different retail and online pharmacies for $28 and $77.  

“The burden for that massive overpayment falls on Johnson and Johnson’s ERISA plans, which pay most of the agreed amount from plan assets, and on beneficiaries of the plans, who generally pay out-of-pocket for a portion of that inflated price,” the plaintiffs wrote.

“No prudent fiduciary would agree to make its plan and beneficiaries pay a price that is two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket,” they added.

It further accuses J&J of agreeing to terms under which plan beneficiaries were financially incentivized to obtain their prescriptions from the PBM’s own mail-order pharmacy, even though that pharmacy’s prices are routinely higher than the prices at other pharmacies.

The case accuses the company of:

  • Failing to regularly put PBM services out to bid.
  • Failing to negotiate favorable terms with PBMs and continually supervise PBM’s actions to ensure that the plan is reducing costs and maximizing outcomes for beneficiaries.
  • Failing to periodically attempt to renegotiate PBM contracts.
  • Failure to independently assess the PBM’s formulary placement of each prescription drug and closely supervise PBM’s formulary management to ensure the plan is paying only reasonable amounts for each prescription drug.
  • Improperly steering plan participants towards their PBM’s mail-order pharmacy, even though that pharmacy’s prices were routinely higher than what retail pharmacies charge for the same drugs.

The fallout

Legal observers say employers that offer their employees group health insurance that includes one of the nation’s large PBMs, could be targeted.

The driving argument would be that employers have been warned through news reports of how PBMs have been accused of not being transparent about their negotiated prices, and how they often pocket rebates that could be used to lower the plan’s and enrollees’ outlays.

Most at risk are employers that are in self-insured or level-funded plans. It’s not clear yet how much liability insured employers may have, but they too could be accused of choosing health plans for their employees that contracted with PBMs that allegedly overcharge for medications.

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Uncategorized

PBMs Feeling the Heat on All Fronts

by Inoventive Solutions
May 23, 2023

While drugmakers have been assailed for years for increasing their prices and driving the cost of medications higher and higher, there is another player in the health care space that is receiving increased scrutiny: pharmacy benefit managers.

PBMs are intermediaries, acting as go-betweens for insurance companies, self-insured employers, drug manufacturers and pharmacies.

They can handle prescription claims administration for insurers and employers, facilitate mail-order drug delivery, market drugs to pharmacies, and manage formularies (lists of drugs for which health plans will reimburse patients.) 

Express Scripts, which provides network-pharmacy claims processing, drug utilization review, and formulary management, among other services, is the best-known PBM. CVS Caremark and UnitedHealth Group’s OptumRx are other major players. 

PBMs typically contract with both insurers (or self-insured employers) and pharmacies. They charge health plans fees for administering their prescription drug claims and create formularies that spell out the prices pharmacies receive for each drug on the list.

Commonly, the price the plan pays for a drug is more than the pharmacy receives for it. The PBM collects the difference between the two prices. 

It can do this because the health plan does not know what the PBM’s arrangement is with the pharmacy, and vice versa. Also, the plan doesn’t know the details of the PBM’s arrangements with its competitors. 

A PBM could charge one plan $200 for a month’s supply of an antidepressant, charge another plan $190 for the same drug, and sell it to a pharmacy for $170. None of the three parties knows what the other parties are paying or receiving.

Additionally, PBMs have been accused of pocketing the rebates that drug manufacturers offer, instead of passing them on to the end users: the patients who are prescribed the medications. Those rebates can be significant.

In the crosshairs

In theory, the PBMs should pass these rebates back to the individuals who are prescribed the medication so that they can reduce their out-of-pocket costs. However, if most of those costs are born by the insurer, those rebates would conceivably be transferred to the insurer that is paying for the drugs and the insurer could pass some of those savings on to enrollees.

But, because these arrangements are also confidential, the extent to which these savings are passed back to health plans is unknown.

As pressure on PBMs has grown, federal and state lawmakers, attorneys general in various states and state regulators have been taking action.

In 2022, 12 states enacted 19 measures that included a variety of restrictions and requirements for PBMs, according to the National Academy for State Health Policy.

A number of state attorneys general have filed lawsuits against some of the country’s largest PBMs. Ohio Attorney General David Yost has managed to wring more than $100 million in settlements with PBMs in the last three years, after filing lawsuits accusing them of violating state antitrust laws and overcharging state agencies like the Ohio Bureau of Workers’ Compensation and the Ohio Department of Medicaid.

And in Washington D.C., a bipartisan bill introduced in the U.S. Senate would require PBMs to file an annual report with the Federal Trade Commission about fees charged to pharmacies and reimbursements sought from drug companies.

The bill also authorizes state attorneys general “to conduct investigations, to administer oaths or affirmations, or to compel the attendance of witnesses or the production of documentary or other evidence.”

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Uncategorized

PBM Trade Association Sues Over Transparency Rules

by Inoventive Solutions
September 14, 2021

As the federal government continues rolling out new laws and regulations aimed at increasing price transparency in the health care industry, one group is fighting back: pharmacy benefit managers.

The Pharmaceutical Care Management Association, a trade association for PBMs, has sued the Department of Health and Human Services, Internal Revenue Service and Department of Labor, all of which were instrumental in rolling out transparency regulations in 2020, which took effect Jan. 1, 2021.

The rules specifically require health plans (including PBMs) and health insurers to disclose on their websites their in-network negotiated rates, billed charges and allowed amounts paid for out-of-network providers, and the negotiated rate and historical net price for prescription drugs.

PBMs were included in the transparency rules because numerous reports have found that some of them rely on opaque contracts with pharmacies and drug companies, and that they allegedly fail to pass on rebates and lower drug prices they negotiate to their enrollees.

The lawsuit comes as PBMs are feeling the heat over their practices. At least seven states and the District of Columbia are investigating them, mainly focusing on whether they fully disclose the details of their business and whether they receive overpayments under state contracts.

Also, attorneys general in four states have sued PBMs, mostly alleging that they misled state-run Medicare programs about pharmacy-related costs.

What the PBMs are saying

The PBMs allege in their lawsuit that the rule will not benefit consumers because their knowing what the contracted drug prices are won’t have an effect on them as there are no actions they can take knowing this information.

The trade association said: “The rule offers consumers no actionable information because net prescription drug prices are not charged to consumers and never appear on a bill.” Instead, the information will likely confuse consumers, it alleges.

The trade body in its court filing said PBMs maintain that their business model hinges on their ability to negotiate confidentially and keep the details of their manufacturer contracts as trade secrets that are not available to other drug manufacturers or otherwise disclosed to the public.

“Confidentiality, in turn, allows PBMs to bargain from a position of strength to reduce drug prices,” it wrote. “Government-enforced information sharing will raise costs by reducing PBMs’ ability to negotiate deeper discounts on drug prices.

“The regulation threatens to drive up the total drug price ultimately borne by health plans, taxpayers and consumers by advantaging drug manufacturers in negotiations over price concessions,” it added.

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Finance, Industry News

Trump Administration Decides Not to End PBM Rebates

by Inoventive
October 3, 2019

The Trump administration has decided not to pursue a policy that would have put an end to rebates paid to pharmacy benefit managers, which could put the focus again on how drug companies set their prices.

The proposal would have barred drug companies from paying rebates to PBMs that participate in Medicare and other government programs. According to the administration, the proposed rules were shelved because Congress had taken up the issue to control drug costs.

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