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Patient With MS Sues J&J Over ERISA Violation


After a patient with multiple sclerosis (MS) was forced to pay exorbitant out-of-pocket costs for a brand name medication when she could’ve gotten a generic for way less, the patient filed a class action complaint against her employer, Johnson & Johnson (J&J), for violating the Employee Retirement Income Security Act of 1974 (ERISA).

A patient with multiple sclerosis (MS) has filed a class action complaint against her employer, Johnson & Johnson (J&J), and its Pension & Benefits Committee over an alleged violation of the Employee Retirement Income Security Act of 1974 (ERISA). The complaint stems from the patient being directed by J&J’s pharmacy benefit manager (PBM) to pay upwards of $10,000 for a 90-day supply of a branded medication despite a generic version of the drug going for between $28 and $77.

Doctor and scale of justice | Image credit: onephoto - stock.adobe.com

Scale of justice | Image credit: onephoto - stock.adobe.com

The plaintiff is Ann Lewandowski, a health-care policy and advocacy director for J&J, and the drug in question (teriflunomide; Aubagio) is an active metabolite of leflunomide used to treat relapsing forms of MS, including clinically isolated syndrome, relapsing-remitting disease, and active secondary progressive disease.

The case comes after the House Committee on Oversight and Accountability held a hearing to examine pricing tactics implemented by PBMs in September 2023. This hearing was the second hearing on PBMs to be initiated by the Committee. PBMs have long been known as the third-party “middlemen” that make decisions on which drugs will be included on formulary lists and which preference tiers they fall on, which correspond with their level of coverage, meaning that PBM decisions have a large impact on how much employers and patients alike pay for medicines.

PBMs often favor brand name small molecule drugs and originator biologics over generics and biosimilars, respectively. This is because PBMs have control over rebate and reimbursements related to covered drugs. Rebates, which are determined during negotiations between PBMs and drug companies, help payers save money on drugs. However, they are often greater for reference products and do not result in lower out-of-pocket costs for patients.

Reimbursements, or compensation given to a pharmacy or clinic for using a certain product, are agreed on by PBMs and payers and can impact providers. Again, however, this compensation does not result in lower drug prices for patients but can affect prescribing habits.

According to the complaint, Congress enacted ERISA to address several scandals where employee benefits programs were mismanaged by employers, resulting in employees and their dependents having to pay millions of dollars in costs. The law was designed to protect the interests of employee benefit plan participants by “establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans” and providing employees with “appropriate remedies, sanctions, and ready access to the federal courts” when fiduciaries mismanage plan assets.” In this case, the mismanaged assets would be the mismanagement of prescription drug benefits.

Specifically, the complaint accuses the defendants of not managing the prescription drug benefits of the employee plans properly, leading to high costs for participants. It also mentions instances where plan documents were not provided as requested and where there were issues with health care services being redirected without proper communication.

Overall, the complaint seeks to hold J&J accountable for allegedly not acting in the best interests of the employees and beneficiaries covered by their benefit plans.

The complaint alleges that J&J mismanaged prescription drug benefits in multiple ways. Firstly, J&J allegedly failed to adequately compare alternative service providers in the marketplace to secure the lowest costs for services, as required by ERISA. This oversight may have resulted in elevated expenses for prescription drugs.

Additionally, J&J purportedly entered agreements with a PBM that led to inflated costs for generic drugs, disproportionately burdening the plans and beneficiaries. Examples cited in the complaint include instances where beneficiaries were directed toward higher-priced options, such as using Accredo (the PBM's mail order pharmacy) over retail alternatives.

Furthermore, J&J is accused of neglecting to oversee crucial aspects of its prescription drug program, thereby enabling the PBM to benefit at the expense of the company's ERISA plans and beneficiaries. The complaint further contends that J&J missed opportunities to reduce costs, such as through negotiating better rates with the PBM or promoting cost-effective options for beneficiaries, opting instead for methods that allegedly resulted in higher prescription drug expenses.

If Lewandowski’s case is successful, this class action complaint could have several potential effects on the employees and dependents affected by the alleged mismanagement of assets:

  • Financial restitution: Employees and beneficiaries who were overcharged or affected by the alleged mismanagement could potentially receive financial restitution if the court rules in favor of the plaintiffs
  • Improved benefit management: A successful outcome could lead to improved oversight and management of employee benefit programs by J&J, ensuring that future decisions are made in the best interests of the participants
  • Precedent for future cases: The outcome of this case could set a precedent for similar cases involving other companies, potentially leading to better protection of employee benefits and stricter adherence to fiduciary duties under ERISA
  • Increased awareness: The publicity surrounding the class action complaint could raise awareness among employees and beneficiaries about their rights and the importance of monitoring and questioning benefit plan management.

Overall, a successful resolution of the class action complaint could result in positive changes that benefit employees and their dependents by ensuring fair treatment and proper management of their benefit plans.

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