Lawsuit: Johnson & Johnson Health Plan Overpaid for Drugs

3-minute read

Someone with a 90-pill prescription for the generic drug teriflunomide, used to treat multiple sclerosis, could fill that prescription, without even using their insurance, for as little as $28.40.

But employees at Johnson & Johnson would have paid $10,239.69 for the same prescription.

That alleged disparity is one of several cited in a federal class-action lawsuit filed this week against the New Jersey-based drug company by one of its employees. The plaintiff, a healthcare policy and advocacy director for the company, claims J&J is in breach of its duties under the federal Employee Retirement Income Security Act of 1974 (ERISA) to prudently manage employee benefit plans.

The result, according to the suit, is that J&J workers have over the years purportedly paid millions of dollars more for generic drugs than they should have.

“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,” the lawyers for the plaintiff wrote in the complaint.

The lawsuit is believed to be the first of its kind – in which an employer rather than an insurance company is named as the defendant – since the passage of the Consolidated Appropriations Act of 2021. The legislation, among other provisions, imposed new fiduciary obligations on employers that offer group health plans for their employees.

The lawsuit alleged J&J violated the company’s fiduciary duty under ERISA. J&J’s mismanagement of the drug benefits resulted in “higher payments for prescription drugs, higher premiums, higher deductibles, higher coinsurance, higher copays, and lower wages or limited wage growth,” the lawsuit said.

J&J, the lawsuit said, “failed to exercise prudence before selecting a Pharmacy Benefits Manager, failed to exercise prudence in agreeing to make its ERISA plans and beneficiaries pay unreasonable prices for prescription drugs, failed to exercise prudence in agreeing to contract terms with its PBM that needlessly allows the PBM to enrich itself at the expense of the company’s ERISA plans and their beneficiaries, failed to actively manage and oversee key aspects of the company’s prescription-drug program, and failed to take available steps to rein in its PBM’s profiteering and protect plan assets and beneficiaries’ interests.”

Johnson & Johnson did not immediately respond to a request for comment from a number of news media outlets.

The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. For more information, visit our website or call 877-440-3304.

This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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