Jon Levitt Highlights Urgency for Stronger Employer Oversight of PBMs

Jonathan E. Levitt, Esq, founding partner of boutique health care law firm Frier Levitt, LLC, spoke on 2 panel discussions at the 2024 Community Oncology Conference presented by the Community Oncology Alliance (COA): “The Post-DIR Hangover: Underwater Reimbursement & Challenges” and “Legal Updates & Developments in PBM & Community Pharmacy Relationships.” Here, he discusses a recent class-action lawsuit brought against pharma giant Johnson & Johnson (J&J) in which an employee alleged a “breach of fiduciary duty” regarding her employer-sponsored pharmacy benefits.

Levitt recently coauthored an article on the J&J lawsuit that predicted the employee’s decision to bring this action will force employers to have stronger oversight of the pharmacy benefit managers (PBMs) that manage their benefits.

Transcript

Can you address how soon we might see stronger employer oversight of PBMs?

In February of this year, a woman, [Ann] Lewandowski is her name, filed a class-action lawsuit against Johnson & Johnson. Her allegation is simply that Johnson & Johnson messed up in the pharmacy benefit design. The legal term is “a breach of fiduciary duty.” Every single self-funded plan under ERISA [Employee Retirement Income Security Act of 1974] has a duty of prudence. That means that you have to intelligently look at your pharmacy benefit design.

As it relates to COA, for example, if a major employer is telling its employees, “You can't go get your oncology medication from your oncologist. You have to go to Accredo, which is owned by Express Scripts, or Caremark Specialty Pharmacy owned by CVS,” that benefit design employee at that company really has to be able to answer the question, “Why did you exclude the COA practice? Does that really make sense to you?” And so your question is, how quickly are we going to see changes? We already see changes.

At Frier Levitt, we have a plan sponsor division, and we talk to plans and coalitions of plans, and they're all asking the question, “How do we avoid breaching the duty of prudence? What do we have to do when we look at our pharmacy benefit design?” Some of the things we're saying are, “Well, are you excluding community oncology practices? Are you excluding cheap drugs, like Mark Cuban Cost Plus Drugs, when he has something for $49 that the PBM’s own specialty pharmacy is selling for $10,000?” You have to be able to answer those questions and you have to select your PBM wisely, and you have to look at your drug formulary. And you have to audit. So all these plans now know, because this Johnson & Johnson class action is the first of its kind and so plans have all taken note.

The plaintiff’s lawyers were pretty smart. What they did was they picked examples like that, where there was no rebate. This $10,000 drug was a specialty generic; there's no rebate. And so the $49—by the way, it may have been $69—$49 to $69 vs $10,500, that is a true apples-to-apples comparison. And then you have Humira examples, the net cost after rebate: $32,000 vs $8000, something like that—it’s a $20,000 difference. These are substantial differences.