Johnson & Johnson Mismanaged Employee Prescription Drug Benefits Programs, Lawsuit Claims

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A proposed class action lawsuit alleges Johnson & Johnson and its pension and benefits committee have mismanaged the pharmaceutical giant’s prescription drug benefits programs, costing the plan and employees millions. 

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The 75-page Johnson & Johnson lawsuit accuses the company and its pension and benefits plan committee of violating the federal Employee Retirement Income Security Act (ERISA), most evidently by agreeing to pay a vendor, its pharmacy benefits manager, high prices for many generic drugs that are available for drastically less. 

Overall, the defendants have cost Johnson & Johnson prescription drug benefits program participants millions in the form of not only higher prices for prescription drugs but higher premiums, deductibles, coinsurance and copays amid lower wages or limited wage growth, the case claims. 

“For example, someone with a 90-pill prescription for the generic drug teriflunomide (the generic form of Aubagio, used to treat multiple sclerosis) could fill that prescription, without even using their insurance, at Wegmans for $40.55, ShopRite for $41.05, Walmart for $76.41, Rite Aid for $77.41, or from Cost Plus Drugs online pharmacy for $28.40. Defendants, however, agreed to make their ERISA plans and their beneficiaries pay $10,239.69—not a typo—for each 90-pill teriflunomide prescription.” 

No “prudent fiduciary” would allow a plan and its beneficiaries to pay prices that are 250 times higher than the price available to anyone “who just walks into a pharmacy and pays out-of-pocket,” the filing contends. According to the complaint, such discrepancies exist for dozens of generics under J&J’s prescription drug plans.

The lawsuit says that across all covered generic “specialty” drugs for which there exists publicly available data on average acquisition costs, Johnson & Johnson and its co-defendants agreed to make the prescription drug benefit plans and their beneficiaries pay, on average, a markup of 498 percent above what pharmacies pay to acquire those drugs. 

“In other words, Defendants agreed to make Johnson and Johnson’s prescription-drug plans and their beneficiaries pay, on average, roughly 6 times as much as the [pharmacy benefits manager] (or a PDM-owned pharmacy) paid for those very same drugs,” the suit shares. “Not incidentally, Johnson and Johnson is a leading drug maker that earns billions of dollars a month selling drugs.” 

Further, the case claims the defendants have also agreed to certain terms under which plan beneficiaries are financially incentivized to order their prescriptions through the pharmacy benefits manager’s own mail-order pharmacy, even though the prices are “routinely higher” than those at other pharmacies. In short, the suit says, Johnson & Johnson is steering plan beneficiaries toward an option that, “for many drugs, wastes thousands of dollars in plan assets while enriching the Plan’s [PBM] by that same amount.” 

Overall, the lawsuit alleges the defendants have failed to exercise prudence in selecting a pharmacy benefit manager, imprudently agreed to make the ERISA-covered plans and beneficiaries pay “unreasonable prices” for prescription drugs, imprudently agreed to contract terms that “needlessly allow[] the PBM to enrich itself” at the expense of the plans and their beneficiaries, failed to actively manage and oversee “key aspects” of the prescription drug program, and failed to take available steps to “rein in” the PBM’s “profiteering.” 

“ERISA required Defendants to make a diligent and thorough comparison of alternative service providers in the marketplace, to seek the lowest level of costs for the services to be provided, and to continuously monitor plan expenses to ensure that they remain reasonable under the circumstances,” the case summarizes. “Defendants did not do those things to the extent ERISA requires.” 

The lawsuit looks to cover all persons who were participants in or beneficiaries of any of the Johnson & Johnson prescription drug benefit plans at the beginning of the statute of limitations period through the time when judgment is entered in the case. 

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