“You f’d up, you trusted us.”
Otter, Animal House
The thing about being a fiduciary is that all responsibility and liability rests on the plan sponsor. You can hire some pretty awful vendors to manage components of your health plan but mismanagement, excess fees, self-dealing, and profiteering are the plan sponsors peril.
Here’s text from Section 9 of the lawsuit:
9. Defendants failed to satisfy their fiduciary obligations… in agreeing to pay excessive fees to Express Scripts, in agreeing to contract terms with Express Scripts that needlessly allows Express Scripts to enrich itself at the expense of the Plan and its participants/beneficiaries, in failing to monitor Express Scripts and the prices charged for prescription drugs, in failing to address conflicts of interest, in failing to actively manage and take reasonable measures oversee key aspects of the company’s prescription-drug program, and failing to take available steps to rein in Express Scripts’ profiteering, protect plan assets, and avoid unnecessary costs to participants and beneficiaries and protect their interests.
Express Scripts isn’t a defendant. They’re not on trial. But their actions are the employer’s liability. And while most of the plan sponsors across this great country can’t count the same number of enrolled employees as Wells Fargo’s nearly 200,000, Express Scripts blankets a quarter of all PBM business in the U.S.A. 1 out of 4.
If the leverage of Wells Fargo’s health plan produced a PBM contract like this one, how can any smaller employer, business coalition, or consortium do any better?
“Money’s just something you throw off the back of a train.”
Tom Waits, “Long Way Home’
This lawsuit is but the tip of the iceberg. It follows on the heels of a similar class action suit against Johnson & Johnson, who’s PBM is….(you guessed it), Express Scripts.
So what are methods that plan sponsors can take to shore up their fiduciary responsibilities related to prescription drug coverage?
Here are six recommendations:
Contractual covenants that ensure that the plan sponsor receives 100% of participating pharmacies negotiated discount for the drug dispensed – without any reclassification, mark-up or spread by the PBM.
Drugs should be priced to the lowest of the MAC pricing, acquisition cost, or AWP discount
Firm contractual language defining generic, brand, and specialty drugs that prohibit reclassification to game different pricing schedules or withheld rebates
Unbundling of functions. Your PBM should not be your preferred pharmacy. Your PBM should not be your sole pharmacy source for specialty drugs.
PBM revenues should be strictly defined and solely isolated to per script or per member monthly fees
Rebates should be defined to include compensation or remuneration of any kind received or recovered from a pharmaceutical manufacturer or any other third party. (H/T Tyronne Squires, CPBS of Transparent Rx)
With pharmacy expenditures eclipsing 25% of overall health spend, these lawsuits should be a good wake up call for plan sponsors. The good news is that action taken means lower costs not just for plan sponsors but for employees and their families as well.
