Johnson & Johnson lawsuit: Where to find sources for your articles

One of the biggest health care stories of the year broke in February when an employee of pharmaceutical maker Johnson & Johnson (J&J) filed a lawsuit against the company and its Pension and Benefits Committee. I covered that story here: “Lawsuit exposes hidden factors driving up prescription drug costs.”

Any hidden reasons behind the rising costs of employers’ and workers’ health care and prescription drugs should be covered widely, and the J&J lawsuit could be the first of many against self-insured employers, according to Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions.

And the nation’s largest pharmacy benefit managers (PBMs) and employee benefits consultants could be named in similar lawsuits, Bob Herman and Ed Silverman wrote in their article on the J&J lawsuit for STAT News. J&J and its benefits committee were sued under the federal Employee Retirement Income Security Act of 1974 (ERISA), which requires employers to be prudent stewards of their health plan assets and prescription drug benefits, the lawsuit alleges.

The important ERISA angle

“The first thing reporters will want to do is to get educated about ERISA and how it works,” Gremminger told me, adding that ERISA governs how 80% of employers manage workers’ benefits.

Those 80% self-insure, meaning they assume the financial risk of covering all costs for employees’ health care, prescription drugs and other benefits. Typically, self-insured employers or an association of employers, contract with third-party administrators to establish provider networks, negotiate payment rates, design benefit plans and process claims, according to The Center on Health Insurance Reforms at Georgetown University.

The other 20% of employers are fully insured, meaning health insurers assume the financial risk of paying all medical, prescription drug and other bills related to employees’ health care, according to HealthInsurance.org, an independent site providing advice to consumers.

When reporting on this story, reporters may find that employers, pharmacy benefit managers, and benefits consultants are reluctant to discuss the hidden factors driving up health costs, as Herman reported in 2023.

Potential sources: Business groups and lawyers

When seeking sources for comment, Gremminger recommends interviewing experts at groups that represent employers’ interests, including the 45 business coalition members of the National Alliance. Such experts can explain the contract terms (whether hidden or not) that drive up health care and prescription drug costs, he said. Officials at labor unions that negotiate health care coverage for members and state and municipal governments that provide health care and drug benefits to workers and their family members may be willing to comment, he added.

Reporters also may need expert legal sources because ERISA requires employers to be prudent stewards under the federal Department of Labor’s fiduciary requirements. Last year, Herman interviewed Jonathan E. Levitt, an attorney with the New Jersey law firm of Frier Levitt.

Quoting Levitt, Herman wrote, “The broker not only gives bad advice to the employer that’s in the broker’s self-interest, but the broker also allows the big PBM to write crazy terms into a contract. It’s unethical.’’

Levitt testified last year during a hearing of the U.S. Senate Committee on Finance on pharmacy benefit managers, prescription drugs and the high costs of drugs. That testimony explains how PBMs and health insurers generate profits at the expense of patients, employers, unions; and federal, state and municipal governments buying health and prescription coverage for their employees and family members.

Another expert in ERISA compliance is attorney Michael Lieberman of Fairmark Partners, LLP, a law firm in Washington, D.C., representing Ann Lewandowski, a J&J employee and plaintiff in the lawsuit. “For too long, some large corporations have agreed to patently unreasonable contracts with PBMs that force employees and their health plans to drastically overpay for prescription drugs,” Lieberman told Herman and Silverman.

Reporting on conflicts of interest

The lawsuit itself is a good source of context because it alleges that J&J contracts with Express Scripts, the pharmacy benefit manager division of the health insurer Cigna, and with the benefits consulting company Aon. J&J allowed its selection of a PBMs “to be guided or managed by a broker with a potential conﬂict of interest,” the lawsuit states.

An analysis of the prices that J&J and the benefits committee agreed to reveals “a staggering markup from prices charged to comparable plans by other traditional PBMs,” the lawsuit shows. Such high prices “exceed the prices that any prudent fiduciary would agree to pay,” it adds.

Employee benefits consultants sometimes require pharmacy benefit managers to pay anywhere from $1 to $5 for every prescription that an employee, family member or retiree fills under an employer’s contract, Herman and Silverman reported. In exchange, the consultants will recommend the employer choose that PBM, a fact that may not be disclosed, they added. “Because it receives payment, the consulting ﬁrm also may not closely scrutinize the PBM contract, which allows the PBM to proﬁt more on certain drugs,” they wrote.

Employers’ increased responsibilities

An important angle to this story is that since 2021, the Biden administration and Congress have sought to strengthen ERISA to require employers to know how much money PBMs and benefit consultants make in both direct and indirect compensation that brokers and consultants may get for “pharmacy beneﬁt management services,” Herman reported in June. “However, it appears many companies may not be compliant — and almost none are willing to talk about it,” he added.

For example, Sara Hansard with Bloomberg law reported in February that some health plans have failed to comply with employers’ requests for information.

And last summer, Hansard reported on lawsuits employers filed against health insurers such as Aetna, Elevance and Blue Cross Blue Shield of Massachusetts, all of which administer employers’ health plans.

“The suits allege [a] breach of fiduciary duty by plan administrators in not providing adequate claims data to employers so that they can review whether the plans are being properly administered,” she wrote.

Employers need the data to meet new compliance requirements under ERISA, the Consolidated Appropriations Act of 2021 and the Transparency in Coverage Rule that the federal Department of Health and Human Services issued in 2020, according to reporting by Jakob Emerson for Becker’s Payer Issues.

Also last summer, Bloomberg’s John Tozzi wrote an article titled “Health Insurers Don’t Want You to Know Where Your Money is Going.”

After facing rising health care costs over many years, employers and union benefit plans have filed lawsuits charging that the nation’s largest health insurers are squandering their money and those insurers refuse to give them critical information about their medical claims, he wrote.

“The cases reveal an emerging rift between employers that spend $1 trillion a year on health benefits and the insurance firms they hire to operate those plans…” he explained, adding that insurers say they must keep those details private to stay competitive.