April 1, 2025
Natashia Wright, Associate Director, Benefits Compliance
On January 24, 2025, the United States District Court for the District of New Jersey dismissed a class action lawsuit in Lewandowski v. Johnson & Johnson, et al. Therein, the Plaintiff claimed that Johnson & Johnson’s (“J&J”) health and welfare plan fiduciaries violated The Employee Retirement Income Security Act (“ERISA”), to the extent they mismanaged and/or undermanaged their plans’ prescription drug benefits options.
Employer Action Items
The Lewandowski decision has implications for employers and plan sponsors, because the disposition of the case leaves open the opportunity for a novel plaintiff to seek to establish claims related to higher out-of-pocket costs for prescription drug coverage due to an employer’s retention of certain prescription drug rebates.
- Assure prudence in the selection of plan-level service providers. Employers and plan sponsors should ensure that plan fiduciaries undertake and document a prudent process in selecting service providers, negotiating service provider contracts, and ongoing monitoring of the service provider.
- Perform participant disclosure obligations and document production activities. Employers and plan sponsors should maintain adequate plan documents and provide them to participants within 30 days of a request.
Summary
Employee participants and their beneficiaries sued J&J and J&J’s Pension and Benefits Committee, alleging certain breaches of ERISA’s fiduciary duties relative to the selection of pharmacy benefit managers (“PBMs”), which, as alleged in the Complaint, led to unreasonably increased prescription drug prices. They claimed this enriched the PBM at the the Plaintiff’s expense, and further, that J&J and J&J’s fiduciary committee failed to oversee the prescription drug program in a prudent and loyal manner. The court dismissed the case, citing a lack of standing, dismissing the Plaintiff’s arguments as speculative. Largely, this was because the named Plaintiff’s benefits remained unchanged, and her claims related to higher out-of-pocket costs were inapplicable because the Plaintiff had already satisfied her prescription drug benefit-related out-of-pocket annual maximum, as required under the applicable health plan.
The dismissal was issued without prejudice, meaning the Plaintiffs may amend their Complaint to survive a later motion to dismiss. Importantly, the court did not rule that Plaintiff’s claim of injury-in-fact due to increased out-of-pocket expenses was too speculative to satisfy the standing requirement. However, the court did allow Plaintiff to proceed with her ERISA Section 502(c)(1) claim, generally focusing on Defendants’ alleged failure to provide requested and required disclosures to Plaintiff. This case is but one in a growing stream of ERISA-related lawsuits designed to challenge the fees charged by a health plan’s issuers and administrators, but it was among the first seeking to scrutinize the conduct of ERISA fiduciaries in the context of PBM contracting.
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