Learnings from the Latest Pharmacy Benefit Fiduciary Lawsuit Developments 

Proactive Pharmacy Benefit Oversight in an Evolving Legal Landscape

In the first quarter of 2025, plan fiduciaries witnessed significant news about and movement on pharmacy plan fiduciary lawsuits, including a new suit filed by employees against JP Morgan Chase.  While the first two lawsuits against Johnson & Johnson and Wells Fargo were dismissed, it appears the plaintiffs’ attorneys are learning from each court interaction and honing their cases. Additionally, the related legal costs, resource drain, and reputational risk to the employers should not be ignored. Now, more than ever, proactive measures for improving fiduciary responsibility need to be implemented.

Recent Lawsuit Developments

Here’s the latest on all three lawsuits:

• Lewandowski v. Johnson & Johnson: On January 24, a federal judge dismissed the case without prejudice citing a lack of legal standing, since the plaintiff was unable to show how she was financially harmed by the alleged mismanagement of expenses. Essentially, by reaching her deductible and out-of-pocket max each year the plaintiff would have had the same total financial costs regardless of the pricing of her 14 prescriptions. However, since the case was dismissed “without prejudice” the case could resume if new evidence of financial damages or another plaintiff was found to have experienced financial harm. On March 10, an amended complaint was filed, adding an additional plaintiff who did not reach his out-of-pocket max in 2024. We will see in coming months if the new plaintiff meets the requirements for the case to proceed.
• Stern v. JPMorgan Chase: On March 13, three current or former employees filed suit against JPMorgan alleging mismanagement of its employee health and prescription benefits program. While some of the accusations, like overpriced teriflunomide and failure to meet ERISA fiduciary responsibility, are similar to the J&J and Wells Fargo suits, the JPMorgan case has some interesting nuances. The 98-page complaint cites JPMorgan’s investment banking relationship with the PBM as a possible motive for overpaying for prescriptions and accuses the PBM of overpricing (and requiring patients on Humira to use) a private-labeled Humira biosimilar manufactured by an entity that the PBM owns. One of the early legal hurdles will be convincing the judge that, as asserted in the complaint, each of the plaintiffs paid “more in premiums and out-of-pocket costs than [they] would have paid absent [JPMorgan’s] fiduciary breaches and prohibited transactions.” According to the complaint, none of the plaintiffs reached their out-of-pocket maximums, which is a promising start.
• Navarro v. Wells Fargo: On March 24, a federal judge dismissed the case without prejudice, using legal reasoning similar to the J&J dismissal, stating that “While compelling and detailed, Plaintiffs’ allegations are simply too speculative to show concrete individual harm, too tenuous to show causation, and too conjectural to show redressability.” So far, there’s no word on whether an attempt will be made to retry with additional plaintiffs or evidence.

Even when lawsuits are dismissed, employers face significant consequences that shouldn’t be underestimated. The substantial legal expenses and resources allocated to defense can drain budgets and divert leadership attention from core business functions. Negative publicity surrounding these cases damages corporate reputation and can erode employee trust while simultaneously creating heightened awareness and expectations from employees regarding benefit transparency and value. Additionally, the internal scrutiny and process disruptions that follow litigation often necessitate comprehensive reviews of benefit management practices, creating additional operational challenges. Even lawsuits that have been dismissed can teach employers some valuable lessons about proactive fiduciary responsibility.

What We Can Learn from the New JPMorgan Chase Lawsuit

ERISA plan sponsors and administrators learned a myriad of lessons from the Johnson & Johnson and Wells Fargo lawsuits: demand a market-appropriate price for every drug (especially teriflunomide and imatinib), conduct a thorough RFP process for PBM services regularly, manage admin fees actively, be cautious about using consultants who may have financial conflicts of interest, etc. The unique aspects of the JPMorgan complaint may yield additional wisdom regarding the pharmacy benefit options provided to employees and considerations for plan sponsors in their PBM selection process.

The plaintiffs’ 98-page filing was clear on their main issue: “When fiduciaries agree to overpay for prescription drugs, employees—and especially the sickest employees—bear much of the burden.” Beyond deductible phases, copay/coinsurance amounts, inflated point-of-sale prices that don’t factor in rebates, and higher premiums due to perceived poor procurement principles, Stern v. JPMorgan Chase made the point that employee wages are at risk as well. Attorneys for the plaintiff cited both a CBO study on medical costs and UC Berkeley research that show higher medical costs also lead to slower wage growth for employees. It appears each successive case gains sophistication in quantifying damages, the very topic at cause for the dismissal of prior cases (J&J and Wells Fargo).

Attorneys for the plaintiff also wrote 14 pages describing why “An Attentive Fiduciary Would Have Recognized and Avoided the Flaws in [JPMorgan’s] Approach.” From publicly-available employer coalition talking points to Fortune magazine articles to lessons learned from other plan fiduciaries, there were dozens of references to PBM practices, drug pricing, and conflicts of interest that benefits teams have access to in support of pharmacy benefit procurement, contracting, and decision making. Given all the information available in industry publications and the blogosphere, it is becoming increasingly difficult for fiduciaries to claim ignorance of PBM practices, pricing nuances, and contract terms.

Across the growing multitude of vendors, approaches and models, the pharmacy benefits marketplace offers an increasingly robust set of solutions to the pharmacy challenges facing benefits teams today. Stern v. JPMorgan Chase mentioned quite a few alternatives:

“Among other things, Defendants should have: used their bargaining power to obtain better rates from their own PBM or another traditional PBM; moved all or parts of their prescription-drug plan to a “pass-through” PBM that bases its prices on actual pharmacy acquisition costs rather than inflated and manipulable benchmarks; directed substantial portions of their prescription-drug program to a well-known online pharmacy that charges only a modest markup above acquisition cost… If Defendants had engaged in a prudent and reasoned decision-making process, they would have known of, and adopted, many of the numerous options that would have drastically lowered the cost of prescription drugs”

The court filing went on to name PBMs that offer “pass through” models, pharmacies that offer acquisition-cost-based pricing, and portions of the PBM contract that would have been less expensive if carved out of the PBM contract to another pharmacy vendor. They even provided price comparisons to online pharmacies that publish pricing. While these assertions will take the contemplation of a judge and jury to determine culpability in the pending litigation, it’s relatively easy to see the wisdom in “Prudent fiduciaries choos[ing] carefully among PBMs, analyzing multiple PBMs’ offerings to decide which PBM and which payment model will be most beneficial and most cost-effective for the plan.”

What Prudent Fiduciary Responsibility Looks Like

In light of the 2021 CAA requirements and recent litigation, plan sponsors and fiduciaries should pay close attention to:

• Procurement, Contracting and Market Checks: Regularly going out to bid for PBM services is a step in the right direction, but make sure the contract is free of gag clauses, out-of-market specialty generic pricing, high or hidden fees, or perverse PBM incentives. Additionally, ensuring the right to regular market checks to keep the pricing and contract terms up to date is key.
• Detailed Auditing and Vendor Oversight: Gone are the days of “set it and forget it” PBM contracts, so be sure to audit the rates, reconciliation, and terms of the contract, paying special attention to claims tied to rebates/GPOs, the PBM’s owned pharmacies, and drugs manufactured by the PBM. It’s also a best practice to meet with the PBM throughout the year for updates on performance, changes, and an action plan to address in-year abnormalities.
• Claims Monitoring and Cost-Reducing Actions: Having access to your pharmacy and rebate data is a good start, so you can keep an eye on any drugs straying too far from NADAC (or other available acquisition costs), develop plans to reduce costs through formulary and utilization management, and consider outside vendors to assist employees in finding the right medication at the right time for the best price.
• Documentation of Decision Making and Actions: By keeping a record of regular meetings, decisions made, alternatives considered, and actions taken, plan fiduciaries are better prepared for the dreaded discovery process if they end up in legal hot water.
• Independent Advice, Free of Hidden Incentives: With stakes and costs so high, hiring an independent and trustworthy consultant brings valuable experience to a benefits and HR team. At PSG we consider ourselves an extension of our clients’ teams and contract directly with our clients, exclusively for their benefit.

As we learn more about these pharmacy benefit lawsuits, we can glean critical insights to help prepare our own organizations. Even when cases are dismissed, the financial and operational impacts on employers highlight the dire importance of proactive fiduciary responsibility. Schedule a free fiduciary responsibility discovery call with our pharmacy benefit experts today to evaluate your current program and identify opportunities to strengthen your position against potential litigation while delivering better value to your employees.

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