The Consolidated Appropriations Act of 2021 (CAA) is making major waves in the self-insured employer space, with a core focus on transparency and proper stewardship of employee benefit plans. However, for over a year, the CAA lay relatively dormant, with delays in enforcement and litigation — until Johnson & Johnson (J&J).
CAA Litigation Has Arrived — For Employers and Corporate Officers
The J&J lawsuit represents the first landmark in CAA litigation, with an unprecedented employee class action lawsuit against excessive prescription drug spending. Digging deeper, we find that J&J’s benefits consultant and pharmacy benefits manager (PBM) allegedly served as the primary drivers of these exorbitant pharmacy costs, preventing a fair and open RFP due to rampant conflicts of interest and hidden profits. The J&J suit is only the beginning — we’re already seeing several new lawsuits come to light as employers are now held accountable for the fiduciary non-compliance of their benefits vendors.
The story doesn’t stop there. Not only are companies as a whole on the hook for fiduciary obligations across their plans, but chief officers themselves are now personally held liable as well. CAA enforcement letters, released by the Centers for Medicare & Medicaid Services (CMS) with state-specific provisions, are now calling for thorough compliance investigations and, if necessary, enforcement action on both personal and enterprise levels.
Three Steps Employers Can Take to Root Out Non-Compliance
Recent legal action has made one thing clear: the CAA can no longer be ignored. Employers can no longer claim ignorance of CAA requirements if non-compliance is found, even among their benefits vendors and service providers. The question for many employers now is how to ensure fiduciary compliance with existing vendors, especially PBMs that coordinate drug pricing and administration between pharmacies, drug manufacturers, and health plans. Per the CAA, a plan sponsor’s fiduciary duty is to ensure the plan solely acts in the interest of its participants and beneficiaries.
How does this look in practice?
- Demand alignment and transparency from every vendor and service provider that touches your pharmacy plan.
- Certify that every vendor’s compensation is reasonable and holds no conflicts of interest that undermine the value of the plan.
- Gain full access to your healthcare data to maintain total oversight over service providers and responsibly manage plan assets.
By comparing prescription drug cost trends and employee cost-sharing structures against manufacturer rebates and administrative fees, employers can identify how appropriately plan assets are being managed, as well as any sources of fiduciary non-compliance.
This process, however, is time-consuming and costly, and it grows even more complex when vendors do not embed fiduciary compliance from the start. That’s why more employers are partnering with a fiduciary PBM like US-Rx Care. When you know your PBM is fully compliant you can gain peace of mind that your pharmacy benefit plan is offering the most value to your participants without opening the door to corporate and personal legal action.