Yesterday afternoon, I caught the story that Johnson & Johnson was being sued by an employee who claims that the company (as an employer) was overpaying its pharmacy benefit manager (Express Scripts) and that these overpayments result in higher premiums, higher out-of-pocket expenses and limited increase in wages. The lawsuit uses an example of a generic drug for multiple sclerosis that cost ~$10,000 for a 90 day supply under the plan whereas an uninsured patient could walk into a pharmacy and pay $30 cash.

Personally, I feel connected to the story. The person suing is a health policy person. My parents worked for Johnson & Johnson for over 60 years combined. And I once worked on the employer side implementing these types of benefits. In fact, I contracted with not one but two pharmacy benefit managers on behalf of almost 40,000 lives. So maybe connected and conflicted.

The lawsuit launches into a “they should have known better” claim against Human Resources and that they breached their fiduciary duty. And the example is egregious. And you know that there are probably lots more examples out there. But somehow this all feels inevitable. The entire system is opaque and even those who are paying attention can miss things.

First, let’s acknowledge one elephant in the room. The policy people of the world spend a lot of time realizing that how the PBMs work is up for reform. The Benefits/Human Resources people ARE NOT POLICY PEOPLE. They work with lots of vendors. They may understand the ins and outs of all the ways PBMs make money, but they may not. They are likely working with consultants who they trust to help them navigate a request for proposals on their PBMs and work through contracts.

Contracts with PBMs are typically not written on a drug-by-drug basis but are more holistic. Average Wholesale Price minus a percentage that could vary based on types of drugs. There may be a standard formulary and then the benefits person might say we want to add x, y, z or cover this type of drug with a different cost-sharing.

The individuals designing these benefits are likely doing their best with the information they have but the bigger machine around them is broken. What the benefits person might not know is that the consultant could be getting a payment from the PBM for each script or that there is a vertical integration between the companies. Or that the PBM can get away with charging $10,000 for the drug. I am not sure this is negligence, just that there are thousands of ways to work the system and a benefits person can’t know all the ways they could get screwed by the PBM whose role is to make as much money as possible.

What will likely happens is that Johnson and Johnson will try and get the claim dismissed. If that doesn’t work, they’ll pull in their consultants and cast a shadow in that direction. And maybe that’s the point. It isn’t so much that the employer failed but that the system is built to fail patients and here is another way to tell that story and work toward reforming all of it.