Posted on 08/02/2024 7:57:27 AM PDT by Jim Noble
Mark Cuban is issuing a big warning to self-insured employers: If your company receives pharmacy rebates through employee benefits, prepare for an eventual lawsuit.
"It’s not a question of if, it’s a question of when," he wrote on X on July 22. "The inevitable class action suit will dwarf the tobacco settlements."
Mr. Cuban's comments come as large employers are beginning to face lawsuits from their workers over claims of mismanaging health and pharmaceutical benefits and violating their fiduciary duties under the Employee Retirement Income Security Act.
ERISA requires self-funded employers acting as health plan fiduciaries to make an effort to find the lowest costs for healthcare services. In 2021, the Consolidated Appropriations Act amended ERISA to create new requirements for consultants and benefits brokers to disclose to employers any direct or indirect compensation they receive. Price transparency requirements enacted the same year also means that employers have gained more tools and are under more pressure to fulfill their obligations to employees.
"But unlike employers who hold a fiduciary responsibility, consultants and brokers do not hold a fiduciary relationship with employees, thus there is no obligation to prioritize the employer’s interest over their own," researchers wrote in an AJMC study published July 19, and cited by Mr. Cuban.
"In light of recent legal action, employers may wish to better understand the financial incentives of their consultants and brokers when accepting their recommendations for rebate contracting strategies and pharmacy benefit design."
In the most recent example, Wells Fargo was sued by employees in July for allegedly paying inflated prices to its contracted pharmacy benefits manager, Express Scripts.
A February lawsuit against Johnson & Johnson accuses the company of paying inflated costs for generic prescription drugs designated as specialty medications to Express Scripts, thereby harming employees through higher costs, premiums, deductibles, copays and lower or limited wage growth. J&J's employee health plan paid more than $10,000 for a 90-day prescription of a generic drug used to treat multiple sclerosis, which is available for as little as $40 without insurance at retail pharmacies, according to the suit.
"No prudent fiduciary would agree to make its plan and beneficiaries pay a price that is two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket," the plaintiff's attorneys wrote.
With employers increasingly feeling the pressure, some have sued their health plan and third-party administrators directly in an effort to access complete medical claims data.
In June 2023, Kraft Heinz alleged Aetna used its role as third-party health plan administrator "to enrich itself to Kraft Heinz's detriment" through undisclosed fees and processing medical and dental claims without human review. The food manufacturer voluntarily dismissed the lawsuit in December and moved it to private arbitration.
But employers can't always point the finger at third-party administrators, Christin Deacon, an attorney and principal owner at VerSan Consulting, previously told Becker's. For example, if an employer signed a bad contract that allowed egregious behavior, the TPA could turn around and ask why the employer didn't act upon that.
"I think that definitely plays into the fear factor of employers not being more aggressive," Ms. Deacon said. "There's plenty out there that are going to get on the bandwagon of being more aggressive with their carriers. Nobody wants to be the first, but everybody wants to be a fast follower."
"I think the first step is get a handle on all of your existing contracts and relationships and ask for your claims data. Document everything you're doing to try to be a good fiduciary to the plan," Ms. Deacon said. "Get your contracts, read your contracts, get your data and put processes in place that are going to help you protect yourself again from that fiduciary liability."
Amazing.
The state creates a problem, then produces a solution that puts money in plaintiff lawyer’s pockets as the “solution”.
“Express Scripts”
Employers get a package that they sell. Employers don’t get to pick and choose each drug item. Employees could do their own shopping.
The Pharmacy Benefit Managers (PBMs) are middlemen. As such, they will want and need markups, which could be regulated by law. They can bring to bear nearly complete drug substitute knowledge that few employers and doctors have.
PBMs can also have retail affiliates enabling employees to obtain drugs in a matter of minutes.
In 2021, the U.S. spent 17.8% of its GDP on healthcare, nearly twice as much as the average OECD country.
If the medical industry was efficient and honest health care spending could be halved. Imagine cutting that much grift and putting it to productive uses in other parts of the economy.
This!
“No prudent fiduciary would agree to make its plan and beneficiaries pay a price that is two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket,” the plaintiff’s attorneys wrote.
Drug related policy recommendations from my profile page:
DRUG APPROVAL
Drugs approved by the European Union/Health Canada would be deemed eligible for import, sale and use in the USA six/eighteen months after such approval unless Congress acts otherwise.
NEW DRUG PLANS
Federal PPACA exchanges would offer Interstate Class Drug Plans,
exempt from state control, that to be fully federally subsidy eligible must cover at least:
1. 80% of all recombinant drugs by key active entity
(or 100% less the percentages held by the top three domestic rights holders by percentage),
2. 80% of all FDA breakthrough drugs by key active entity
(or 100% less the percentages held by the top three domestic rights holders by percentage),
3. 80% of all drugs covered by a key active entity patent
(or 100% less the percentages held by the top three domestic rights holders by percentage),
4. 90% of all WHO “essential” drugs
Any percentage shortfalls would result in twice the percentage reduction in the federal subsidy amount and must have the word ‘Deficient’ in the drug plan name to at be all federally subsidy eligible.
This system would allow for genuine negotiation between drug plans and drug companies. Drug plans would have an incentive to try to buy drugs from drug companies and drug companies would have an incentive to make deals to make sales.
All drugs would be supplied at on an all-the doctors prescribe basis. The co-pays would be roughly equal to mere manufacturing cost.
The baseline federal drug subsidy would be the average policy holder age (as of the beginning of the policy period) divided by 3 taken as a percent of PPACA baseline subsidy amount for the PPACA household.
EXAMPLE A: For a PPACA household with a 34-year-old, a 36-year-old, and a two-year-old, the baseline federal drug subsidy would be 8% ((34+36+2)/(3*3))% of the PPACA household’s baseline subsidy amount.
EXAMPLE B: For a single PPACA policy of age 60, the baseline federal drug subsidy would be 20% (60/3)% of the PPACA household’s baseline subsidy amount.
They are trying to mimic nationalized healthcare using a mangled web within big corporations, HMOs, and regulation is the glue that holds it together and makes it work.
I'll wager that nobody administering "advantage" is your friend. Neither are AARP United Health or any of the others. Advantage is a hard core scam. Why else would there be so many "encouraging" you to join that program. If you can't make money directly you make it some other way. Kick backs will do just fine, thank you. Inducements? Right.
If you look deeply enough at the doctor's office you will find some of the same thing. When the doc prescribes something take a look at what else does the same thing for less money. I'll bet you find it. When you, do ask why not that and watch the doc stumble sometimes. Other times he may have a good reason and a lot of it is based on opinion or experience. Medicine is not always cut and dried.
As an aside, I spent more than two hours yesterday unwinding the junk pile of our statements from AARP United medicare supplement. It is very complicated but in April they transitioned from household pay to individual pay. In my case and 3% of the subscribers, according to United, the pay system has randomly allocated the two payments from a household from one account to another since May. The result of this jumble is two statements that are undecipherable and left my account one month behind and hers more than a month ahead. The solution is a mess that I am doubtful United will execute correctly. I have always paid any insurance premium at least a month in advance; always have and always will. Time will tell if they get this correction right.
Imagine a company has 20 employees and one uses a drug that costs $300,000/year.
How is that $300,000 to be funded?
It has to be partially taken on by the PBM. How does the PBM make itself not only whole but profitable? By charging others more than they would otherwise pay.
Most health coverage payers overpay so a small minority of costly care health coverage payers can underpay.
Few families can afford to spend $300,000/year on a drug.
But then there's less opportunity for graft.
Twice as expensive? Is it twice as effective? I doubt that very very much. We are being fleeced to the tune of at least somewhere between $1.8 and $2.0 TRILLION a year!! Cutting that amount should be easy low hanging fruit. Won't happen, too many are getting filthy rich from it.
That means this graft is arranged or created by the executives of the employer, who then (in part) pay themselves bonuses based on the graft.
Now shareholders will get soaked by trial lawyers for the kickbacks.
Why are they executives not being sued and/or arrested?
There is a class war being waged in this country, but it's by the c-suite, bankers and fund managers who think they have a divine right to loot money from employees, shareholders and the government. Remember, these are not the owners, they are managers. They loot and they pay zero penalty. As a consequence, we have a management class in both business and government that is completely out of control.
Imagine you want to build an apartment building in Blue City.
The average apartment might cost $1500/month to provide.
How are $1000/month “affordable” rents to be provided for say 40% of the units?
It’s done by charging not $1500/month on the other units but at least $1800/month.
That is a terrific comment, one of the best I have ever read here.
Except for the "holds it together" and "makes it work" part.
Ordinary people do not understand how close to collapse this faux-nationalized healthcare system is. And ordinary conservatives, you know, the free market guys, do not understand the magnitude of the subsidies that keep the system afloat nor do they understand the consequences of ending the subsidy.
Yes, you can sell boob jobs at a market price - for heavens sake, we can't train plastic surgeons fast enough to do them all.
But, for the most part, the pool of money contributed by employers and governments is finite, and it pays for at least 85% of all sick care in America. The fraction of that pool being consumed by middlemen not subject to regulation has exploded since 2009, causing the funds available for the care of the sick to shrink. This phenomenon requires "management" by "managers", whose population is also exploding, and eventually the cost of "management" + bribery and grifting now endemic in the middleman sector is going to collapse the system.
Guy is an idiot savant. Ever watch him on Shark Tank. He passed on Instagram and a dozen other companies. Why he is the Oracle of business, I have no idea. He hit a few homeruns but he’s batting .175
Would you want your doctor to prescribe the ‘best’ drug?
Yes.
And doctors generally try to do their best.
However, there are other drugs that might work sufficiently well.
What the PBM might do is to point that out to the maker of the ‘best’ drug and try to get a price cut. And the PBM might succeed.
Would you as an employer want to get a cut of that price cut (in the form of a rebate) or would you want the PBM to keep 100% of it?
Articles like this are illuminating to me because they demonstrate that in many cases, the employer is actually a fourth party in the whole mess -- which makes things even MORE dysfunctional.
Once again, Black women....follow me here. Healthcare middle mgmt has a disproportionate amount of black women in it. You know, the low-IQ Shaniqua types who graduated from an HBCU with a degree in social work and 100k in student loan debt. Look at almost any societal problem here in America, and it’s that 6% of the citizenry that had a hand in it. Call me racist, but facts don’t lie.
I wonder how many subcontractors the entity calling itself "United" is currently using.
Legislatures are much too stupid to keep up with the exploding grift sector. Anything forbidden to a Medicare "contractor" will be permitted to its subs, you can bet on that.
And you can also bet those subs are frantically recycling some of those $$$ to the committee members who are supposed to regulate this.
I was a teenager listening to dinner table arguments by my doctor dad and his colleagues for Medicare, pro and con, prior to 1965.
The problem, as it has turned out, was Democrats (for the most part) expected Medicare to lead to nationalization in a relatively short time frame (by 1975) and Republicans (for the most part) expected it to fail and go away.
The history of Medicare 1965-2024 will make a fascinating book some day, if books are still allowed.
As it turned out though, both sides were right.
Government regulations and malpractice insurance has priced most PCPs out of practice. Nurses are easily making six figures with their overtime thanks to unions that have hospitals by the throat. Lack of extended family involvement makes post surgical/elder care very expensive.
It isn’t all BIG PHarma and BIG Medicine. There are a LOT of factors involved with driving up those costs.
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