PBMs: A Growing Legal Risk for Employers and How to Protect Your Organization

Recent Federal Trade Commission findings reveal a troubling reality: the top three pharmacy benefit managers (PBMs) inflated specialty drug prices and generated over $7.3 billion in excess profits from 2017 to 2022. This revelation has sparked more than regulatory concern, it's driving employee lawsuits against employers for failing to protect their interests in prescription drug benefits.

The FTC's Findings

The Federal Trade Commission's investigation exposed systematic price inflation by major PBMs on specialty medications. These companies didn't innovate or improve services, they simply overpriced products while employers and employees continued paying without question. The $7.3 billion figure represents money extracted from healthcare budgets that could have been used for patient care or returned to plan sponsors.

Employees Are Taking Legal Action

A trend is emerging in employment litigation: employees suing their employers for breach of fiduciary duty related to prescription drug benefits. These lawsuits argue that employers have failed to act in their employees' best interests when selecting and overseeing PBM partnerships.

The legal theory is straightforward: when employers offer prescription drug benefits, they assume a fiduciary responsibility to ensure these benefits serve employee interests rather than enriching intermediaries.

Employees argue that continuing relationships with PBMs that engage in price manipulation violates this duty.

The Lobbyist Protection Problem

The pharmaceutical and PBM industries maintain substantial lobbying operations designed to protect current business models. This political influence has slowed regulatory responses and legal remedies, creating frustration among employees and employers alike.

However, the legal momentum is building.

Courts are increasingly willing to examine whether traditional PBM arrangements serve plan participants' interests or primarily benefit the PBM and its shareholders.

The Fiduciary PBM Solution

The emerging legal landscape demands a different approach to pharmacy benefit management. Employers need PBM partners that operate as fiduciaries themselves, contractually bound to act in the plan's best interests.

DisclosedRx provides contractual protections that help employers meet their fiduciary obligations:

Complete Pricing Disclosure: 100% pass-through of all drug costs with no hidden markups

Full Rebate Pass-Through: All manufacturer rebates flow directly to plan sponsors

Single Admin Fee: One fee with no hidden revenue sources

Contractual Fiduciary Commitment: Contractual obligation to act in your plan's best interests

Practical Steps for Risk Mitigation

Employers can reduce their legal exposure by taking these actions:

Conduct Regular PBM Audits: Examine pricing, rebate handling, and cost trends

Demand Full Disclosure: Require complete visibility into all PBM revenue sources

Document Fiduciary Processes: Maintain records of decision-making and oversight activities

Evaluate Fiduciary PBM Options: Consider PBMs that operate under fiduciary standards

What Can You Do Next?

The FTC's findings on PBM pricing practices represent just the beginning of increased scrutiny. Employers who continue relationships with PBMs that prioritize profits over patient and plan interests face growing legal and financial risks.

The path forward requires partnership with PBMs that operate under fiduciary standards, provide Full Disclosure of all costs and revenue sources, and contractually commit to acting in plan sponsors' best interests.

Change in the PBM industry requires collective action. When employers demand better practices and partner with fiduciary PBMs, they protect their organizations while driving industry-wide improvement. The legal momentum is building, the question is whether your organization will be part of the solution or continue accepting risks.

Learn more here - https://www.disclosedrx.com/