Fiduciary Responsibility

One of the buzzwords in today’s pharmacy benefits is “fiduciary responsibility.” While it is not new, it is receiving increased attention in light of headlines regarding employers being sued for failing to meet their fiduciary responsibilities. In the simplest terms, fiduciary responsibility means treating every dollar spent by your plan members—often employees and their beneficiaries—as if it were your own, or making pharmacy benefit plan design decisions in their best interest.  

Recent Legal Cases Highlighting Fiduciary Responsibility

Recent lawsuits, such as those against Johnson & Johnson and Wells Fargo, have brought fiduciary responsibility to the forefront. These cases allege mismanagement and inflated costs in prescription drug benefit programs, emphasizing the importance of employer fiduciary responsibility.

While the Johnson & Johnson lawsuit was recently dismissed, plan sponsors should not take this as a sign of things changing. The lawsuit was dismissed because the plaintiff was not on the medicine used as the basis for the lawsuit. You will also note that the lawsuits that have become headlines relate to pharmacy benefit costs.  

When a member can search through Google and find the same drug from Mark Cuban or Good Rx at less than half the price as their plan, it leads to several questions. The member doesn’t care about the back-end rebates or how those are managed when they have out-of-pocket expenses. This leads directly to fiduciary challenges in managing pharmacy benefit costs. The pharmacy benefits industry is complex and convoluted and requires special knowledge. 

A few of the key challenges that fiduciaries must navigate are the lack of transparency in the supply chain, the growth in innovation—which has resulted in the launch of several new drugs—the rapid growth in additional indications for existing drugs and battling the level of knowledge across the board in understanding biosimilars.  

The objective of this blog is not to cover all the complexities; that would be more like an encyclopedia than a blog. Let’s transition to what you can do as a fiduciary to minimize risk while providing benefits to your members. 

Ensuring Compliance: What can you do as a plan sponsor?

1. Understand Your Pharmacy Contract: This requires clinical, PBM industry and legal knowledge to ensure key terms are understood and not open to interpretation. Spend some time reviewing the contract in detail and asking for clear definitions of PBM terms, programs available and effectiveness. Also, understand your rights to check the market and/or terminate the contract.  
2. PBM Contract Management:   
   1. Annual Reconciliation. Utilize a third party to review and reconcile performance against the contract. You may or may not be eligible for compensation, depending on how the contract is written. 
   2. Market Checks and Audits. Regularly review the performance of the plan administrator through market checks or comprehensive audits. This allows you to see how you perform against the market without going out to RFP. This may tell you it is time for RFP. While most of today’s focus is on PBMs, this doesn’t mean you shouldn’t push for additional transparency and value from your consultants. 
3. Continuous Program Review: Regularly review programs providing financial and clinical assistance to ensure they deliver value. This requires a holistic understanding of your Rx benefit plan design, review of results versus expected, knowledge of your population and the ability to bring it all together for analysis and, most importantly, to realize the results. 
4. Independent Clinical Expertise: Engage independent clinical experts to review your employee population and assess the impact of new drugs or changes from brand to generic to create a clinical pharmacy plan design that works for you. 
5. RFP: In most cases, going out to RFP will deliver cost savings to the plan. It is often the most common tactic used to bend the cost curve within benefits. While this will deliver year-one results, it is important to note the other items on the checklist to ensure that it is not just a one-time savings. There is another chapter, maybe not a full encyclopedia, on best practices for RFPs and turning RFPs into contracts. 

While the news may be a source of fear, it can also be a catalyst for plan sponsors to take proactive steps to ensure compliance with their fiduciary responsibilities and protect their organization’s interests. Always begin by understanding your pharmacy contracts, conducting regular market checks and audits, engaging independent clinical experts and continually reviewing financial and clinical assistance programs. This will help minimize risks and maximize the value of your employee benefits programs. Take action now to safeguard your fiduciary responsibilities and lead your organization toward a more secure and cost-effective future.