While the term “co-pay” might suggest a sharing of costs between patients and their health plans, a recent study by the University of Southern California Schaeffer Center found that almost a quarter of patients are paying more than the full price for their prescription drugs under their insurance plans due to “clawbacks.”  A prescription drug clawback occurs when patients purchasing drugs from pharmacies make co-payments required under their insurance plans that exceed the price of the prescriptions and then the insurers and/or pharmacy benefit managers (“PBMs”) clawback from the pharmacies the excess amounts paid.

There have been frequent media reports on the practice of prescription drug clawbacks and federal lawsuits have been filed against insurance companies and PBMs, such as UnitedHealth, Cigna, Humana, and Optum Rx.  The theories of liability being asserted include breach of fiduciary duty under the Employee Retirement Income Security Act (“ERISA”), violations of the Racketeer Influenced and Corrupt Organizations Act, as well as under various state laws.  These actions are all in their early stages, with none having been decided on the merits.

With respect to the ERISA claims, plan participants and beneficiaries have argued that the insurers and PBMs are liable as ERISA plan fiduciaries.  In two recent cases, the courts have concluded that the fiduciary duty analysis turns on whether the defendants exercised any discretionary authority or control in creating and implementing the alleged clawbacks and acted in accordance with the terms of the plans.  See Negron v. Cigna Health & Life Ins., No. 16-cv-1904, 2018 WL 1258837 (D. Conn. Mar. 12, 2018); In re UnitedHealth Grp. PBM Litig., No. 16-cv-3352, 2017 WL 6512222 (D. Minn. Dec. 19, 2017).

In In re UnitedHealth, the court dismissed plaintiffs’ ERISA fiduciary argument because the plaintiffs failed to allege facts sufficient to demonstrate that the defendants exercised any discretion and thus UnitedHealth and its PBM, Optum Rx, were not acting as ERISA plan fiduciaries.  In so ruling, the court determined that the defendants’ performance of “instantaneous calculations” in accordance with the terms of the plan was insufficient to show that their conduct was “anything more than ministerial claims processing.”  More recently, in Negron, plaintiffs’ claim survived a motion to dismiss.  The court found plaintiffs alleged facts sufficient to assert a plausible claim of fiduciary status based on the argument that Cigna’s conduct was in violation of plan terms and thus necessarily required the exercise of discretion.

In light of the Negron decision, and armed with a new academic study establishing the overpayment of a large portion of prescription drug claims, we may see an increase in actions involving health insurers and PBMs targeting clawbacks.  As the existing cases continue to be litigated and decisions on the merits are rendered, the impact of this trend will become more apparent.  In the interim, plan fiduciaries should consider:  (i) reaching out to their health insurer and/or PBM to determine whether or not participants are being advised when the co-pay under the plan exceeds the cost of the prescription; and (ii) advising plan participants who fill prescription drugs to ask the pharmacy whether the cash price for that prescription is less than the co-pay required under the plan.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Neal Schelberg Neal Schelberg

Neal serves as legal counsel to numerous pension and welfare benefit plans subject to ERISA. His clients span a wide variety of industries, including professional sports, teamsters, building and construction, health care, industrial, wholesale and retail food and newspaper publishing. He has particular…

Neal serves as legal counsel to numerous pension and welfare benefit plans subject to ERISA. His clients span a wide variety of industries, including professional sports, teamsters, building and construction, health care, industrial, wholesale and retail food and newspaper publishing. He has particular experience representing insolvent and financially distressed multiemployer pension plans.

He practices the full spectrum of employee benefits law. From advising on compliance issues, to negotiating benefit provisions in mergers and other business reorganizations and advising benefit plan clients and sponsors on investment transactions in traditional and alternative asset classes, Neal deftly hones in on the critical issues in order to protect the plan fiduciaries and meet their business needs.

Neal has been widely recognized as a leading employee benefits practitioner in Proskauer’s Employee Benefits & Executive Compensation Group which is rated “Tier 1” by The Legal 500 United States, a leading legal directory which rates firms and lawyers based on client feedback. Clients cite Neal as ‘one of a kind’ – he is the only practitioner in the field I would select to brief a CEO or corporate board.”

He is a former Chair of the ERISA Advisory Council, having been appointed to this position by the U.S. Secretary of Labor in 2014

Neal is a frequent lecturer and prolific author for many organizations such as the International Foundation of Employee Benefit Plans, the Law Education Institute and the Practising Law Institute. He has also been quoted in numerous journals and periodicals.

He serves as a board member for the National Association of Drug Abuse Programs and the D.C. 9 Scholarship Fund.