JPMorgan Chase & Co. is the latest major corporation to face a class action lawsuit from employees alleging mismanagement of their prescription drug benefits. The lawsuit claims that JPMorgan, through its pharmacy benefit manager (PBM), CVS Health, overpaid for prescription medications, ultimately driving up costs for both the company’s health plan and its employees. Plaintiffs argue that JPMorgan failed to act in the best interests of plan participants by allowing CVS to charge inflated prices for drugs that could have been obtained at significantly lower costs elsewhere.

At the heart of the lawsuit are allegations that JPMorgan breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA), which requires plan sponsors to prudently manage employee benefit plans. According to the complaint, employees paid excessive amounts for their prescriptions due to JPMorgan’s failure to negotiate better terms with CVS or seek alternative PBM arrangements. One striking example cited in the lawsuit involves the multiple sclerosis drug Teriflunomide, which was reportedly available at retail pharmacies for approximately $30 but was billed to JPMorgan’s health plan at over $6,000.

The financial implications of such alleged mismanagement extend beyond inflated drug prices. Higher prescription drug costs can lead to increased premiums and out-of-pocket expenses for employees, as well as suppressed wages due to employers compensating for the rising costs of healthcare benefits. As prescription drug costs continue to be a major financial burden for both employees and employers, this case underscores the necessity of responsible plan administration and the potential consequences of fiduciary negligence.

A Growing Trend of Lawsuits Against Employers

This lawsuit follows a growing trend of employees challenging their employers over prescription drug benefits. Similar legal actions have been filed against companies like Johnson & Johnson and other employers who have been accused of allowing their PBMs to overcharge for medications.
 

The case against Johnson & Johnson was dismissed earlier this year due to a lack of standing, but a second amended complaint was filed on March 10, 2025, aimed at addressing the procedural issues noted in the prior dismissal. The plaintiffs in that case argue that J&J failed to ensure that its PBM negotiated competitive pricing for prescription drugs, leading to excessive costs for plan participants. The ongoing litigation against another employer raises similar allegations, asserting that the company failed to properly oversee the costs imposed by its PBM.

These cases highlight the increasing scrutiny on how corporations manage their healthcare benefits and whether they are fulfilling their obligations to employees. With prescription drug costs continuing to rise, more employees may begin to question whether their employers are truly acting in their best interests.

The Role of PBMs and Their Controversial Practices

PBMs play a critical role in the prescription drug supply chain by negotiating drug prices and managing formularies for employer-sponsored health plans. However, critics argue that PBMs often prioritize their own profits over cost savings for patients and plan sponsors. They have been accused of engaging in opaque pricing practices, failing to pass on manufacturer rebates, and setting artificially high reimbursement rates for pharmacies.

One of the biggest concerns with PBMs is the lack of pricing transparency. PBMs negotiate drug prices with manufacturers, secure rebates, and determine how much pharmacies are reimbursed. However, these negotiations are often conducted behind closed doors, leaving employers and employees in the dark about how much they are actually paying for medications. Without adequate oversight, employers can end up paying far more for prescription drugs than necessary, ultimately leading to higher premiums, out-of-pocket costs, and suppressed wages for employees.

Another common criticism of PBMs is the practice of spread pricing, where PBMs charge a health plan a higher price for a drug than what they reimburse the pharmacy, keeping the difference as profit. This practice has been the subject of multiple state investigations and lawsuits, with some states implementing legislation to prohibit it.

PBMs also control which drugs are covered under a health plan’s formulary and can influence drug pricing by using restrictive practices such as requiring patients to use higher-cost brand-name drugs when lower-cost generics are available. This formulary control can result in significant financial burdens for both plan sponsors and employees, as they may be forced to pay for more expensive medications due to PBM preferences.

The Fiduciary Duty of Employers in Managing PBMs

For employers, these lawsuits serve as a wake-up call to take a more proactive approach in managing their prescription drug benefits. Under ERISA, plan sponsors are required to act in the best interests of plan participants, which includes ensuring that prescription drug benefits are managed efficiently and cost-effectively.

Employers should ensure that their PBM contracts are structured in a way that prioritizes cost savings for employees rather than allowing PBMs to maximize their own profits. Transparency is key—employers should demand full disclosure of pricing structures, rebates, and any hidden fees that could be inflating drug costs. Regular audits of PBM performance can help identify overcharges and ensure compliance with contractual terms.

Employers should also consider alternative PBM arrangements. The rise of transparent PBMs, which operate on a fee-based model rather than a percentage-based spread pricing structure, provides an alternative to traditional PBMs that may prioritize their own financial interests over cost savings for plan sponsors. Transparent PBMs pass through all manufacturer rebates to employers and do not engage in spread pricing, allowing employers to have a clearer understanding of the true cost of prescription drugs.

Potential Industry Implications of the JPMorgan Lawsuit

The outcome of the JPMorgan lawsuit could have wide-ranging implications for both employers and the broader healthcare industry. If the plaintiffs succeed, it may prompt other employees to file similar lawsuits, increasing the legal risks for corporations that fail to manage their pharmacy benefits responsibly.

A ruling against JPMorgan could also lead to regulatory changes aimed at increasing transparency and accountability in the PBM industry. Lawmakers have already begun pushing for greater oversight of PBMs, and a high-profile case like this could further fuel efforts to introduce federal and state-level regulations to curb PBM abuses.

Moreover, PBMs themselves may be forced to reconsider their business practices to avoid further legal challenges and maintain client trust. Increased litigation and regulatory scrutiny could push PBMs to adopt more transparent pricing models and provide more accountability to employers and employees alike.

How We Can Help

For independent pharmacies, self-funded employers, and other stakeholders affected by PBM practices, understanding the legal landscape is critical. Our firm has extensive experience assisting plan sponsors and healthcare providers in navigating PBM disputes, including audits, reimbursement negotiations, and litigation over unfair pricing practices. Whether you are a pharmacy seeking to challenge PBM audit findings or an employer looking to ensure your prescription drug benefits are being managed properly, we provide strategic legal guidance tailored to your needs.

Our team can assist with contract reviews, ensuring that PBM agreements contain fair and transparent terms that protect plan sponsors from excessive costs. We also help employers implement PBM oversight strategies, including audits and compliance reviews, to identify potential overcharges and inefficiencies. For independent pharmacies, we offer legal support in disputes over unfair reimbursements, network terminations, and compliance with PBM contract terms.

If your organization is navigating complexities related to PBM contracts or drug spend, we’re here to help. Contact us to explore how we can support your efforts in ensuring fair and transparent management of your prescription drug benefits.

For independent pharmacies, self-funded employers, and other stakeholders affected by PBM practices, understanding the legal landscape is critical. Our firm has extensive experience assisting plan sponsors and healthcare providers in navigating PBM disputes, including audits, reimbursement negotiations, and litigation over unfair pricing practices. Whether you are a pharmacy seeking to challenge PBM audit findings or an employer looking to ensure your prescription drug benefits are being managed properly, we provide strategic legal guidance tailored to your needs.

Our team can assist with contract reviews, ensuring that PBM agreements contain fair and transparent terms that protect plan sponsors from excessive costs. We also help employers implement PBM oversight strategies, including audits and compliance reviews, to identify potential overcharges and inefficiencies. For independent pharmacies, we offer legal support in disputes over unfair reimbursements, network terminations, and compliance with PBM contract terms.

This article was authored by Dae Y. Lee, Shareholder, Buchanan, and Adam C. Farkas, Associate, Buchanan.