Last Monday, two lawsuits were filed that strike at a fundamental challenge facing the U.S. health system:
In the District Court of NJ, a class action lawsuit (ANN LEWANDOWSKI v THE PENSION & BENEFITS COMMITTEE OF JOHNSON AND JOHNSON) was filed against J&J alleging the company had mismanaged health benefits in violation of the Employee Retirement Income Security Act (“ERISA”). As noted in the 74-page filing “This case principally involves mismanagement of prescription-drug benefits. “Over the past several years, defendants breached their fiduciary duties and mismanaged Johnson and Johnson’s prescription-drug benefits program, costing their ERISA plans and their employees millions of dollars in the form of higher payments for prescription drugs, higher premiums, higher deductibles, higher coinsurance, higher copays, and lower wages or limited wage growth… Defendants’ mismanagement is most evident in (but not limited to) the prices it agreed to pay one of its vendors—its Pharmacy Benefits Manager (“PBM”)—for many generic drugs that are widely available at drastically lower prices.”
The issue is this: what liability risk does a self-insured employer have in providing health benefits to their employees?
Is the structure of the plan, the selection of providers and vendors, and costs and prices experienced by employees subject to litigation? What’s the role of the employer in protecting employees against unnecessary costs?
On the same day, in the District Court of Eastern Wisconsin, an 85-page class action lawsuit was filed against Advocate-Aurora Health (AAH) claiming it “uses its market power to raise prices, limit competition and harm consumers in Wisconsin:
- Forces commercial health plans to include all its “overpriced facilities” in-network even when they would prefer to include only some facilities.
- Goes to “extreme efforts to drive out innovative insurance products that save commercial health plans and their members money.”
- Suppresses competition through “secret and restrictive contract terms that have been the subject of bipartisan criticism.”
- Acquires new facilities, which then allows it to raise prices due to reduced competition
… without intervention, the health system will continue to use “anticompetitive contracting and negotiating tactics to raise prices on Wisconsin commercial health plans and their members and use those funds for aggressive acquisitions and executive compensation.”
The issue is this: is a health system’s liable when its consolidation activities result in higher prices for services provided communities and employers in communities where they operate?
Is there a direct causal relationship between a system’s consolidation activities and their prices, and how should alleged harm be measured and remedied?
Two complicated issues for two reputable mega-players in the U.S. health system. Both lawsuits were brought as class actions which guarantees widespread media attention and a protracted legal process. And each contributes directly to the gradual erosion of public trust in the health system since the plaintiffs essentially claim the business practices of J&J and Advocate-Aurora willfully harm the individuals they pledge to serve.
In the November 2023 Keckley Poll, I asked the sample of 817 U.S. adults to assess the health system overall. The results were clear:
- 69% think the system is fundamentally flawed and in need of major change vs. 7% who think otherwise.
- 60% believe it puts its profits above patient care vs. 13% who disagree.
- 74% think price controls are needed vs. 7% who disagree.
- 83% believe having health insurance that’s ‘affordable and comprehensive’ is essential to financial security vs 3% who disagree.
- 52% feel confident in their ability to navigate the U.S. system “when I have a problem” vs. 32% who have mixed feelings and 16% who aren’t.
- And 76% think politicians avoid dealing with healthcare issues because they’re complex and politically risky vs/ 6% who think they tackle them head-on.
The poll also asked their level of trust and confidence in five major institutions “to develop a plan for the U.S. health system that maximizes what it has done well and corrects its major flaws.”
Clearly, trust and confidence in the health system is low, and expectations about solutions fall primarily on hospitals and doctors. Lawsuits like these widen suspicion that the industry’s dominated first and foremost by Big Businesses focused on their own profitability before all else. And they pose particular problems for sectors in healthcare dominated by not-for-profit and public ownership i.e. hospitals, home care, public health agencies and others.
My take
These lawsuits address two distinct issues: the roles of employers in designing their health benefits for employees including the use of PBMs, and the justification for consolidation of hospital and ancillary services in markets.
But each lawsuit s predicated on a legal theory that prices set by organizations are geared more to corporate profits than public good and justifiable costs.
Pricing is the Achilles of the health system. Pushback against price transparency by some, however justified, has amplified exposure to litigation risk like these two and contributed to the public’s loss of trust in the system.
It is unlikely greater price transparency and business practice disclosures by J&J and Advocate-Aurora could have avoided these lawsuits, but it’s clearly a message that needs consideration in every organization.
Healthcare organizations and their trade groups can no longer defend against lack of transparency by defaulting to the complexity of our supply chains and payment systems. They’re excuses. The realities of generative AI and interoperability assure information driven healthcare that’s publicly accessible and inclusive of prices, costs, outcomes and business practices. In the process, the public’s interest will heighten and lawsuits will increase.
P.S. Nashville is known as a hot spot for healthcare innovation including transparency solutions. Check out this meeting February 29: https://www.eventbrite.com/e/leaping-into-the-future-of-healthcare-2024-insights-tickets-809310819447
Resources
Lawsuit 119120873885 (documentcloud.org)
Microsoft Word – Aurora Class Action Complaint (FINAL filed Feb. 5 2024) (aboutblaw.com) February 5, 2024
HENRY KOTULA 