(Originally published February 11, 2025 — Updated March 14, 2025)
Employers and benefits professionals continue to closely monitor developments in the landmark employer fiduciary breach case Lewandowski v. Johnson & Johnson. In late January 2025, the court dismissed the breach of fiduciary duty claims without prejudice. This meant that the plaintiff would be permitted to refile the same claims again, and she did just that this week.
Background on Lewandowski v. Johnson & Johnson
In early February 2024, Johnson & Johnson (J&J) was sued in its capacity as an employer plan sponsor for alleged mismanagement of the company’s prescription drug benefit plan. The plaintiff employee claimed that J&J breached its fiduciary duties by failing to prudently select a pharmacy benefit manager and negotiate favorable prescription drug pricing terms for the plan and its participants. The complaint claims that as a result of this fiduciary breach, the plan and its participants overpaid for certain drugs and overall premiums.
Citing specific examples, the plaintiff argued that the costs of specialty generic drugs were unreasonable and, therefore, J&J breached its fiduciary duties by contractually agreeing to pay those prices. The allegations did not take into consideration the fact that prescription drug discounts are negotiated collectively across thousands of drugs and failed to address the overall value of the plan’s contract. The complaint made references to certain specialty generic drug prices without considering how J&J purchased all its drugs under the program. The complaint acknowledged that the prices of most drugs covered by the plan were less than 2% above acquisition cost.
Update
In its January 2025 opinion, the court dismissed the plaintiff’s ERISA breach of fiduciary duty claims. The court found that the plaintiff did not have legal standing to sue for breach of fiduciary duty because she was not actually injured by the plan’s alleged mismanagement of expenses. The plaintiff was unable to show that she paid higher premiums as a result of the employer’s pricing for certain generic specialty drugs. Furthermore, she would still have met her deductible and maximum out-of-pocket even if she had not been subject to alleged higher out-of-pocket costs for the drugs identified in the complaint.
The court left open the possibility that another plaintiff, who would not have otherwise met his or her deductible or maximum out-of-pocket, could have standing to bring this claim. Accordingly, in an amended complaint filed on March 10, an additional plaintiff was named in the lawsuit – one who did not reach his out-of-pocket maximum in 2024. This amended complaint effectively restarts the legal process and we must now wait for the court’s ruling on whether this additional plaintiff has legal standing to bring these fiduciary breach claims. Readers should also be mindful of forthcoming developments in a nearly identical case, Navarro v. Wells Fargo, which was filed six months after the J&J lawsuit.
Impact to employer efforts
These latest developments do not impact employers’ ongoing fiduciary obligations and plan governance efforts. Employers should continue working to ensure they have proper plan oversight and a solid documentation process. Responsibilities include prudently selecting and evaluating vendors, documenting the vendor selection, negotiating key contract terms in furtherance of fulfilling fiduciary responsibilities and ongoing monitoring. Plan sponsors must also make sure that required plan communications are complete, readily available and comply with ERISA’s requirements.
For a detailed look at the Lewandowski v. Johnson & Johnson lawsuit, read our previous article written by ERISA attorney Jeff Zimon, J.D.
