ERISA Class Action Filed Against JPMorgan Targeting Health Plan Prescription Drug Benefit Contracting, Pricing, and Monitoring

On March 13, 2025, a putative class filed ERISA breach of fiduciary duty and prohibited transaction claims against several JPMorgan Chase entities and employee benefit plan fiduciaries (JPMorgan) in the U.S. District Court for the Southern District of New York. Stern v. JPMorgan Chase & Co., No. 25-2097 (S.D.N.Y. Mar. 13, 2025). This case adds to the growing number of ERISA class action lawsuits against employers and their health plan fiduciaries and benefits committees attacking benefit plan costs and fees.

The complaint alleges that defendants breached their ERISA duties of prudence and loyalty when they:

gave their [pharmacy benefit manager] free rein without any meaningful monitoring or review, allowed the [p]lan and its participants/beneficiaries to pay unnecessarily high prices for prescription drugs and administrative fees, ceded control of the [p]lan's formulary to conflicted third-parties, failed to ensure that decisions were made in the best interests of the [p]lan and its participants/beneficiaries, failed to conduct adequate reviews of the [p]lan's costs, failed to steer participants/beneficiaries to lower-cost options, failed to engage in a prudent process for monitoring the [p]lan's formulary, and failed to take other available steps that would have saved the [p]lan and its participants/beneficiaries millions of dollars.

The complaint also alleges that the defendants failed to adequately monitor their appointed fiduciaries. It bases some of these allegations on a comparison of the JPMorgan plan's generic drug prices to those of another plan that uses pharmacy benefit managers (PBMs) found in publicly filed reports, concluding that this other plan exercised "bargaining power to secure prices for generic drugs that are far lower than JPMorgan's prices." 

We recently wrote about a case against Johnson and Johnson (J&J) raising similar allegations that was dismissed without prejudice for lack of Article III standing. In Lewandowski v. Johnson and Johnson, No. 24-671 (D.N.J. Jan. 24, 2025), the court ruled that the sole class representative plaintiff did not sufficiently plead a redressable harm for standing purposes because she had already met her out-of-pocket maximum for the year and therefore would not benefit from any recovery in the case. The plaintiffs in Stern are represented by the same law firm as in Lewandowski, and the pleadings are similar, but with some twists. 

One set of allegations unique to Stern is that JPMorgan breached its ERISA fiduciary duty of prudence by failing to "recognize[] and avoid[] the flaws" in their approach to procuring prescription drug coverage for their employees which they should have known through their "own business and trade experience." The complaint alleges that although JPMorgan joined several industry trade groups, the Purchaser Business Group on Health (PBGH) and the Health Transformation Alliance (HTA), it ignored their recommendations to bring down drug costs. The complaint also alleges that JPMorgan "pursu[ed]... cost-saving initiatives through Haven Healthcare," "a joint venture with Amazon and Berkshire Hathaway that officially launched on January 30, 2018," "spearhead[ed]" by "JPMorgan CEO Jamie Dimon," but "abandoned these efforts under pressure from CVS and other banking clients, subordinating the Plan's interests to JPMorgan's business relationships." 

Also unique to Stern is a prohibited transaction claim alleging that JPMorgan's PBM, Caremark, is a service provider and party in interest under ERISA and that Caremark is also "vertically integrated with CVS, which is a JPMorgan banking client." The plaintiffs claim that defendants "retained Caremark... as their PBM and declined to take appropriate measures to monitor Caremark or control costs in order to benefit Caremark, avoid blowback from JPMorgan's clients in the healthcare industry, and smooth the way for JPMorgan's banking business in the lucrative healthcare field." Neither CVS nor Caremark are named as defendants in the lawsuit.

The plaintiffs in Lewandowski filed their second amended complaint last week. Of particular note, to address the court's concerns that the plaintiff, Ann Lewandowski, had not adequately alleged redressability, the new complaint adds another representative plaintiff who allegedly did not hit his out-of-pocket maximum for plan year 2024. Additionally, the second amended complaint adds several paragraphs alleging harm to the named plaintiffs, including that they paid more in premiums as employees and/or under Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage or as retirees as healthcare spending increased, and that the defendants' conduct caused Ms. Lewandowski to "pay more out-of-pocket for prescription drugs than she otherwise would have paid," even though she "nominally hit her 'out-of-pocket maximum' for 2023, and was harmed by being forced to pay her "out-of pocket costs sooner." The second amended complaint points to a $210 loss of "concrete financial harm" of out-of-pocket expenses that she would not have otherwise paid. 

To address the standing concerns raised in Lewandowski, the Stern complaint specifically alleges that the plaintiffs in that case "did not reach their out-of-pocket maximums." 

In addition, the defendants' motion to dismiss filed in Navarro v. Wells Fargo & Co. raising similar claims remains pending in the District of Minnesota. If any of these cases proceed to discovery and the merits, they will likely set the course for more widespread class claims by plan participants and beneficiaries challenging prescription drug prices and practices around PBM contracting and beyond to other health plan costs and fees. 

HHS Drops Appeal of Order Enjoining Gender Identity Anti-Discrimination Rule

On March 13, 2025, the parties in State of Tennessee, et al. v. Kennedy, No. 24-60462 (5th Cir.), submitted a joint stipulation to the Fifth Circuit dismissing the government's appeal of the preliminary injunction blocking the U.S. Department of Health and Human Services (HHS) from enforcing a 2024 final rule, Nondiscrimination in Health Programs and Activities (the Rule), which prohibits discrimination on the basis of sex, interpreted to include gender identity and sexual orientation, in covered health programs. By dropping the appeal, implementation of the Rule continues to be enjoined while the new administration determines how it wishes to address the underlying litigation ongoing in the Southern District of Mississippi and the Rule itself.

As previously covered, 15 states sued to enjoin the Rule shortly after it was issued in May 2024, arguing that it unlawfully interferes with state health regulations restricting gender-affirming care. The district court agreed, stating that the Rule impermissibly applied Bostock v. Clayton County, 590 U.S. 644 (2020), to section 1557 of the Affordable Care Act (ACA), the anti-discrimination provision that the Rule purported to implement. The Biden administration's HHS appealed the preliminary injunction ruling to the Fifth Circuit. Shortly after the change in administrations, both the district court and the Fifth Circuit granted requests to pause proceedings while new HHS leadership familiarized itself with the litigation and the March 13 stipulation followed. Though proceedings on the merits continue in the district court, HHS is expected to take steps to rescind or alter the Rule in short order, given the Trump administration policies underlying the government's recent reversal on federal law's requirements regarding gender-affirming care in United States v. Skrmetti, No. 23-477 (U.S.). 

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