JPMorgan Chase employees may sue over high drug costs and premiums, judge rules

By Jonathan Stempel

NEW YORK, March 9 (Reuters) – A federal judge ruled on Monday that JPMorgan Chase employees can pursue part of their lawsuit accusing the largest U.S. bank of mismanaging its health and prescription benefits program, causing them to overpay for prescription drugs and premiums.

U.S. District Judge Jennifer Rochon in Manhattan said employees may seek to prove that JPMorgan authorized repeated, unauthorized overpayments to CVS Caremark to benefit its pharmacy benefits manager and avoid “blowback” from health care customers.

The proposed class action lawsuit, on behalf of tens of thousands of employees, accused JPMorgan of violating the Employee Retirement Income Security Act of 1974 (ERISA) by using a “fundamentally flawed” process to hire CVS Caremark, whose parent company, CVS Health, is an investment banking client.

He also noted that ⁠JPMorgan knows potential areas where it could cut costs, reflecting Chief Executive Jamie Dimon’s interest in efforts with Amazon.com’s Jeff Bezos and Berkshire Hathaway’s Warren Buffett to improve employee health care. Their failed joint venture Haven closed in 2021.

Lawyers for the employees did not immediately respond to requests for comment. JPMorgan and its lawyers did not immediately respond to similar requests.

According to the complaint, JPMorgan allowed CVS Caremark to raise prices for 366 generic drugs by an average of 211%, causing some employees to pay more than uninsured patients.

The complaint stated that the multiple sclerosis drug teriflunomide rose from $16.20 for a 30-unit prescription to $6,229.23, an increase of 38,000%.

In his 34-page decision, Rochon rejected allegations that JPMorgan breached fiduciary duties of loyalty and prudence, saying: “Decisions about joint ventures, corporate strategy, or relationships with third parties do not become fiduciary acts simply because the defendants also sponsor an ERISA plan.”

He also said the bank may have broad defenses to surviving claims after the U.S. Supreme Court ruled last April that ERISA plaintiffs must plausibly allege only that defendants engaged in “prohibited transactions.” Defendants may assert possible exemptions as an affirmative defense.

(Reporting by Jonathan Stempel in New York; Editing by Mark Porter)