This page is updated as cases move. The tracker above shows each case’s status as of its last verified court event.
Why are employers being sued?
Employers are being sued because ERISA treats a health plan’s money as plan assets, and the people who manage those assets are fiduciaries. ERISA section 404 requires them to act prudently and solely in the interest of participants, and section 406 bars certain transactions with service providers unless an exemption applies. None of that is new. What changed is that plaintiffs’ firms that spent two decades suing over 401(k) fees have turned the same playbook on health plans.
The suits fall into four groups:
| Type of suit | What plaintiffs allege | Main legal theory |
|---|---|---|
| Prescription drug prices and PBM contracts | The plan paid far more than market prices for drugs, often generics, because fiduciaries accepted a PBM contract without testing it | Breach of the duty of prudence; prohibited transactions with the PBM |
| PBM rebates | Drug rebates that should have benefited the plan went to the employer | Breach of the duty of loyalty; use of plan assets |
| Tobacco surcharges | Employees paid a surcharge under a wellness program that did not meet federal wellness rules, such as offering and explaining a reasonable alternative standard and giving the full reward | Wellness program rules under ERISA section 702; fiduciary breach for collecting the surcharge |
| Voluntary benefits | Employee-paid products such as accident, critical illness and hospital indemnity carried broker commissions near 40% of premium | Breach of prudence in selecting and monitoring products and brokers; brokers as functional fiduciaries |
The drug pricing cases share a pattern. Participants allege the plan steered prescriptions to a PBM-owned mail order or specialty pharmacy that charged more than retail, paid prices above what an uninsured person would pay in cash, did not push lower-cost generics, and paid PBM fees above comparable plans. The employer is the defendant because the employer, through its benefits committee, chose and monitored the PBM.
The voluntary benefits suits go a step further. They name the benefits consultants as defendants, arguing that a broker who shapes product and carrier selection, and is paid a percentage of the premium, is acting as a fiduciary and cannot be paid excessively out of plan money. The long-standing “we advise, we don’t decide” position is being tested in court for the first time in health and welfare plans. The consultants named so far include Mercer, Willis Towers Watson, Gallagher and Lockton.
The Johnson & Johnson case in detail.
Lewandowski v. Johnson & Johnson is the case that put health plan drug pricing on every employer’s radar. The complaint alleged that J&J’s plan, through its PBM arrangement, paid far more for many drugs, especially generics, than the same drugs cost at retail pharmacies, and that participants were steered to a mail order pharmacy that charged more than retail. It alleged J&J’s fiduciaries did not prudently vet the PBM contract or negotiate lower prices.
The court never reached whether J&J acted prudently. In January 2025 it found that the lead plaintiff had not shown a redressable injury: higher premiums were speculative, and her out-of-pocket drug costs would not have changed because she reached the plan’s out-of-pocket maximum through other medical expenses. A claim for failing to produce plan documents on time survived that round. The plaintiffs added a retiree and refiled, and in November 2025 the court dismissed again, finding the link between PBM pricing and what participants pay too speculative and noting that the plan gave J&J sole discretion to set contribution rates. The plaintiffs chose to appeal rather than amend.
Win or lose on appeal, the facts alleged in the complaint are the lesson. Employees can see drug prices, compare them with retail and cash prices, and ask for plan documents. A plan that cannot explain why it pays more than the pharmacy down the street has a problem whether or not a court ever hears the case.
How have courts ruled on standing?
Standing has decided most health plan cases so far. To sue in federal court, a plaintiff must show a concrete injury caused by the defendant that a court can fix.
| Ruling | Date | What it held |
|---|---|---|
| Thole v. U.S. Bank, U.S. Supreme Court | June 1, 2020 | Participants in a defined benefit pension plan who receive their full fixed benefits lack standing to sue over plan mismanagement |
| Knudsen v. MetLife, Third Circuit | September 25, 2024 | Claimed effects of diverted drug rebates on participants’ costs were too speculative for standing |
| Lewandowski v. Johnson & Johnson, D.N.J. | January 24, 2025 and November 26, 2025 | Higher premiums and contributions were speculative, and out-of-pocket costs were not redressable on the facts pleaded |
| Navarro v. Wells Fargo, D. Minn. | March 24, 2025 and March 2026 | No one-to-one link between PBM pricing and participant contributions; participants received the benefits the plan promised |
| Cunningham v. Cornell University, U.S. Supreme Court | April 17, 2025 | A prohibited transaction claim under ERISA section 406(a)(1)(C) need not plead that no exemption applies; the defendant must raise exemptions |
| Stern v. JPMorgan Chase, S.D.N.Y. | March 9, 2026 | Premium theory failed, but specific out-of-pocket drug overpayments were a concrete injury; choosing how to structure the drug benefit is plan design, a settlor act |
Three points follow. First, the “higher premium” theory has failed in every PBM case so far. Second, specific out-of-pocket overpayments by a participant who did not hit the out-of-pocket maximum can be enough, as Stern shows. Third, after Cunningham, prohibited transaction claims over service provider contracts are easier to plead, which is why the PBM claim in Stern survived. The Third and Eighth Circuit appeals in the J&J and Wells Fargo cases will be the first appellate word on these PBM theories.
Tobacco surcharge cases have fared differently because the injury is direct: the employee paid the surcharge. On August 26, 2026, the Departments of Labor, HHS and the Treasury said in ACA FAQs Part 74 that they will not take enforcement action against a plan that gives the reward from the point an employee meets a reasonable alternative standard, rather than back to the start of the plan year. That is an enforcement position, not a court ruling, and the Mehlberg court ruled for employees on retroactive reimbursement in October 2026.
What should employers do now?
The answer to all four kinds of suits is a documented process. Courts judge fiduciaries on how they made decisions, and the record is your evidence. The fiduciary standard explains the duties, and the Fiduciary Framework™ shows how to run a plan to them.
- Put a committee and charter in place. Name who the plan fiduciaries are, what they decide and how often they meet. Train them on ERISA duties, and keep minutes that show what was considered, what was decided and why.
- Review your PBM contract. Test pricing against market benchmarks, check how “rebate” is defined and where rebates go, confirm audit rights, and look at whether members are steered to PBM-owned pharmacies that charge more than retail. Compare what the plan pays for common generics with cash prices.
- Know how your advisors are paid. Ask every broker and consultant for their direct and indirect compensation, including on voluntary products, and ask where their incentives point. Arrangements should hold up to a prudence review, not only a disclosure review. See broker compensation disclosure.
- Check voluntary benefits. Find out whether your voluntary products are part of an ERISA plan, what commission each carries, and what share of premium goes to claims. See voluntary benefits fiduciary duty.
- Audit any tobacco surcharge. Confirm the program offers a reasonable alternative standard, that every plan document mentioning the surcharge says so, and how and when the reward is given back.
- Answer document requests on time. A late response to a participant’s request for plan documents was the one claim that survived the first round in the J&J case.
- Review your coverage. Check fiduciary liability insurance limits and exclusions, and negotiate indemnification terms with the PBM and other service providers.
Ethos Benefits consultants work to a fiduciary standard of care, and Ethos Benefits helps employers put this record in place through fiduciary governance, pharmacy and PBM and fiduciary insurance reviews.
Federal PBM reform will add reporting and pass-through rules for plan years beginning on or after August 3, 2028. See PBM reform for what the new law requires.
