MetLife wins appeal in $65M health plan drug rebate case
A three-judge panel found that the employees failed to show how their employer's rebate move hurt them.
Three judges at the 3rd U.S. Circuit Court of Appeals have rejected a suit filed by employees who are angry about how their employer’s health plan handled a drug rebate — but the judges suggested that employees who word their complaint differently might win.
The panel issued the ruling last week in connection with Knudsen et al. v. MetLife Group.
The employees who filed the suit worked for MetLife and health coverage through MetLife’s health plan. They have asserted that MetLife violated its fiduciary responsibility to them under the Employee Retirement Income Security Act of 1974 by keeping $65 million in prescription drug rebates it received from 2016 through 2021, rather than putting the drug rebate cash in the plan.
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A federal district court judge in New Jersey dismissed the suit, arguing that the employees lacked standing to bring the suit.
The 3rd Circuit panel supported the district court’s decision to dismiss the case. ”Plaintiffs have simply failed to allege financial harm that is ‘actual or imminent,’ as opposed to theoretical, conjectural or hypothetical,” Senior U.S. Circuit Judge Theodore McKee wrote in an opinion for the panel.
The plaintiffs got their health coverage from a self-funded MetLife benefit plan that was established in 1992, according to McKee.
As of Dec. 31, 2021, it had 36,962 participants and about $1.4 billion in assets. During the period covered by the suit, it used Express Scripts as its pharmacy benefit manager and paid Express Scripts $3.2 million to $6.3 million to manage its benefits.
Express Scripts obtained about $65 million in rebates, and MetLife kept all of the rebates.
MetLife may have increased the health plan participants’ costs by keeping the rebate money, but “the complaint does not include well-pleaded allegations that drug rebates (or even the total value of plan assets) are, under the plan documents, used to calculate plan participants’ out-of-pocket costs and that the effect of these inputs would decrease costs,” the judge wrote.
Representatives for MetLife and the plaintiffs could not immediately be reached for comment.