[Source: Health Lawyers Weekly, December 7, 2007 - AHLA]
A pharmaceutical benefits manager (PBM) was not a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) by virtue of the services it provided pursuant to its contract with the sponsor of an employee benefits plan, a federal trial court in Tennessee ruled November 13.
. . . .
Plaintiff alleged Caremark acted as an ERISA fiduciary in that it had sole discretion to (1) set the price the plan paid for generic prescriptions; (2) select the benchmark average wholesale price reporting source used to set the price the plan paid for brand-name prescriptions; (3) determine whether a particular prescription would be adjudicated and priced as a brand-name or generic prescription; (4) decide when to dispense a brand-name drug as a generic prescription at its mail order facilities; and (5) manage the plan’s formulary.
The U.S. District Court for the Middle District of Tennessee found these activities related to the basic administration of Caremark’s own business and that Morrell & Co. retained exclusive control over the management and administration of the plan at all times.
Thus, the court held Caremark did not exercise discretionary control over the plan and the PBM was not a fiduciary under ERISA.
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