Company leaders who treat employee health benefits as someone else’s problem may be setting themselves up for a legal reckoning, and billionaire entrepreneur and Cost Plus Drugs co-founder Mark Cuban wants them to know it.
The pressure is building around pharmacy benefit managers, the middlemen that negotiate drug prices for employer health plans. New transparency rules are forcing more disclosure from them, and that raises a harder question for the companies that hire them. Who is on the hook when the arrangement does not help workers?
The Buck Stops at the Corner Office
“You have to learn how it all works,” Cuban wrote in a post on X on Oct. 7. “You can’t ask a broker or consultant to figure it out for you. The responsibility stays with you and never goes to them. Even if they lie, steal and cheat you. It’s all on you.”
Cuban was responding to an article arguing that many pharmacy benefit managers are not working in the best interests of employers or employees. Anyone running a company has a legal responsibility to make sure healthcare benefits actually benefit employees, he wrote, and if they do not, the company is legally liable.
Sunlight Is Nice, but Someone Still Has to Steer
The post quoted drug price transparency advocate Antonio Ciaccia, who shared a Human Resources Director magazine article titled “Your pharmacy benefit manager may not be working for you.” According to the article, disclosure is not the same as control, and the employers that sponsor health plans remain the ones with the legal duty to judge whether their pharmacy benefit manager arrangements are reasonable.
Cuban has said repeatedly that healthcare is usually an employer’s second-largest expense after payroll and that many CEOs treat it as a black box handed off to HR or brokers. He has also said class-action risk around pharmacy benefits is rising.
Brokers Walk Away, Employers Do Not
For self-funded employer health plans, the warning tracks existing rules under the Employee Retirement Income Security Act. Sponsors of those plans carry duties of loyalty and prudence when they select and monitor vendors such as pharmacy benefit managers and third-party administrators. That includes making sure fees are reasonable and that arrangements primarily serve plan participants rather than intermediaries.
Brokers and consultants generally do not hold the same duty to employees, which leaves the responsibility with the company that sponsors the plan.
Employees have sued several large employers, including Johnson & Johnson (NYSE:JNJ), Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM), alleging that poor oversight of pharmacy benefit manager contracts led to inflated drug costs.
The Johnson & Johnson and Wells Fargo cases were dismissed because courts found the employees lacked legal standing. A federal judge let part of the JPMorgan case move forward in March while dismissing the fiduciary duty claims. Still, the number of lawsuits and new disclosure requirements are increasing scrutiny on how companies manage pharmacy benefits.
Self-funded plans are common at larger companies, and in those arrangements the employer ultimately pays the claims. That means the incentives of pharmacy benefit managers and other middlemen can directly affect what the company and its workers pay. Critics, including Cuban, argue that spread pricing, retained rebates and formulary decisions that favor higher-priced drugs often leave both sides worse off.
For employers, leaning on a broker’s recommendation is no longer viewed as enough protection. Documenting a prudent process, including competitive reviews, compensation disclosures and ongoing monitoring, is becoming more important.
For employees, stronger oversight could eventually mean lower costs or better access. In the short term, many still face high deductibles, restricted drug lists and prior-authorization hurdles even when their employer is the one writing the checks.
Whether courts expand the liability Cuban describes remains an open question. The direction is clear, though, and company leaders who treat benefits as someone else’s job are facing more legal and financial pressure to understand how the system actually works.
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