Wells Fargo Sued Over Mismanagement of Health Care Plan

Wells Fargo & Company, including executives at the bank who were fiduciaries to the plan, have been accused in a lawsuit of breaching duties under ERISA by mismanaging the firm’s health plan in a way that caused employees to overpay for prescription drugs. 

The lawsuit, Navarro v. Wells Fargo & Co., was filed Tuesday in a U.S. district court in Minnesota by four former participants of the ERISA plan at issue.  

Some of the named Wells Fargo executives in the lawsuit include David Galloreese, former senior executive vice president and head of human resources, Michael Branco, former executive vice president and head of total rewards and Mark Hickman, former head of benefits and enterprise recognition. These executives were all plan administrators and fiduciaries. 

Expensive Prescription Drugs 

The plaintiffs’ suit claims that Wells Fargo agreed to pay its Pharmacy Benefits Manager high prices for generic drugs that were “widely available at drastically lower prices.” 

According to an example laid out in the lawsuit, someone with a 90-unit prescription for the generic drug fingolimod—the generic form of Gilenya, used to treat multiple sclerosis—could fill that prescription without insurance at Wegmans for $648, ShopRite for $677, Rite Aid for $891 and Walmart for $895.  

The lawsuit alleged that Wells Fargo agreed to make the plan and its participants and beneficiaries pay $9,994.37 for each 90-unit fingolimod prescription. 

The plan itself pays most of the agreed amount from plan assets, while participants and beneficiaries pay more in the form of increased premiums and out-of-pocket costs, according to the suit. In a price breakdown outlined in the lawsuit, the plan is shown to pay $6,694 of the total medication cost, and the participant is responsible for paying $3,300. 

“No prudent fiduciary would agree to make its plan and participants/beneficiaries pay a price that is fifteen times higher than the price available to anyone who just walks into a pharmacy and pays without using their insurance,” the lawsuit stated.  

The participants in the Wells Fargo case, represented by law firms Gustafson Gluek PLLC and Fairmark Partners, LLP, are seeking “plan-wide relief” and recovery for injuries to the plan sustained as a result of the breaches of fiduciary duty and the “prohibited transactions.”  

Wells Fargo did not immediately respond to a request for comment on the lawsuit.  

Overpaying the PBM 

The participants alleged that the roughly $9,000 per-prescription difference between what pharmacies pay to acquire fingolimod and what Wells Fargo agreed to make the participants pay for the same drug goes “largely into the pocket of the plan’s PBM,” — which is Express Scripts — at the expense of the plan and its participants. 

Express Scripts is one of the big three PBMs that the Federal Trade Commission is posed to file a lawsuit against for pushing patients to more expensive brand-name drugs. Express Scripts is owned by Cigna Group.  

Wells Fargo designated approximately 300 generic drugs as “preferred” drugs that participants are encouraged to use, and according to the lawsuit, the company agreed to make the plan and its beneficiaries pay, on average, a markup of 114.97% above what it costs pharmacies to acquire those same drugs.  

In addition, the suit claims Wells Fargo agreed to terms under which participants are required to obtain some of their prescriptions from Accredo, a mail-order pharmacy owned by Express Scripts, even though that pharmacy’s prices are “routinely higher than the prices at other pharmacies,” the lawsuit stated. 

The lawsuit also accuses Wells Fargo of agreeing to pay excess administrative fees to Express Scripts. According to its most recent Form 5500 filing, Wells Fargo paid more than $25 million in administration fees to Express Scripts in 2022, which translates to $135.81 per participant. The lawsuit claimed that this amount exceeds the per-participant fees paid to Express Scripts by plans both comparable in size and smaller than Wells Fargo’s plan. 

“Fiduciaries conducting negotiations on behalf of plans as big as Wells Fargo’s have substantial bargaining power and, when acting prudently, can obtain low rates compared to smaller plans with less bargaining power,” the lawsuit stated. “Defendants, however, squandered that bargaining power, agreeing not only to make the plan and its participants pay Express Scripts unreasonably high prices for prescription drugs, but also to pay excessive administrative fees to Express Scripts.” 

ERISA Breaches 

The plaintiffs also argued that the company went afoul of ERISA by failing to exercise prudence and failing to act in the interest of participants by selecting a PBM and agreeing to make the plan and participants pay “unreasonable prices” for prescription drugs based on “unreasonable methodologies.” The suit also accuses Wells Fargo of failing to monitor Express Scripts and the prices charged for prescription drugs, among other claims. 

“The price discrepancies … are illustrative of a pervasive and systematic problem of unreasonable prescription drug charges…” the lawsuit stated.  

Fiduciary litigation risk is on the rise for employer-provided health plans. Other notable lawsuits filed this year include claims against Johnson and Johnson and the Mayo Clinic. 

Under the Consolidated Appropriations Act of 2021, employers are required to audit their vendors and their partners, including their PBMs, and make sure their prices are reasonable and that plan participants are paying a fair market price.