Wells Fargo sued over drug costs in employee health plan

Wells Fargo was accused of overpaying for prescription drugs by former employees, who claim mismanagement of the bank's health plan drove up costs for workers.

A lawsuit filed in federal court in Minnesota Tuesday alleges that the country's fourth-largest bank squandered money in its health plan, sometimes causing workers to pay far more for medications than they would have if they'd paid cash. For example, the Wells Fargo plan paid almost $10,000 for a generic pill for multiple sclerosis that Wegmans pharmacies sold for $648, according to the complaint, driving up premiums and out-of-pocket costs.

The former employees are seeking class action status. Wells Fargo is reviewing the complaint, spokesperson Beth Richek said in an email.

US employers spend about $1 trillion annually on company-sponsored health plans, the main source of insurance for working-age Americans. While employees typically are responsible for part of the premiums and out-of-pocket costs of their care, the prices they pay are determined by deals that their employers strike.

Companies are facing increasing questions over how they manage those contracts and potential legal risks about their oversight as employees find themselves paying more and more for medical care.

This is at least the second lawsuit from workers alleging they paid more than they should have for medications because their employers struck bad deals with the companies that oversee drug benefits for health plans, known as pharmacy benefit managers.

In February, a Johnson & Johnson worker made similar claims against the drugmaker in a New Jersey federal court. J&J has sought to dismiss the suit, arguing the plaintiff wasn't prescribed any of the drugs and thus isn't in a position to file such a complaint. The case is pending.

Employers typically rely on brokers, outside administrators and pharmacy benefits managers to design and run their health plans. Critics say those relationships can be rife with conflicts of interest and hidden fees that increase costs.

Richek, the Wells Fargo spokesperson, said the company offers an array of benefits "to support the health of our employees and their families."

Some large companies and union plans have sued their health plan administrators, seeking more access to data on where their money is going.

"There are no excuses left for a large corporation like Wells Fargo to ignore its legal obligation to identify reasonable prescription drug coverage," Michael Lieberman, an attorney with Fairmark Partners, said in an emailed statement. The firm filed the cases against both J&J and Wells Fargo.

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Fiduciary breach

The plaintiffs allege that Wells Fargo breached its fiduciary duty under the law that governs large corporate benefit plans, the Employee Retirement Income Security Act.

Similar litigation targeting companies over fees in their retirement plans has led to millions of dollars in settlements. Trial lawyers are now testing whether that strategy can be replicated for health benefits and are recruiting people to bring cases against their own employers.

The lawsuit against Wells Fargo doesn't name the bank's pharmacy benefit manager as a defendant, but it does allege that a deal with Cigna Group's Express Scripts unit raised costs for employees. Drugs on the plan considered "preferred" cost more than twice as much as what Express Scripts paid pharmacies, according to the complaint.

Representatives for Cigna didn't immediately respond to a request for comment.

Pharmacy benefit managers are facing intensifying backlash in Washington, as members of Congress and the Federal Trade Commission fault them for driving up costs in the convoluted US drug supply chain. Pharmacy benefit managers counter that drug manufacturers set prices and should take the blame for rising costs.

The Wells Fargo complaint alleges that the plan steered members to Express Scripts' mail-order pharmacy, which charged higher prices. It cites one drug, a generic gel used to treat lymphoma, that costs almost $70,000 from Cigna's specialty pharmacy but less than $4,000 at Rite Aid. That echoes allegations made in a recent FTC report that said PBMs paid higher rates to their affiliated mail-order pharmacies.

The plaintiffs say the bank also overpaid in fees for administering the drug plan, paying $25 million to Express Scripts in 2022, or $136 per plan participant, which they said was higher than other plans.

The four named plaintiffs in the case worked for Wells Fargo for various periods between 1980 and 2023. The complaint names the company and top benefits executives as defendants.

The case is Navarro v. Wells Fargo & Co., 24-cv-03043, US District Court, District of Minnesota.