Wells Fargo & Company and its plan fiduciaries are alleged to have breached their fiduciary duties under ERISA by mismanaging the firm's health plan in a way that caused employees to overpay for prescription drugs.
The suit, filed in a Minnesota U.S. district court, alleges that Wells Fargo agreed to pay its Pharmacy Benefits Manager (PBM) high prices for generic drugs that were "widely available at drastically lower prices."
According to an example set forth 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. In contrast, it is alleged that Wells Fargo agreed to make the plan, and its participants and beneficiaries, pay $9,994.37 for each 90-unit fingolimod prescription.
"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 allege 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.
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 percent above what it costs pharmacies to acquire those same drugs.
Wells Fargo is accused 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.
This amount is alleged to exceed the per-participant fees paid to Express Scripts by plans that are both comparable in size and smaller than Wells Fargo's plan. "Wells Fargo Sued Over Mismanagement of Health Care Plan" www.plansponsor.com (Aug. 05, 2024).
Commentary
Although rising plan fees have always been heavily litigated, one variation of this trend is to question whether employers are doing enough to contain health and pharmacy plan costs.
ERISA was amended to include the regulation of the cost of employer-sponsored health care plans as part of the Consolidated Appropriations Act of 2021.
Those regulations included making plan fiduciaries responsible for price shopping for the best health plan for employees; requirements to report drug pricing and pharmaceutical information to government regulators; and the monitoring of the direct and indirect compensation received by health industry broker/dealer.
Plan fiduciaries should carefully review ERISA's fiduciary requirements and then ensure they are followed. Frequent plan and fee reviews should be conducted to ensure continued compliance.