Dive Brief:
- A federal judge has tossed out a lawsuit against Wells Fargo from a group of former employees arguing that the bank violated its fiduciary obligations by agreeing to pay steep prices for prescription drugs. It’s a victory for employers concerned they could be the next company accused of mismanaging health benefits.
- The four ex-employees filed suit in July accusing Wells Fargo of allowing its pharmacy benefit manager, Express Scripts, to overcharge for drugs. In addition, Wells Fargo allowed Express Scripts to retain rebates it negotiated with drugmakers instead of passing the savings along, which could have lowered drug costs for the company and its members, according to the lawsuit.
- The lawsuit argues that Wells Fargo’s actions violated the Employee Retirement Income Security Act, or ERISA, the federal law setting standards for employer-sponsored health coverage. However, on Monday a Minnesota district court judge disagreed, ruling workers failed to demonstrate concrete harm and therefore lacked standing to bring the case.
Dive Insight:
The litigation against Wells Fargo is the second lawsuit accusing a large, self-funded employer of failing to bring down drug costs for their workers and acting as a poor steward of their healthcare dollars in violation of ERISA.
The first, filed against pharmaceutical giant Johnson & Johnson in February 2024, sent shockwaves through the health benefits industry as it represented a new and potentially powerful legal argument that, if successful, could force companies to take a much more active role in controlling drug costs.
However, employee plaintiffs have yet to persuade the courts. A New Jersey judge dismissed the case against J&J in January, also determining the plaintiffs lacked standing. Now, the dismissal of the Wells Fargo case throws more cold water on the possibility of other copycat suits against employers in the future.
The lawsuit against Wells Fargo claimed that the international bank mismanaged its health plan, including by paying excessive administrative fees to Express Scripts, one of the “Big Three” U.S. PBMs.
In 2022, the plan paid over $25 million in administrative fees to Express Scripts, up from $9 million in 2019 — well above fees paid by other large Express Scripts clients, and despite Express Scripts’ services remaining the same and enrollment in Wells Fargo’s plan actually decreasing over that time, according to the complaint.
Wells Fargo also allowed Express Scripts to retain savings it negotiated with drugmakers, and agreed to require employees to fill some prescriptions at Accredo, a specialty mail pharmacy owned by Express Scripts, despite Accredo’s higher prices, the complaint alleges.
As a result, Wells Fargo members paid higher costs for drugs that they could have gotten for much lower prices. In one example laid out in the complaint, Wells Fargo employees in its plan paid almost $10,000 for a 90-unit prescription for the generic multiple sclerosis drug fingolimod — even though the same prescription could be filled without insurance for about $650 to $900 at various retail pharmacies.
However, Judge Laura Provinzino agreed with Wells Fargo that the plaintiff’s alleged harm was insufficient to confer standing.
The connection between Wells Fargo’s administrative fees and what plan members had to pay for drugs is “tenuous at best,” Provinzino wrote in her order dismissing the case. In addition, examples of high costs for specific drugs are an unrepresentative subset of the thousands of drugs covered in the plans’ full formulary, she said.
And, the plaintiffs’ entitlement to their benefits was unchanged, regardless of any mismanagement on the part of Wells Fargo.
“While compelling and detailed, Plaintiffs’ allegations are simply too speculative to show concrete individual harm, too tenuous to show causation, and too conjectural to show redressability,” Provinzino wrote, though she added later that “the Court is not unsympathetic to Plaintiff’s concerns” and called their frustration with prescription drug costs “understandable.”
Wells Fargo did not take issue with the facts of the case. A spokesperson for Wells Fargo declined to comment on the case’s dismissal and whether the bank’s relationship with Express Scripts has changed since it was filed.
Provinzino dismissed the lawsuit without prejudice, meaning the plaintiffs can replead the case if they choose. The legal team for the plaintiffs did not respond to a request for comment by time of publication.
