A lawsuit filed Tuesday in federal court in Minnesota alleges that Wells Fargo, the fourth-largest U.S. bank, squandered funds on health insurance plans, causing employees to have to pay much higher drug prices than they would have if they had paid cash. (AP Photo/CX Matiash, File)
John Tozzi | Bloomberg
Wells Fargo has been accused of overpaying for prescription drugs by former employees who say the bank’s mismanagement of its health insurance programs drove up costs for employees.
A lawsuit filed Tuesday in federal court in Minnesota alleges that the nation’s fourth-largest bank squandered funds on its health insurance plans, forcing employees to pay much higher drug prices than they would have if they had paid cash. For example, Wells Fargo’s plan paid nearly $10,000 for a generic multiple sclerosis drug that Wegmans Pharmacy sold for $648, driving up premiums and copays, according to the complaint.
The former Wells Fargo employees are seeking class-action status. Representatives for Wells Fargo did not immediately respond to a request for comment.
See also: Angry patients spur new state oversight agency to demand lower drug prices
U.S. employers spend about $1 trillion a year on employer-sponsored health plans, the primary source of insurance for working-age Americans. Employees typically pay some of the cost of premiums and out-of-pocket expenses, but the price they pay is determined by the contract their employers enter into.
As employees pay more and more into health care costs, companies are facing increasing questions about how to administer these arrangements and the potential legal risks surrounding their oversight.
This is at least the second lawsuit filed by workers who claim they were forced to pay more for drugs than they should have because their employers cut unfavorable contracts with companies that manage health plans’ pharmacy benefits (pharmacy benefit managers).
More information about medical expenses: FTC accuses pharmacy benefit managers CVS, Cigna, and UnitedHealth of high drug prices
In February, a Johnson & Johnson employee filed a similar lawsuit against the company in federal court in New Jersey. Johnson & Johnson is seeking dismissal of the lawsuit, arguing that the plaintiffs were never prescribed either drug and therefore do not have standing to bring such a lawsuit. The lawsuit is pending.
Employers typically turn to brokers, outside administrators and pharmacy benefit managers to design and administer health plans — relationships that critics say can be rife with conflicts of interest and hidden fees that drive up costs.
Some large companies and labor unions are suing health plan administrators, seeking more access to data about how the money is being spent.
Breach of fiduciary duty
The plaintiffs allege that Wells Fargo breached its fiduciary duties under the Employee Retirement Income Security Act, the law that governs large employer benefit plans.
Similar lawsuits targeting companies over retirement plan fees have resulted in multimillion-dollar settlements. Now litigation lawyers are exploring whether the strategy could be applied to health care benefits, and are recruiting people to sue employers.
The lawsuit against Wells Fargo does not name the bank’s pharmacy benefit managers as defendants, but alleges that its contract with Cigna Group Inc.’s Express Scripts raised costs for employees. Prices for drugs considered “preferred” by the plans were more than double what Express Scripts paid pharmacies, according to the complaint.
A representative for Cigna did not immediately respond to a request for comment.
There’s been a growing backlash against pharmacy benefit managers in Washington as lawmakers and the Federal Trade Commission accuse them of driving up costs in the complex U.S. drug supply chain. Pharmacy benefit managers counter that drug companies set prices and are to blame for rising costs.
Wells Fargo’s complaint alleges that the plan steered members to Express Scripts’ mail-order pharmacies, where they were charged higher prices. The complaint alleges that a generic version of a drug called Gel, used to treat lymphoma, would cost nearly $70,000 at a Cigna specialty pharmacy but less than $4,000 at Rite Aid. This matches allegations in a recent FTC report that PBMs paid higher fees to the mail-order pharmacies they partnered with.
The plaintiffs allege the bank also overpaid administration fees for the drug plan, paying Express Scripts $25 million in 2022, or $136 per plan participant, which was higher than other plans.
The four plaintiffs in the case worked for Wells Fargo at various times between 1980 and 2023. The complaint names the company and top executives in its employee benefits division as defendants.
The case is Navarro v. Wells Fargo & Co., 24-cv-03043, U.S. District Court, Minnesota.
