Overview
On July 30, 2024, Plaintiffs, who are members of the Wells Fargo & Company Health Plan filed a putative class action against Wells Fargo and senior executives who oversee the Wells Fargo & Company Health Plan for breaches of fiduciary duties and engaging in prohibited transactions while managing the health plan in violation of ERISA.
Specifically, Plaintiffs claim that over the past several years, Defendants breached their fiduciary duties and mismanaged Wells Fargo’s prescription-drug benefits program, costing their ERISA plan and their employees millions of dollars in the form of higher payments for prescription drugs, higher premiums, higher out-of-pocket costs, and lower wages or limited wage growth.
Case Background
This case involves mismanagement of prescription-drug benefits.
Among other things, Plaintiffs claim that as a result of Defendants’ mismanagement, which is funneled through its Pharmacy Benefits Manager (“PBM”), Express Scripts, they must pay higher prices for many generic drugs that are widely available at drastically lower prices.
For example, Wells Fargo Health Plan designated approximately 300 generic drugs as “preferred” drugs that participants/beneficiaries are encouraged to use; however, those drugs are marked up an average of 114.97% above what it costs pharmacies to acquire those same drugs. For participants/beneficiaries, this means that they have to pay more than twice as much as Express Scripts paid for the same drugs.
For generic-“specialty” drugs, Defendants agreed to make the Plan and its beneficiaries pay, on average, a markup of 383% above what it costs pharmacies to acquire those drugs. In other words, Defendants agreed to make the Plan and its beneficiaries pay, on average, roughly five times as much as Express Scripts paid for those very same drugs.
Plaintiffs also claim that, among other things, Wells Fargo agreed to: (1) pay Express Scripts unreasonably high administrative fees, (2) require Plan participants/beneficiaries to obtain all specialty drug prescriptions from Accredo, the mail-order pharmacy that Express Scripts owns, even though that pharmacy’s prices are routinely higher than the prices at other pharmacies, and (3) hire a PBM based on the recommendation of a conflicted broker rather than engage in an open request for proposal (“RFP”) process.
Under ERISA, Wells Fargo is required to make diligent and thorough comparison of alternative service providers in the marketplace, to negotiate prudently on behalf of the plan, and to continuously monitor plan expenses and ensure they remain reasonable under the circumstances.