A lawsuit was filed in a Minnesota federal court accusing Wells Fargo and its plan fiduciaries of engaging in prohibited transactions and violating their fiduciary duties under the Employee Retirement Income Security Act (ERISA) concerning the Wells Fargo & Co. Health Plan (the “Plan”) and its participants. The complaint mirrors many of the allegations made in a similar lawsuit against Johnson & Johnson (JNJ), with some sections being directly copied.
The plaintiffs allege that Wells Fargo mismanaged the Plan’s prescription drug benefit program, leading to millions of dollars in increased premiums, out-of-pocket expenses, and reduced wages for participants. Unlike the JNJ case, this complaint includes specific drugs (although redacted) that the plaintiffs were prescribed and purchased, which are claimed to be among the overpriced medications.
A new aspect of the Wells Fargo complaint is the allegation that the Plan fiduciaries violated ERISA by causing the Plan to pay excessive and unreasonable administrative fees to its pharmaceutical benefit manager (PBM). ERISA generally prohibits transactions between a health plan and its service providers unless the terms are reasonable and necessary, with compensation being fair. The complaint asserts that the $25 million in administrative fees paid to Express Scripts in 2022 was significantly higher than what other comparable plans paid, making it an unreasonable and prohibited transaction. The complaint strengthens its argument by citing what similarly situated plans paid per participant in administrative fees, likely in response to the issues raised in the JNJ motion to dismiss.
The plaintiffs seek to recover losses to the Plan from Wells Fargo and its fiduciaries personally, request the removal of current Plan fiduciaries, the appointment of an independent fiduciary, and the replacement of Express Scripts as the Plan’s PBM. They also seek any other equitable relief available.
Employer Action Items
- Create a committee dedicated to overseeing health and welfare benefits, adopt a charter, and delegate fiduciary responsibilities to this committee.
- Hire qualified prescription drug plan consultants to help compare PBMs and prescription drug arrangements, ensuring that these consultants have no conflicts of interest.
- Carefully review PBM agreements, fee structures, and formularies, and negotiate terms rather than accepting the PBM’s standard agreement.
- Gather and analyze benchmark data from other plans and pharmacies to compare against current and potential vendor agreements.
- Consider whether all compensation arrangements are reasonable and free from conflicts of interest. Periodically subject PBMs and other vendors to competitive requests for proposals (RFPs).
- Thoroughly document all procedures for obtaining, reviewing, and monitoring proposals, agreements, and vendor performance to demonstrate procedural prudence.