Wells Fargo bank location in Baltimore, MD. August 20, 2020.
A federal judge in Minnesota on Monday dismissed an ERISA lawsuit brought by former Wells Fargo employees against the company for breach of fiduciary duty.
The lawsuit, filed last summer, argued that the company mismanaged its employee prescription drug benefits program, causing participants to pay “substantially more in premiums and out-of-pocket costs for certain prescription drug benefits than they would have absent Wells Fargo’s mismanagement.” The case outlined how Wells Fargo used Express Scripts as its pharmacy benefit manager without competitive bidding and permitted enormous markups, such as charging the plan more than $1,800 for a cancer drug that pharmacies acquired for less than $100.
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The company countered that the plaintiffs either lacked standing to bring suit or that they failed to state a claim upon which relief could be granted. The case was dismissed on standing grounds -- not because the allegations lacked merit, but because the plaintiffs couldn’t show a concrete and personal injury. Judge David T. Schultz ruled that:
- The health plan operates like a defined benefit plan, meaning participants aren’t guaranteed savings, only access to a defined set of benefits.
- Even if the plan grossly overpaid, the participants’ out-of-pocket costs and premiums were deemed too speculative to be legally traceable to those fiduciary decisions.
- Wells Fargo retains sole discretion over how much participants pay. So, even if the plan had saved money, there's no guarantee Wells Fargo would have passed those savings on to participants.
- In theory, high out-of-pocket costs could constitute injury, but on these facts, the alleged harm was deemed too indirect and “conjectural.”
Chris Deacon of VerSan Consulting discussed the implications of the ruling in a LinkedIn post.
“Health plans aren't pension plans,” she said “And health plan mismanagement absolutely drives up participant costs. The connection isn’t theoretical; it’s annual. Every employer uses plan cost projections to set contribution tiers, deductibles and premiums. When your PBM inflates costs or your third party administrator mismanages claims, those costs roll downhill. They hit employees, families and retirees in real time.
“Saying participants have no injury unless they were ‘denied a benefit’ is an insult to every employee that has deferred care because they couldn't afford their out-of-pocket deductible.”
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
