Wells Fargo & Co., a financial services company in the United States, has been sued by tens and thousands of employees for mismanagement of its health plan.
The lawsuit, filed on Tuesday at the federal court in Minnesota, claims that the bank has violated the Employee Retire Income Security Act (ERISA), a law which requires companies to manage health and retirement benefits for employees prudently.
Four former Wells Fargo employees brought this legal action forward. It follows an increasing pattern of scrutiny towards the bank.
A US court had ordered that the bank face a new lawsuit claiming it defrauded its shareholders, pretending they were committed to diversity and conducting fake interviews with females, non-whites, or other applicants without any intention to hire them.
US District Judge Trina Thomson in San Francisco, California found both direct and indirect proof that the bank was trying to mislead its shareholders regarding their hiring practices. She reversed a dismissal last August.
All claims of drug price inflation
Minnesota’s lawsuit is based on claims that Wells Fargo Health Plan pays pharmacy benefit managers (PBMs) inflated prices.
The PBM negotiates with the drugmakers, insurance companies, pharmacies, and health plans to determine prescription drug pricing and which drugs will be included in their formularies.
Plaintiffs claim that health plans have been paying prices far in excess of market rate for drugs.
The cancer drug bexarotene is cited as an example in this lawsuit.
Wells Fargo’s health plan paid over $69,000 per tube of bexarotene that could have been purchased at other pharmacies for just $3,750.
The lawsuit also claims that health plans marked up generic drugs used for treating certain diseases by 400%.
This lawsuit could include tens or thousands of individuals.
Plaintiffs seek unspecified damages as well as statutory penalties to make Wells Fargo responsible for the mismanagement of funds and excessive pricing.
PBMs are subject to a nationwide review
The lawsuit filed against Wells Fargo fits into a larger trend that has increased scrutiny of PBMs, and their role as a factor in rising prescription drug costs in the United States.
Government bodies and advocacy organizations are increasingly critical of PBMs, claiming that they contribute to the escalation in medication costs.
The Federal Trade Commission released an interim report earlier this month. It contained findings of its two-year investigation into the six biggest PBMs in the United States.
According to the agency, vertical integration and consolidation of markets have given a small number PBMs significant control over consumer prices and drug costs as well as non-affiliated pharmacy.
Wells Fargo’s lawsuit was the latest of a number of legal actions taken against health plans sponsored by employers who are accused of not negotiating lower prices on drugs for their members.
Johnson & Johnson faces a proposed class-action lawsuit that was filed by a New Jersey federal judge in February.
In that lawsuit, the plaintiffs alleged that mismanagement by the company of its health insurance plan led to millions in excess payments for drugs.
Johnson & Johnson moved to dismiss this case. They argued that their program had actually saved the participants money, and that plaintiff did not have legal standing to bring the suit.
Wells Fargo is yet to comment on this lawsuit.
This case may have significant consequences for future negotiations on drug pricing and management of PBM relationships by employer sponsored health plans.
As new information becomes available, this post Wells Fargo is facing a lawsuit for alleged mismanagement of health plans and prescription cost inflation may change.
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