Navarro v. Wells Fargo & Co., No. 24-cv-3043 (LMP/DTS), 2025 WL 897717 (D. Minn. Mar. 24, 2025) (Judge Laura M. Provinzino)
We have been watching cases alleging that fiduciaries are mismanaging prescription drug benefit programs at Your ERISA Watch for several years now. These lawsuits contend that plan sponsors and fiduciaries of ERISA-governed healthcare plans are breaching their fiduciary duties by contracting with middlemen called pharmacy benefit managers (“PBMs”), with little oversight, in a way that harms plan participants.
The three big PBMs are CVS Caremark, Optum Rx, and as relevant here, Express Scripts, Inc. Employers hope that they are hiring a PBM to help them save money on prescription drugs, but these lawsuits contend that the reality is quite different and money may not be saved at all.
PBMs are conflicted. Part of the reason why is the way these publicly traded for-profit companies are molded. PBMs “generate profit through some mix of spread pricing, rebates they negotiate with pharmacies, administrative fees charged to the plans they serve, and ownership of their own pharmacies.”
Although there are differences between the lawsuits – including which PBM is at issue, and the particulars of the plan’s contracts with it – they share one fundamental allegation: participants are paying too much for prescription drugs. The PBM cases allege that because of their obvious conflicts of interest PBMs are actually driving costs up. One way they are doing this is by overcharging for drugs, sometimes to a staggering degree.
Four former employees of Wells Fargo & Company, who participated in the Wells Fargo &. Company Health Plan, allege in this action that Wells Fargo mismanaged its prescription drug benefits program with Express Scripts, resulting in plan participants paying substantially more in premiums and out-of-pocket costs for prescription drugs than they would have absent the alleged mismanagement. Plaintiffs maintain that Express Scripts charges the Wells Fargo Plan more than twice as much on average for prescription drugs. One reason why is that the agreement between the Plan and Express Scripts requires participants to acquire generic specialty drugs exclusively from its wholly owned pharmacy, Accredo. The plaintiffs alleged that in some particularly egregious examples, the markup of Accredo’s pricing is more than 2,000% over the cost of an uninsured person filling the same prescription at other retail pharmacies.
On top of drug markups, plaintiffs allege that the administrative fees Express Scripts charges to the Plan exceed, by more than twice as much, the fees paid by other large plan sponsors for substantially comparable or equivalent services. Plaintiffs allege that Wells Fargo should have wielded its power to negotiate better terms and get a better deal for the participants.
Plaintiffs asserted claims under ERISA Sections 502(a)(2) and (a)(3) alleging Wells Fargo breached its fiduciary duties and caused the Plan to engage in a prohibited transaction with a party in interest. Plaintiffs sought various forms of equitable and monetary relief, including recovery of plan losses, restitution, disgorgement, surcharge, and injunctive relief, including the removal of plan fiduciaries, the appointment of an independent plan fiduciary, and the replacement of Express Scripts as the Plan’s PBM.
Wells Fargo moved to dismiss plaintiffs’ complaint in its entirety under Federal Rules of Civil Procedure 12(b)(1) and (b)(6). In this decision the court did not even consider the motion to dismiss for failure to state a claim upon which relief may be granted, as it agreed with Wells Fargo that plaintiffs lacked Article III standing. It found plaintiffs were unable to show concrete individual harm, causation, and redressability.
Plaintiffs contended that (1) they were harmed in the form of high out-of-pocket costs, increased premiums for their healthcare coverage, and exorbitant fees to Express Scripts, (2) the harms are traceable to Wells Fargo’s fiduciary breaches, and (3) the relief requested will redress these harms. Wells Fargo responded by emphasizing that plaintiffs did not allege that they failed to receive the benefits to which they were entitled while they were members of the plan. It therefore argued that under the Supreme Court’s 2020 decision in Thole v. U.S. Bank,plaintiffs had not suffered an injury and thus had no standing.
The court did not wholly agree. It did not read Thole to hold, as a matter of law, that a plaintiff suing a fiduciary of an ERISA-governed defined-benefit health plan cannot ever establish standing on a theory of harm premised on excessive out-of-pocket costs and high premiums. The court agreed with plaintiffs that the type of individual harm they alleged could, under certain circumstances, constitute injury-in-fact for standing purposes. To find otherwise, the court worried, could result in fiduciaries of ERISA plans flagrantly violating the federal statute “while effectively enjoying immunity from any liability so long as participants receive the benefits to which they are entitled.”
Still, despite agreeing in theory with plaintiffs’ argument, the court nevertheless concluded that the actual facts plaintiffs alleged could not satisfy Article III’s standing requirements because their alleged harm was speculative and ultimately not redressable.
The court defined plaintiffs’ theory of harm as follows: “had Wells Fargo more closely monitored the Plan’s prescription drug costs and negotiated a better deal with ESI [Express Scripts, Inc.], replaced ESI with a different PBM, or adopted a different model altogether, the Plan would have paid less in administrative fees and other compensation to ESI, which would have resulted in lower participant contributions and out-of-pocket costs.” It said that this theory while “tempting at first blush...withers upon closer scrutiny.”
First, the court tackled the plan-wide theory of harm. The court found the connection between what the participants were required to pay in contributions and out-of-pocket costs, and the administrative fees the Plan was required to pay to Express Scripts, “tenuous at best.” The Plan terms not only vest Wells Fargo with the sole discretion to set participant contribution rates but also authorize Wells Fargo to require participants to fund all plan expenses, not just expenses related to their own individual benefits. Taken together, these terms led the court to believe it was speculative that the excessive fees the Plan paid to Express Scripts had any effect at all on plaintiffs’ contribution rates or out-of-pocket costs for prescriptions, particularly as participant contribution amounts may be affected by several other factors having nothing to do with prescription drugs.
According to the court, plaintiffs’ allegations regarding the markups of prescription drugs failed to alter this conclusion or establish a connection between plaintiffs’ increased costs and Express Scripts’ administrative fees. What the court was getting at was that there were “simply too many variables in how Plan participants’ contribution rates are calculated to make the inferential leaps necessary to elevate Plaintiffs’ allegations from merely speculative to plausible.”
The court’s fundamental point was this: even if plaintiffs prevailed in this case and received all the relief they requested, Wells Fargo could still increase their contribution amounts under the terms of the plan without violating ERISA. And the court was not convinced that it had the authority to alter the terms of the Plan to expressly require Wells Fargo to reduce participants’ contribution amounts. Thus, the court concluded plaintiffs’ theory of redressability could not overcome the fact that the plan grants Wells Fargo the sole discretion to set participant contribution rates. “Simply put, while Plaintiffs’ requested relief could result in lower contribution rates and out-of-pocket costs, there is no guarantee that it would, and ‘pleadings must be something more than an ingenious academic exercise in the conceivable’ to meet the standing threshold.” As a result, the court agreed with Wells Fargo that plaintiffs’ plan-wide theory of harm was rooted in speculation and conjecture and thus insufficient to confer Article III standing.
This left the court with plaintiffs’ individual claims. While these did not suffer from the same issues as their representative claims on behalf of the Plan, the court nevertheless determined that plaintiffs failed to establish standing for these claims too “both because they have not alleged concrete individual harm and because these Plaintiffs ‘have no concrete stake in the lawsuit’ regarding any prospective injunctive relief.”
In the end, the court was sympathetic to plaintiffs’ larger concern that prescription drug costs are too high. But the court’s sympathy could not overcome its view that plaintiffs’ allegations were insufficient to establish Article III standing. As a result, the court granted Wells Fargo’s motion to dismiss plaintiffs’ complaint pursuant to Rule 12(b)(1). Notably, the court’s dismissal was without prejudice, so it is possible plaintiffs may be able to amend their complaint to address the court’s standing concerns. If they ultimately cannot, that would raise some serious questions about the path forward for these types of PBM cases.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Attorneys’ Fees
Eleventh Circuit
Johnson v. Russell Invs. Tr. Co., No. 22-21735-Civ-Scola, 2025 WL 928853 (S.D. Fla. Mar. 27, 2025) (Judge Robert N. Scola, Jr.). Plaintiff Ann Johnson sued Royal Caribbean Cruises Ltd., the Royal Caribbean Cruises Investment Committee, and Russell Investment Trust Company under ERISA as the representative of a class of similarly situated participants in the Royal Caribbean Cruises Ltd Retirement Savings Plan for losses incurred as a result of a series of...
