Large, self-insured employers are beginning to face lawsuits from their workers over claims of mismanaging health and pharmaceutical benefits and violating their fiduciary duties under the Employee Retirement Income Security Act.

ERISA subjects anyone with discretionary authority over an employee- benefits plan to fiduciary duties derived from the law of trusts. ERISA’s “duty of prudence” requires fiduciaries to act “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” 29 U.S.C. § 1104(a)(1)(B).

In the most recent example, Wells Fargo was sued by employees in a July class action for allegedly paying inflated prices to its contracted pharmacy benefits manager, Express Scripts.

Plaintiffs Sergio Navarro, Theresa Gamage, Dayle Bulla, and Jane Kinsella, individually, on behalf of all others similarly situated, and on behalf of the Wells Fargo & Company Health Plan, filed a federal class action in the United States District Court for the District of Minnesota (case 24-cv-3043) under 29 U.S.C. § 1132 against Wells Fargo & Company, along with other defendants, for breaches of fiduciary duties and engaging in prohibited transactions under the Employee Retirement Income Security Act (“ERISA”),

This case involves alleged mismanagement of prescription-drug benefits. Over the past several years, Plaintiffs claim “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.”

“Defendants’ mismanagement is evident from, among other things, the prices it agreed to pay one of its vendors – its Pharmacy Benefits Manager (“PBM”) – for many generic drugs that are widely available at drastically lower prices.”

“For example, someone with a 90-unit prescription for the generic drug fingolimod (the generic form of Gilenya, used to treat multiple sclerosis) could fill that prescription, without even using their insurance, at Wegmans for $648, ShopRite for $677.68, Rite Aid for $891.63, Walmart for $895.63, or from Cost Plus Drugs online pharmacy for $875.09.”

“Defendants, however, agreed to make the Plan and its participants/beneficiaries pay $9,994.37 for each 90-unit fingolimod prescription. The burden for that overpayment falls on both the Plan and its participants/beneficiaries.”

An in another class action example reported by the Minnesota Reformer, a worker at Mayo Clinic’s Arizona hospital filed a proposed class action lawsuit against the health system and insurer Medica in federal court last April , alleging they were saddled with enormous health care bills after their claims were “systemically underpaid.”

Mayo Clinic employees said they racked up more than $10,000 in health care costs a year while others said they avoided going to the doctor for fear of what it would cost, all while working for one of the world’s most prestigious health care organizations.

The lawsuit filed in the United States District Court for the District of Minnesota (:24-cv-01124-JMB-JFD) alleges Medica, which administers Mayo Clinic’s self-insured plan, uses “deceptive, misleading, arbitrary” pricing methods that leave plan members in the dark about health costs and allow for inconsistent reimbursement rates, in violation of federal law and Medica’s fiduciary responsibilities.

And in a third example, Lockton reports reports a class action lawsuit was filed in February against drug manufacturer Johnson & Johnson (J&J) in its capacity as an employer and plan sponsor.

The suit alleges that J&J breached its fiduciary duties by not taking proper measures to ensure its plan costs were reasonable as well as failing to exercise prudence in selecting its pharmacy benefit manager (PBM) and agreeing to undesirable contract terms. Specifically, the suit accuses J&J of mismanaging its employees’ drug benefits, resulting in employees significantly overpaying for certain drugs.

According to Fisher Phillips plaintiffs’ attorneys are turning their eyes to group health plan fiduciaries in light of the Consolidated Appropriations Act of 2021 (CAA-21), which has ushered in a new wave of ERISA excessive fee litigation.

The CAA-21 and the Transparency in Coverage (TiC) Rule comprise the most comprehensive health plan legislation and reforms since the Affordable Care Act. They place new obligations on group health plans and health insurance companies for plan fee disclosures and pricing transparency. Notably, these laws may contribute to new class action lawsuits against health plan fiduciaries.

Fisher Phillips points out the Johnson & Johnson case as an example of this emerging trend.