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Wells Fargo (WFC) Faces Lawsuit Over Employees High Drug Costs
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Wells Fargo & Company (WFC - Free Report) is facing a class action lawsuit alleging that it mismanaged its employee health insurance plan, forcing thousands of U.S.-based employees to overpay for prescription medications.
The proposed class action was filed in Minnesota federal court, claiming that the bank violated a federal law requiring firms to manage employee health and retirement programs properly. This legal action was filed by four former workers, which follows a pattern of increased scrutiny of Wells Fargo.
Per former employees, Wells Fargo's health plan pays inflated prices to pharmacy benefit managers (PBMs), who negotiate with drugmakers, health insurance plans and pharmacies to set prescription drug prices. These drugmakers also determine which drugs will be included on their so-called formularies or lists of drugs covered by insurance.
Wells Fargo mentioned that it was reviewing the lawsuit. Per management, Wells Fargo provides an array of benefits to employees, which are provided to support the health of its employees and their families.
The latest lawsuit action seeks statutory fines and unspecified damages on behalf of a nationwide class of WFC health plan participants and beneficiaries, which may number in tens of thousands.
PBMs are receiving heightened regulatory scrutiny for their involvement in rising prescription drug costs. With prescription drug costs continuing to grow dramatically in the United States, this lawsuit is the latest to accuse employer-sponsored health plans of failing to negotiate lower drug pricing on behalf of participants.
Since September 2016, WFC faced significant challenges with numerous penalties and sanctions, including a cap on the asset position by the Federal Reserve. In June 2024, WFC faced a proposed class action lawsuit alleging the bank for taking part in a $300-million Ponzi scheme. This scheme affected more than 1,000 investors, mainly senior citizens, and left them without substantial life savings. The lawsuit filed stated that WFC knew about the fraudulent activities from 2011 to 2021 and the company provided substantial assistance to the perpetrators while reaping benefits from the scam.
In the past six months, shares of WFC have surged 23.9% compared with the industry’s 24% growth.
Other Financial Services Firms Facing Legal Issues
In July 2024, Citigroup (C - Free Report) was also penalized by the U.S. bank regulators with a $136-million fine for failing to make adequate progress in fixing data management issues.
The regulators stated that C made “insufficient progress” in dealing with the issues identified in 2020 which required it to fix these issues in its enterprise-wide risk management, compliance risk management, data governance and internal controls.
In June 2024, Mitsubishi UFJ Financial Group, Inc.’s (MUFG - Free Report) banking and securities units were penalized by Japan’s financial regulator for breaching the regulations governing client confidentiality. MUFG Bank Ltd., Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co. units are directed by the Financial Services Agency to reinforce its compliance measures.
Several clients of MUFG have already shifted their bond underwriting business as a result of this regulatory action.
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Wells Fargo (WFC) Faces Lawsuit Over Employees High Drug Costs
Wells Fargo & Company (WFC - Free Report) is facing a class action lawsuit alleging that it mismanaged its employee health insurance plan, forcing thousands of U.S.-based employees to overpay for prescription medications.
The proposed class action was filed in Minnesota federal court, claiming that the bank violated a federal law requiring firms to manage employee health and retirement programs properly. This legal action was filed by four former workers, which follows a pattern of increased scrutiny of Wells Fargo.
Per former employees, Wells Fargo's health plan pays inflated prices to pharmacy benefit managers (PBMs), who negotiate with drugmakers, health insurance plans and pharmacies to set prescription drug prices. These drugmakers also determine which drugs will be included on their so-called formularies or lists of drugs covered by insurance.
Wells Fargo mentioned that it was reviewing the lawsuit. Per management, Wells Fargo provides an array of benefits to employees, which are provided to support the health of its employees and their families.
The latest lawsuit action seeks statutory fines and unspecified damages on behalf of a nationwide class of WFC health plan participants and beneficiaries, which may number in tens of thousands.
PBMs are receiving heightened regulatory scrutiny for their involvement in rising prescription drug costs. With prescription drug costs continuing to grow dramatically in the United States, this lawsuit is the latest to accuse employer-sponsored health plans of failing to negotiate lower drug pricing on behalf of participants.
Since September 2016, WFC faced significant challenges with numerous penalties and sanctions, including a cap on the asset position by the Federal Reserve. In June 2024, WFC faced a proposed class action lawsuit alleging the bank for taking part in a $300-million Ponzi scheme. This scheme affected more than 1,000 investors, mainly senior citizens, and left them without substantial life savings. The lawsuit filed stated that WFC knew about the fraudulent activities from 2011 to 2021 and the company provided substantial assistance to the perpetrators while reaping benefits from the scam.
In the past six months, shares of WFC have surged 23.9% compared with the industry’s 24% growth.
Currently, Wells Fargo sports a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Financial Services Firms Facing Legal Issues
In July 2024, Citigroup (C - Free Report) was also penalized by the U.S. bank regulators with a $136-million fine for failing to make adequate progress in fixing data management issues.
The regulators stated that C made “insufficient progress” in dealing with the issues identified in 2020 which required it to fix these issues in its enterprise-wide risk management, compliance risk management, data governance and internal controls.
In June 2024, Mitsubishi UFJ Financial Group, Inc.’s (MUFG - Free Report) banking and securities units were penalized by Japan’s financial regulator for breaching the regulations governing client confidentiality. MUFG Bank Ltd., Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co. units are directed by the Financial Services Agency to reinforce its compliance measures.
Several clients of MUFG have already shifted their bond underwriting business as a result of this regulatory action.