On March 3, 2026, a federal district court in Minnesota dismissed a lawsuit alleging that an employer imprudently managed its self-funded health plan’s prescription drug benefit, causing the plan participants to overpay for health benefits.  This alert provides a summary of the District of Minnesota’s recent decision in Navarro v. Wells Fargo and the status of substantially similar cases alleging that participants in self-funded health plans paid too much for their health benefits due to the reimbursements their health plans paid to pharmacy benefit managers (“PBMs”) for certain prescription drugs.

Key takeaways are:

• Courts have consistently dismissed cases alleging that participants paid too much for health benefits due to excessive prescription drug costs for lack of Article III standing.

• In dismissing the plaintiffs’ complaint, the Wells Fargo court leaned heavily on the plan’s terms, which afforded Wells Fargo complete authority to set participant contribution rates and to require participants to fund all plan expenses.

• The Wells Fargo court held that health plans are closely analogous to defined benefit pension plans.  Like defined-benefit pension plan benefits, health benefits are contractually-defined by the plan’s terms.  As a result, the court held that cases where plaintiffs have alleged that 401(k) plans—which are defined-contribution plans—charged participants excessive fees are distinguishable.

Navarro v. Wells Fargo            

In 2025, the District of Minnesota dismissed the plaintiffs’ complaint because the plaintiffs failed to establish Article III standing—that is, the court held that the plaintiffs failed to allege (1) an injury that was (2) caused by Wells Fargo’s alleged fiduciary breach (its supposed failure to prudently manage the plan’s prescription drug benefit), (3) that could be redressed by a favorable judgment.  The court’s decision primarily turned on three points:

• The court held that Wells Fargo’s self-funded health plan was “closely analogous” to a defined-benefit pension plan.  The court noted that the plaintiffs did not dispute that they received all of the benefits to which they were contractually entitled under the plan’s terms. 

• The court held that the plan vested the employer with “sole discretion” to set participant contributions, up to and including requiring participants to fund all plan expenses.  As a result, the court held that the plaintiffs’ alleged injury was entirely speculative—that is, it was speculative that the plaintiffs’ claim that the reimbursements paid by the plan to the PBM had any effect on the amount they paid in premiums and out-of-pocket costs at the pharmacy for prescription drugs.  And, the court held that the plan’s terms created a redressability issue.  Even if the court entered a favorable judgment, Wells Fargo would be free to increase the participants’ contribution amounts under the plan’s terms without violating ERISA.

• The court held that the plaintiffs’ allegations that the plan charged participants excessive prices for certain prescription drugs were insufficient to establish that the PBM’s fees caused their alleged injury, increased premiums and out-of-pocket costs.  The complaint identified the pricing of only a subset of the prescription drugs covered by the plan.  And, the court observed that the plan’s prescription drug coverage is only a subset of the plan’s total benefits package.  Consequently, the court found that there were “too many variables” in how participant contribution rates are calculated to make the plaintiffs’ fiduciary breach theory plausible.

The plaintiffs filed an amended complaint, which supplemented the original complaint’s allegations by, among other things, (1) claiming that Wells Fargo negotiated lower prescription drug prices after the filing of the original complaint, (2) attempting to tie the plan’s prescription drug spend to participants’ overall cost for health coverage by alleging that Wells Fargo maintained a consistent ratio of employer-employee contributions to the plan, and (3) adding a new plaintiff who participated in plan coverage through the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), who appears to have paid the full cost of the coverage.

In its March 3, 2026 decision, the court found that the plaintiffs’ amended allegations did not cure the deficiencies it identified in its prior opinion.  At bottom, the plaintiffs alleged the same theory of relief—i.e., that if Wells Fargo had negotiated a better deal with its PBM or retained a different PBM, the plan’s overall spending would have decreased which, in turn, would have resulted in lower participant contributions.  The court rejected the plaintiffs’ theory and reiterated many of the principles underlying its initial decision:

• The court again held that the plaintiffs failed to allege an injury-in-fact.  The court observed that the plaintiffs did not allege they were denied any promised benefits or that there was any risk that they would not receive their promised benefits in the future.  The court further noted that there was no plausible allegation that Wells Fargo’s exercise of discretion to set participant contribution rates violated the plan’s terms. 

• The court also held that the plaintiffs again failed to demonstrate that their claimed injury, higher contributions, was caused by the alleged fiduciary breach—the failure to prudently manage the plan’s prescription drug benefit.  The court held that there was no “one-to-one relationship” between the amount the plaintiffs paid in contributions for health coverage and the amount the plan paid the PBM.

• The court found that the addition of the new plaintiff, who participated in the plan through COBRA, and thus paid both the employer and employee share of the cost of coverage, did not change its analysis regarding the plaintiffs’ failure to demonstrate the first two elements of standing:  (1) injury and (2) causation.  The court reiterated that that the plan’s terms afforded Wells Fargo total authority to require plan participants, including those who participated in the plan through COBRA, to fund all plan expenses.  If Wells Fargo elected to stop its plan contributions altogether, that would “almost assuredly” increase participant costs, but such a decision would not, in itself, violate ERISA.

• The court further found that the plaintiffs failed to demonstrate that their injury could be redressed by the court.  In doing so, the court rejected the plaintiffs’ theory that, because Wells Fargo generally maintained a consistent ratio of employer-employee contributions, the plaintiffs’ contributions would necessarily be less if total plan expenses were less.  The court underscored that the plan did not require Wells Fargo to maintain the same ratio of employer-employee funding going forward.  And, the court cited Groom’s victory in Winsor v. Sequoia Benefits & Insurance Services, LLC to hold that, even if the court entered a favorable judgment and the recovered funds were deposited into the plan, Wells Fargo would be free to use those funds to offset its future plan contributions.

• Further, when analyzing the plaintiffs’ claim that they paid too much out-of-pocket at the pharmacy for prescription drugs, the court underscored that health plans are closely analogous to defined-benefit pension plans and that the plaintiffs’ theory was merely another way of claiming that that they wished the plan’s benefits were “better or different.” 

• Critically, the court went on to hold that cases alleging excessive fees in the context of 401(k) defined-contribution plans are distinguishable because, in those cases, the plaintiffs alleged losses to the plan and to their benefits—i.e., the value of the funds in their individual investment accounts.  By contrast, in this case, the plaintiffs did not allege that their contractually-defined health benefits were diminished.  The plaintiffs alleged only that they “should have paid less for those benefits.”

What’s Next?

The Navarro v. Wells Fargo decision marks a decisive victory for employers in litigation alleging excessive participant health plan benefit costs.  This decision comes on the heels of a district court in New Jersey dismissing substantially similar allegations in Lewandowski v. Johnson & Johnson on the basis that the plaintiffs there also failed to establish Article III standing.  The plaintiffs in that case have filed a notice of appeal.  Meanwhile, a motion to dismiss a similar complaint remains pending in a New York federal court.  We are continuing to monitor this active and evolving area of ERISA class action litigation.  We also note that, in light of recent proposed rules and newly enacted legislation regarding disclosure of pharmacy benefit costs, we anticipate employers to face similar challenges in the future as plaintiffs’ counsel seek to leverage greater publicly available data around the cost of prescription drugs.