Drugmakers push back on a clever tactic employers use to avoid paying for specialty medicines

In the face of rising drug prices, health plan sponsors have quietly used a clever, but questionable tactic over the past few years to deflect costs. And now, some pharmaceutical companies are pushing back.

The maneuver goes by different names — it’s sometimes called a specialty carve out, or alternative funding – but relies on exploiting charitable programs. It works like this: a health plan sponsor excludes certain expensive specialty medicines from coverage and taps an outside vendor to help patients obtain the drugs for free from patient assistance programs run by drugmakers or foundations.

By doing so, plan sponsors — usually employers that fund their own health coverage — no longer have to pay for the medicines. Instead, the pharmaceutical company bears the cost. Typically, drug companies provide free medicines directly through their own assistance programs or work with charitable foundations, many of which receive some funding from drug companies and are devoted to assisting patients with specific diseases.


But the costs can add up. So in recent months, at least two drug makers — AbbVie and Johnson & Johnson’s Janssen unit — have started to include language in patient assistance enrollment forms that draw a line in the sand. (See here and here.) The forms stipulate that anyone who worked with an outside vendor to obtain a medicine through one of those assistance programs is not eligible for free medication.

A J&J spokesperson wrote to say “patient assistance programs are meant to be for patients alone. Unfortunately, some companies are running programs that divert patient assistance away from patients. As a result, we have put safeguards up to protect the program and the patients it serves.” He added that J&J created another program to ensure anyone facing access issues due to limited or restricted insurance coverage can obtain assistance.


And an AbbVie spokesperson sent a note saying the company is taking steps “to safeguard the purpose of our patient assistance program, which is to ensure access to free medicine for patients with limited or no health insurance coverage and who demonstrate qualifying financial need. These changes aim to prevent the exploitation of these charitable programs, which depletes their resources and harms legitimately uninsured and underinsured patients in need.”

In effect, the tactic amounts to a loophole that is being mined by health plan sponsors with help from third-party vendors, said Chris Brown, a pharmacy benefits expert. “These intermediaries figured out that, by changing the language in employer plans, they can squeak these people through for free drugs and not break the letter of the program.”

There is no definitive tally of pharmaceutical companies that have started to apply exclusionary language, but AbbVie and J&J appear to be among the first to take a stand, according to Brown, who calls it a “really big deal.” He noted that a growing number of employers have been using this tactic to lower their prescription drug bills.

Indeed, just 8% of commercial health plans, employers and unions used alternative funding programs, according to a survey that was conducted two years ago by Pharmaceutical Strategies Group, a consulting and analytics firm. But another 31% were already exploring the possibility. The businesses and organizations that were queried covered more than 40 million people at the time.

Removing insurance coverage for people who were appropriately prescribed a medicine is unethical, though, argued Adam Fein, who heads the Drug Channels Institute, a research firm that tracks the pharmaceutical supply chain. He maintained that people who otherwise have health insurance should not be forced into a charity program to gain access to a needed medicine.

Meanwhile, he estimates intermediary firms receive 20% to 25% of the full list price of a drug, which can be hefty for specialty medicines generally prescribed for chronic or hard-to-treat diseases. In some cases, he said the firms may get paid a fee for each person who is forced into an assistance program. But the efforts are “a little bit under the radar, because no payer wants to admit they use them.”

“These companies hide in the shadows, and their websites are ambiguous and vague. The amount of money they’re making is totally disproportionate to the value they bring,” he told us. “There are so many entities in the system leeching the money away. It’s one more thing people don’t understand about how the drug channel system works.”

In its latest patient enrollment form, AbbVie mentions at least three companies: Paydhealth, SHARx, and Payer Matrix. None could be reached for comment. The Janssen enrollment form does not list any intermediaries that work with health plans.

A spokesperson for America’s Health Insurance Plans, an industry trade group, argued that drug prices are “out of control” and that pharmaceutical companies increase prices “year after year.” “Today, 22% of every premium dollar goes to pay for prescription drugs – representing the largest portion of premiums,” she wrote us, adding that keeping prices high is price gouging.

On a broader scale, this is only the latest struggle over health coverage across the U.S. in response to the rising cost of prescription medicines.

A few years ago, health insurers and pharmacy benefit managers — which help establish formularies, or lists of covered medicines — began rolling out tools called copay accumulators. These were created in response to patient assistance programs, which critics argue are designed by drug companies to promote greater use of more expensive medicines and, as a result, drive up costs for insurers.

An accumulator does not count the value of copay assistance toward out-of-pocket drug costs applied to a patient’s deductible and out-of-pocket maximum. This means patients are on the hook for overall higher costs, unless the copay assistance is large enough to continue covering the expense. Insurers, meanwhile, keep copay assistance funds that are used by the patient.

Vertex Pharmaceuticals recently created a fracas by reducing its annual copay assistance for its high-priced cystic fibrosis treatments from approximately $100,000 a year to $20,000, which means that patients or their families will incur much higher costs. The company has called accumulator programs “predatory,” because copay assistance is designed to help patients, not insurance companies.

There are also somewhat similar programs called copay maximizers, which reduce costs for a health plan by shifting costs to a drugmaker. Last year, Johnson & Johnson sued a company working with Express Scripts, the pharmacy benefit manager, for allegedly exploiting its copay coupon program and causing it to pay at least $100 million more in assistance than it would have otherwise.

These efforts are ultimately unsurprising, because employers are always trying to save money, and there is always somebody willing to help, said Randy Vogenberg, the board chair at the Employer Provider Interface Council, a nonprofit that researches commercial health insurance issues.

“But as more expensive drugs come out, it’s becoming a bigger issue. So for the manufacturer, it’s a whack-a-mole situation. On the one hand, they want to offer assistance to those who need it. On the other hand, the prices (for some medicines) are high. But these alternative funding programs are not really solving the problem for people who have demonstrated need and can’t afford the medicines.

“When you start looking at constellation of problems we’ve created in this country with health care, it’s astounding. And this is just another piece of the puzzle.”

Source: STAT