Pharma faces tough choices as alternative funding programs exploit charitable giving

Patient assistance programs (PAPs) are at a crossroads. Designed by pharmaceutical manufacturers to help uninsured or underinsured patients afford medications, they are increasingly being exploited by alternative funding programs (AFPs). The allegations in an AbbVie lawsuit, for example, expose the genuine threat these programs pose to the viability of PAPs. They take funding away from patients most in need for financial assistance to instead help employers and health plans lower their pharmacy benefit costs.

Consequently, pharma must now take strategic action. The problem cannot be solved tactically or within patient services team silos. A unified vision and a cross-functional effort to mitigate growing program misuse will be required. Pharma furthermore needs to develop a long-term plan to keep PAPs sustainable and bypass the years of “whack-a-mole” that have defined the accumulator/maximizer defense strategy for co-pay programs. Difficult decisions may be ahead, but pharma needs to act decisively to ensure these programs only serve actual patients in need.

Pharma PAPs are designed to provide access to medications to patients who otherwise would not be able to afford them. Many of these programs are incorporated as 501(c)(3) charitable foundations, with PAP eligibility depending on a patient’s unique situation and the program design. Enrollment criteria typically include a patient’s income, pharmacy benefit coverage and drug cost-share. Although helpful for many different patient types, these programs are vital for a few large patient segments:

• Medicare Part D beneficiaries with unaffordable co-pays. Standard eligible Medicare Part D beneficiaries may have high co-pays, especially for specialty medications. Manufacturers are not allowed under federal law to offer co-pay assistance to Medicare Part D beneficiaries, though they may offer PAP support.
• Insured patients that lack coverage for the product because of the plan’s formulary
• Uninsured patients

In recent years, we’ve seen growing adoption of AFPs and specialty pharmacy carve-outs that are designed to take advantage of manufacturer-sponsored PAPs, primarily for high-cost specialty medications. The growth of these programs is expected to continue. A 2023 Gallagher survey indicates that only 4% of employers currently use AFPs, but almost twice as many say they’re planning to use them in the next two years.

AFPs operate by carving out certain specialty medicines from the formulary and then using patients’ insurance status to enroll them in a manufacturer PAP. Health plans and employers benefit from these services by saving money on prescriptions. The third-party AFP operators benefit by collecting a percentage of the savings generated.

Unfortunately, pharma manufacturers and patients are both harmed by these programs. Manufacturers bear the entire cost of a prescription that should have been covered by insurance, thereby cannibalizing commercial sales and potentially impacting their ability to maintain their investment in these programs. For patients, AFPs introduce additional logistical hurdles that may delay access to a drug that would have been covered by their health plan. Furthermore, commercial patients who would have received support with a co-pay card no longer move through the deductible phase as quickly, leading to higher patient out-of-pocket drug costs.

As pharma provides more affordability assistance to patients, third parties find ways to exploit this generosity. Accumulator adjustors were created in response to the growing number of specialty manufacturers that provided co-pay support to patients with high-deductible plans. Maximizers were developed as manufacturers eliminated per-prescription caps and replaced them with annual limits to provide more flexibility with affordability support throughout the year. Now, AFPs are exploiting programs designed to combat deteriorating coverage conditions or Medicare Part D plans that don’t allow co-pay support. Unfortunately, unless pharma’s legal actions succeed, staying the course is not a long-term solution and will enable AFPs to continue exploiting these charitable programs.

As a result, manufacturers must rethink their PAP strategy and design. They also must consider the impact of key changes to the affordability landscape ushered in by the:

• Passage of the Inflation Reduction Act (IRA) of 2022: Many PAP enrollees belong to a contingent of beneficiaries who are underinsured by Medicare Part D. However, IRA changes to the Medicare Part D benefit design such as a $2,000 cap and co-pay smoothing may reduce the need for financial assistance by beneficiaries who, pre-IRA implementation, had unaffordable co-pays. Conversely, plan sponsors may become more restrictive with coverage of expensive products due to other IRA-imposed changes to the Medicare Part D benefit design such as reduction or reinsurance payments in the catastrophic phase. If so, there may be increased need for support from Medicare Part D beneficiaries whose plan does not cover needed medications.
• Unwinding of Medicaid continuous enrollment provisions: In response to the COVID-19 pandemic, the U.S. Congress passed the Families First Coronavirus Response Act, which prohibited states from terminating most existing Medicaid beneficiaries’ coverage to access increased Medicaid funding. In December 2022, Congress finally ended this continuous coverage requirement, allowing states to remove Medicaid coverage for beneficiaries who no longer qualify, starting April 1, 2023. The impact of this change will likely be realized over the next few quarters but is expected to cause a portion of beneficiaries who had access to Medicaid coverage to transition to other channels. This could potentially lead to an uptake in beneficiaries seeking PAP support.

Unfortunately, it’s only getting more difficult for pharma to establish consistent payer coverage and provide patients with quality access to their products. The rise of group purchasing organizations and consolidation in the pharmacy benefit management (PBM) and payer industry brings with it more formulary exclusions and cumbersome prior authorizations. It seems likely that the need for robust PAPs will only grow over time. However, the more expansive PAPs become to properly support the uninsured or underinsured, the more they open themselves to potential misuse and abuse. Therefore, programs need a robust strategy and well-executed plan to ensure funds go to those truly in need.

While assessing a PAP in a strategic manner may be uncomfortable, when charitable giving is being leveraged for third-party profits rather than the benefit of patients, pharma’s posture needs to shift. The strategic levers manufacturers must evaluate, considering recent threats and legislative changes include:

• Reassessing enrollment eligibility criteria: A comprehensive evaluation of enrollment eligibility criteria allows manufacturers to make decisions that best support the long-term sustainability and success of these programs. Each enrollment condition affects several key performance metrics such as the number of patients enrolled, patient experience, and exposure to AFPs and other forms of program misuse. Eligibility levers such as modifications to the income criteria and inclusion of certain patient types such as commercially insured need to be thoughtfully assessed against those key metrics.
• Leveraging data to identify misuse: Traditionally, the data and analytics that support PAP insights generation or program monitoring have been nonexistent, unsophisticated or siloed from the rest of the organization, often intentionally. For PAPs, the analytic strategy starts with capturing the appropriate data in a compliant manner and designing the enrollment criteria to capture information that could help identify potential misuse. A robust analytic approach can be built on top of the data once manufacturers have taken the steps to make it operational within the commercial organization.
• Enhancing communication with employers: Employers, most commonly self-funded, are adopting AFPs due to the savings they offer. While the savings may be realized, it requires employers to leverage a charitable program to fund a portion of their healthcare benefit. Pharmaceutical manufacturers can partner with patient advocacy groups to create and deliver messages to employers and health plans that communicate the risks of AFPs and their implications on health equity—taking funds intended for vulnerable populations and using them for insured patients.
• Partnering with PBMs to combat AFPs: PBMs currently play a key role in enabling AFPs. However, some PBMs may have incentives to combat AFPs as these programs threaten their business model by shrinking rebate and fee revenue and potentially reducing their specialty pharmacy volume. Pharma should partner with PBMs to stop them from enabling these programs. These partnerships could include driving market awareness and education, especially to employers, and sharing knowledge on how to identify these programs. Recently, Optum published an article highlighting some of the financial risks and complications stemming from AFPs. This may be an olive branch to the industry.
• Taking legal measures: Manufacturers may choose to pursue legal actions, such as filing lawsuits, to address fraudulent or improper use of PAPs or co-pay programs. Recent litigation includes challenges from AbbVie related to alleged fraudulent use of their PAPs and Johnson & Johnson’s suit that centers on co-pay maximizer programs.

Given the serious threat from AFPs and changing insurance dynamics, now is the time to reevaluate your organization’s PAP strategy. Failure to act could result in continued exploitation and further debilitation of an otherwise powerful tool used to help patients in need. AbbVie’s lawsuit describes AFP administrators who were working with physicians to switch patients to AFP-friendly products. If that claim is substantiated—and action is not taken—it should serve as a sign of things to come for the pharma industry. Many patients depend on these programs to afford critical and sometimes life-saving medications. Thus, the industry cannot afford to allow AFPs to continue.