In the US, many patients struggle to afford prescription drugs, leading to adverse health outcomes. To improve cost-related medication non-adherence, prescribers, and clinical staff must understand how to assist patients in overcoming high prescription drug costs. 7 strategies of benefits and limitations have been reviewed to help patients afford prescription drugs: co-payment cards, patient assistance programs, pharmacy coupons, direct-to-consumer pharmacies, public assistance programs, international online pharmacies, and real-time prescription benefit tools. Created an algorithm to help clinicians identify appropriate strategies based on a patient’s health insurance and the type of drug (brand-name vs generic). For example, co-payment cards can lower out-of-pocket costs for privately insured patients taking brand-name prescription drugs. Patient assistance or public assistance programs may be available for uninsured individuals or those with public insurance like Medicare Part D, which meets financial eligibility criteria. Regardless of health insurance, all patients can forgo insurance and purchase drugs directly using pharmacy coupons or direct-to-consumer pharmacies, which sometimes offer lower prices for generic drugs than insurance. For insured patients, such purchases do not count toward insurance deductibles or annual out-of-pocket maximums. Online international pharmacies provide a last resort for patients in need of brand-name drugs who lack affordable domestic options. Increasingly, prescribers, can use real-time prescription drug benefit tools to estimate patient out-of-pocket costs and identify alternative lower-cost treatments for insured patients, but these tools can be inaccurate or incomplete. The current patchwork of strategies to help patients manage high prescription drug costs highlights the structural and policy challenges within the US prescription drug market that impede affordable access for some patients. While these strategies provide tangible solutions for clinicians to help patients access medically appropriate but costly medications, they do not address the root causes of high drug prices.
The existence of a variety of strategies to lower prescription drug costs for patients highlights the complex, opaque, and systemic challenges within the US pharmaceutical distribution and pricing system, and the need for reform.
Manufacturers of brand-name drugs frequently offer co-payment cards to offset patient out-of-pocket costs for prescription drugs. These cards lower out-of-pocket costs depending on the drug and the patient’s prescription drug benefits, potentially to $30 per month or less. For example, manufacturer co-payment cards for the anti-coagulant apixaban (Eliquis) can lower out-of-pocket costs to $10 per month with a maximum annual benefit of $6400. In 2023, patients used co-payment cards to offset an estimated $19.8billion in out-of-pocket costs. Patients with private insurance used a manufacturer co-payment card for 19% of all prescriptions, mostly for brand-name drugs, including 63% of brand-name prescriptions to treat obesity. Table 2 illustrates the variation in the terms and conditions for manufacturer co-payment cards for the 10 most frequently prescribed brand-name drugs in 2023.
Manufacturers of brand-name drugs frequently offer co-payment cards to offset patient out-of-pocket costs for prescription drugs. These cards lower out-of-pocket costs depending on the drug and the patient’s prescription drug benefits, potentially to $30 per month or less. For example, manufacturer co-payment cards for the anti-coagulant apixaban (Eliquis) can lower out-of-pocket costs to $10 per month with a maximum annual benefit of $6400. In 2023, patients used co-payment cards to offset an estimated $19.8billion in out-of-pocket costs. Patients with private insurance used a manufacturer co-payment card for 19% of all prescriptions, mostly for brand-name drugs, including 63% of brand-name prescriptions to treat obesity. Table 2 illustrates the variation in the terms and conditions for manufacturer co-payment cards for the 10 most frequently prescribed brand-name drugs in 2023.
Co-payment cards are readily available from manufacturer websites and require minimal patient information to access but can only be used by patients with private health insurance. Patients with public insurance, such as Medicare or Medicaid, are ineligible because these cards violate the federal antikickback statute. In addition, co-payment cards frequently have maximum monthly or annual benefits, so they may not completely cover out-of-pocket costs, particularly for patients with high-deductible health plans. Although co-payment cards typically last for 12 months, they can be renewed if the manufacturer permits it. Co-payment cards can be useful for helping privately insured patients afford necessary brand-name medications, but on a population level, they also incentivize the use of more expensive medications. In response, certain insurers and pharmacy benefit managers have implemented “accumulator” programs, which shift costs from insurers back to patients by preventing manufacturer co-payment cards from counting toward annual out-of-pocket maximums, and “maximizer” programs, which strategically set higher than-usual out-of-pocket costs to maximize the full value of co-payment cards across the entire year. Accumulator programs are likely to be curtailed after a 2023 federal district court ruling required manufacturer co-payment assistance to count toward a patient’s annual out-of-pocket maximum unless a brand-name drug has a medically appropriate generic equivalent.
Some brand-name drug manufacturers offer patient assistance programs to offset the out-of-pocket costs of expensive brand-name drugs for uninsured or underinsured individuals.23 Patient assistance programs are also offered by independent nonprofit organizations, including private foundations, which are frequently financially supported by brand-name pharmaceutical manufacturers. These programs are typically restricted to patients who meet specific needs-based eligibility criteria. For example, in 2024, Boehringer Ingelheim’s patient assistance program for its diabetes drugs empagliflozin (Jardiance) and linagliptin, (Tradjenta), has an annual household income limit of $51100 for a family of 2, which is below the median US family income. To determine eligibility, patients must submit documentation verifying financial hardship, and pre-scribers must certify the clinical necessity of the prescription drug.
Patient assistance programs are available across public and private insurance, but options for uninsured patients may be more limited, particularly when programs are offered by nonprofit organizations, such as the Health Well Foundation and the Patient Access Network Foundation. Patients who qualify for manufacturer-led programs either receive their medications in the mail at no charge or receive a prepaid debit card from the manufacturer to use at a pharmacy. In contrast, nonprofit organizations typically coordinate directly with a pharmacy or physician’s office to pay a patient’s outstanding balance or directly reimburse patients for their out-of-pocket costs. Due to their heterogeneity and lack of transparency, there is limited rigorous research on the clinical benefits and cost-effectiveness of patient assistance programs. Several organizations aggregate lists of available patient assistance programs, including Medicare, Needy Meds, and Rx Assist
Patient assistance programs are available across public and private insurance, but options for uninsured patients may be more limited, particularly when programs are offered by nonprofit organizations, such as the Health Well Foundation and the Patient Access Network Foundation. Patients who qualify for manufacturer-led programs either receive their medications in the mail at no charge or receive a prepaid debit card from the manufacturer to use at a pharmacy. In contrast, nonprofit organizations typically coordinate directly with a pharmacy or physician’s office to pay a patient’s outstanding balance or directly reimburse patients for their out-of-pocket costs. Due to their heterogeneity and lack of transparency, there is limited rigorous research on the clinical benefits and cost-effectiveness of patient assistance programs. Several organizations aggregate lists of available patient assistance programs, including Medicare, Needy Meds, and Rx Assist
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When insurance plans charge substantial out-of-pocket costs or do not include particular medications on their formulary, some patients may benefit from purchasing the prescription drug directly from pharmacies without insurance. Ordinarily, retail pharmacies charge high prices for cash-paying customers, but several organizations (e.g., Good Rx, Single Care, Well Rx, Needy Meds) offer coupons through which patients can access discounted prices negotiated by pharmacy benefit managers on behalf of insurers. These coupons are typically available online or through smartphone applications. Coupon prices for a prescription drug can change frequently and vary by retail pharmacy and zip code.
These coupons are available to all patients regardless of insurance status. They can be particularly helpful for uninsured patients and those with high-deductible health plans who take generic medications. The coupons can also be useful for drugs that are frequently subject to coverage restrictions, such as generic medications for erectile dysfunction (e.g., sildenafil, tadalafil), hair loss (e.g., low-dose finasteride), and weight loss (e.g., topiramate, phentermine).
Although coupons are available for some brand-name drugs, discounted prices can still be high. For insured patients, out-of-pocket spending using these coupons does not count toward deductibles or annual out-of-pocket maximums. For patients taking multiple medications, it may be more advantageous to pay higher prices in the short term (if possible) to maximize insurance benefits later in the year. Pharmacy coupons also require patients and clinicians to shop around for the lowest prices; this may require patients who take multiple medications to use multiple pharmacies, which can be time-consuming and confusing.
Direct-to-consumer pharmacies sell a selection of drugs at trans-parent prices if patients purchase them without insurance. These pharmacies are new entrants in the US prescription drug market, and they provide patients with the option to purchase a range of commonly used generic drugs at prices that may be lower than their insurance-required out-of-pocket costs. Some big-box chain retailers (e.g., Walmart, and Costco) have direct-to-consumer pharmacy programs with in-person pickup and mail-order options. Other direct-to-consumer pharmacies (e.g., Amazon
Pharmacy, and Health Warehouse) are exclusively online. The Mark Cuban Cost Plus Drug Company primarily sells medications online and also partners with independent grocery store pharmacies for in-person pickup. In 2023, Amazon introduced a pharmacy program (RxPass) that offers unlimited access to several dozen commonly used generics for a $5-per-month subscription; this program is only available to those who subscribe to Amazon Prime.
For certain drugs, direct-to-consumer pharmacies can lead to substantial savings. For example, Medicare could have saved around $2.6 billion in 2018 if it were able to purchase drugs at Costco prices and more than $3.3billion if it could purchase generic drugs at Mark Cuban Cost Plus Drug Company prices in 2020.31, However, direct-to-consumer pharmacies do not carry all medications, and the lowest-price option varies by drug, so patients must shop for the lowest cost. have regulatory agencies to oversee marketed prescription drugs, patients should be aware that these pharmacies fall outside of the authority of the US Food and Drug Administration (FDA). It is illegal to import a drug that is unapproved in the US, but the FDA permits patients to purchase FDA-approved drugs internationally as long as they are for personal use, for treatment of a serious condition, and the quantity does not exceed a 3-month supply. If patients choose to individually import drugs, they should choose a reputable pharmacy in a country with adequate drug regulation; pharmacies in low and middle-income countries may be subject to lower quality standards, and rates of counterfeit drugs range from 9% to 41% compared with less than 1% in high-income countries.45 Pharmacy Checker is an independent organization that verifies
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Similar to pharmacy coupons, direct-to-consumer pharmacies are most helpful for uninsured individuals and those with high deductible or high co-payment health plans who use generic medications or drugs not covered by insurance. For most insured patients, it is more economical to purchase generic drugs using health insurance than from direct-to-consumer pharmacies. For example, only 11% of generic prescriptions filled using Medicare prescription drug coverage in 2018 had out-of-pocket costs exceeding Costco pharmacy prices. Similarly, only 12% of prescriptions filled for 124 generic drugs sold by the Mark Cuban Cost Plus Drug Company had
estimated cost savings across all insurance types. Many direct-to consumer pharmacies are online, which is less useful for medications needed urgently, and money spent at these pharmacies does not count toward patients' insurance deductibles. This may change overtime; for example, in 2023, BlueShield of California announced partnerships with Amazon Pharmacy and the Mark Cuban Cost Plus Drug Company.
Several federal, state, and local programs help patients afford prescription drugs. The largest such program is Medicaid, which provided prescription drug coverage to more than 75 million individuals in the US as of March 2024. Medicaid drug coverage is generous, with 2013 federal regulations allowing co-payments of up to $4 for preferred drugs and $8 for nonpreferred drugs for individuals earning less than 150% of the federal poverty level; these costs are even lower in many states. For patients who qualify, enrolling in Medicaid is one of the most effective ways to affordably access prescription drugs.
Patients with Medicare Part D coverage who meet certain financial eligibility criteria pay lower out-of-pocket costs, due to government-funded low-income subsidies, known as the Extra Help program. In 2024, these subsidies limited out-of-pocket costs per prescription to $4.50 for generic drugs and $11.20 for brand-name drugs. Eligibility for these subsidies was expanded under the Inflation Reduction Act to include all Medicare beneficiaries as of January 2024 who earn up to 150% of the federal poverty level.
patients dually enrolled in Medicare and Medicaid or those receiving Supplemental Security Income are automatically enrolled, while others must apply and provide documentation of financial eligibility. Local programs can also help patients afford prescription drugs. For example, in response to the opioid epidemic, the People’s Harm Reduction Alliance was created to mail free naloxone to residents of the state of Washington. In Massachusetts, the state-sponsored Prescription Advantage program covers all out-of-pocket drug costs after enrolled members reach an annual, income-based maximum contribution. However, such programs are susceptible to changes in funding and legislative priorities. International Online Pharmacies Prices for brand-name drugs in the US are 2 to 3 times higher than prices for the same drugs in other countries,42 leading some patients in the US to try to import these drugs.43 While drugs obtained from international pharmacies can be made in the same factories as those prescribed in the US and most high-income countries.
Allows patients to compare prices across pharmacies. Several states are attempting to enact broader drug importation for their residents. In January 2024, the FDA authorized a Canadian drug importation program designed by Florida, the state plans
to import up to 17 brand-name prescription drugs to treat conditions including HIV, heart failure, and prostate cancer. 47,48 Whether such programs can be successful remains unclear. |
One major hurdle to medication affordability is that patients and prescribers lack information about coverage and out-of-pocket cost requirements. Real-time prescription benefit tools provide clinicians with this information at the time of prescribing by linking electronic health records with patients’ prescription benefits information. In 2021, Medicare required Part D plans to implement real-time benefit tools in electronic medical records. In one health system, the implementation of a real-time benefit tool led to an 11% reduction in patient out-of-pocket costs. In another health system, the rate of filled medications was 10% higher when the majority of the tools were compared with when it was not. However, these tools can lack adequate patient pharmacy benefit data to generate notifications, produce inaccurate cost estimates, and provide insufficient recommendations about alternative treatment options. In one study, clinicians using a real-time benefit tool changed the quantity of the drug prescribed far more frequently than specific in addition, real-time benefit tools typically incorporate information about out-of-pocket costs required by insurance but do not include information about manufacturer co-payment cards, pharmacy coupons, or direct-to-consumer pharmacies. This may be changing, as one of the largest pharmacy benefit managers, Optum Rx, launched a tool in January 2023 that automatically offers patients the lowest price with pharmacy coupons. The drug affordability tools described above can provide patients with financial relief in accessing clinically necessary prescription drugs, but they also invoke legal and economic considerations. The federal antikickback statute makes it a criminal offense for individuals and organizations to knowingly and willingly solicit, pay, or offer to pay “remuneration” in exchange for the referral of an individual to a particular item or service covered by a federal health care program, including Medicare and Medicaid. This is the reason that co-payment cards—through which drug manufacturers directly pay for patients to use a prescription drug—are prohibited for patients with federally sponsored insurance, but the use of patient assistance programs has been more controversial. After multiple investigations, pharmaceutical companies have paid hundreds of millions of dollars in settlements to the US Department of Justice to resolve antikickback statute violations. In April 2024, the Office of the Inspector General announced that it would not impose civil monetary penalties for several manufacturer-funded non-profit organizations operating disease-specific patient assistance programs because these programs do not influence which pharmacy or physician a patient chooses. The antikickback statute does not apply to strategies like pharmacy coupons or direct-to-consumer pharmacies that bypass health insurance. These strategies can raise overall health spending by lowering the barriers to prescribing expensive brand-name prescription drugs. For example, the use of co-payment cards and patient assistance programs likely increases the use of expensive brand-name drugs, even when less expensive or more cost-effective alternatives are available.19,59 They also limit the ability of insurers and pharmacy benefit managers to negotiate lower drug prices. Drug manufacturers are often willing to provide rebates in exchange for preferred formulary positions that result in improved patient access. However, they may be less willing to provide rebates if they can use co-payment cards to make their prescription drugs accessible to patients, even without preferred formulary status. To minimize this, prescribers should consider more affordable therapeutic alternatives before recommending that patients use co-payment cards or patient assistance programs
The optimal approach to helping patients afford their medicines depends on their health insurance status and whether the prescribed drug is brand-name or generic.
The availability of generics can be determined using prescription drug compendia, such as Micromedex or Lexicomp. Real-time prescription drug benefit tools can help clinicians select a medication covered by insurance, but prescribers must be cautious of incomplete or inaccurate information and lower-cost options outside of health insurance. |
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In cases where insurers prefer an alternative medication with lower out-of-pocket costs for a patient, prescribers should communicate with patients about these options and facilitate informed, shared decision-making about which medication to select. For brand-name drugs, patients with private health insurance should search for a manufacturer co-payment card. If co-payment cards are unavailable or if patients are ineligible (e.g., Medicare beneficiaries), then patients with financial hardship can apply for need-based financial assistance from drug manufacturers, nonprofit organizations, or public assistance programs. Patients who are ineligible for need-based financial assistance should evaluate drug prices at reputable international online pharmacies to determine if personal importation is an affordable option. For patients with difficulty affording or accessing generic drugs due to high out-of-pocket costs or insurance coverage restrictions, clinical teams should investigate using pharmacy coupons or direct-to-consumer pharmacies and forgoing health insurance altogether. Considering factors such as the cost of the drug, urgency for receiving the medication, and existing store or service memberships can help select the best option for the patient.
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If a pharmacy coupon is selected, medical staff can facilitate this process by sharing a coupon that matches the prescription drug name, strength, and quantity.
The patchwork of prescription drug affordability strategies outlined in this review illustrates the complex, fragmented, and inefficient prescription drug delivery and reimbursement system in the US. The need for clinicians and patients to supplement prescription drug coverage with additional affordability strategies underscores the urgency for system-wide policy reforms, such as expanding Medicare price negotiation and out-of-pocket limits introduced by the Inflation Reduction Act to all patients in the US. In the meantime, clinicians need to understand the array of strategies that are currently available to help patients navigate the high | ||||
The high cost of brand-name medications is one of the critical issues in US health care. The past two decades have witnessed ever-higher launch prices for new drugs, accompanied by substantial annual increases in those drugs during their patent-protected market exclusivity periods. These trends have been especially pronounced for so-called specialty medications, expensive products that are often infused or used to treat conditions such as cancer or human immunodeficiency virus infections. Drug prices in the US are far higher than in other comparable industrialized countries because manufacturers can freely establish prices for US patients. Manufacturers argue that prices reflect high research and development expenses for medications and the substantial risk of failure, particularly for early-stage products.
For many years, the primary counterweight to high US brand-name drug spending resides with US insurers and their counterparts/partners in the area of pharmaceuticals, and pharmacy benefit managers (PBMs). Mechanisms to reduce unnecessary costs of medications include the use of formularies to foment price competition between manufacturers; prior authorization of expensive medications to ensure they are clinically reasonable; and differential patient cost sharing to direct patients toward lower-cost and equally effective (often generic) alternatives.
In addition, over the past two decades, more and more employers have taken advantage of so-called high-deductible plans, those with increased out-of-pocket costs for the patient. The downside of trying to induce the beneficiary to be a more rational “shopper” is that the patient may forgo therapy at the pharmacy counter if faced with too high of an out-of-pocket payment. Such non-adherence comes with ill health effects.
To allow more patients in such situations to access their drugs (and to maintain continued revenues), pharmaceutical manufacturers have developed patient assistance programs, including copayment support through coupons accepted at the retail pharmacy. (Copayments and co-insurance are both forms of patient cost sharing; copayments are specified dollar amounts, while co-insurance takes the form of specified percentages of drug prices.) In the past, the use of the coupon was not communicated to the insurer or the pharmacy benefit manager.
But coupons can also frustrate cost-sharing regimes set up by an insurer/PBM to reduce unnecessary or unnecessarily expensive care, for example, when those coupons are used for brand-name drugs that have available low-cost generic alternatives. PBMs thus started to require retail pharmacies to enter the information about the use of the coupon in the system. Armed with this knowledge, PBMs no longer allowed coupons to count toward the cost-sharing the patient was accumulating against a deductible or out-of-pocket maximum. The repository for this information in the PBM systems was known as the accumulator.
As a result, pharmaceutical manufacturers could continue to provide support in the form of copayment coupons, but coupons no longer counted toward the deductibles and out-of-pocket maximums for the patient. Eventually, the coupon would expire when the limits of the pharmaceutical firm’s support program were reached, and the patient would have to start to pay out of pocket again. Thus, accumulators frustrated the full implementation of manufacturers’ copay assistance strategy. Recently, the PBMs have added a new wrinkle, with programs called maximizers that are not passive but actively take advantage of the assistance programs to lower costs for their clients, the self-insured employer. (Maximizers and their differences from accumulators will be more fully explained in part 2 of this article.)
Three recent developments have brought additional light to this manufacturer/PBM tug-of-war over patient assistance programs; they suggest the status quo is unsustainable. First, new health research concerning the relationship between adherence and patient out-of-pocket spending on drugs has highlighted the poor outcomes associated with such barriers. Second, maximizer programs have suddenly grown in popularity, with an impact on patient assistance programs that is quite different than the accumulators. Third, not surprisingly, litigation is underway, which creates more impetus for government intervention and policy change.
In the first part of this two-part article, we review some key data on the relationship between adherence and out-of-pocket costs, as well as the pharmaceutical firms’ efforts to help patients with such costs. In the second part, we review the counterprograms that pharmacy benefit managers have developed—accumulators and maximizers—as well as the litigation that now attends these interventions.
The Effect of Out-Of-Pocket Costs for Drugs on Patient Adherence Numerous studies show that patients are non-adherent to medications, with fewer than half typically continuing to fill chronic care medications at six months. The reasons for this are multifactorial. Many solutions have been tested, but no silver bullets have emerged.
Cost is well recognized as a factor but has only recently become more widely discussed in the literature. For example, in a thorough review on adherence to medications published in 2005, there was relatively little discussion about the role that costs played in the discontinuation of medication use. Rather, the problem of non-adherence has historically been seen as multidimensional, including a series of psychological factors, not easily addressed by simple reminders and electronic devices. From a clinician’s standpoint, financial barriers did not seem to figure into efforts to improve adherence. Researchers have begun to assess social determinants of health to understand adherence failures, but cost sharing has not traditionally been a prominent part of those analyses. Perhaps, most importantly to this area of investigation, one large, randomized trial compared copayments to no copayments, showing the latter boosted adherence without significant differences in major outcomes.
However financial barriers have grown more prominent as drug prices have increased radically and cost-sharing continues to grow. Out-of-pocket costs across the board increased 10 percent in 2021. Moreover, patients themselves have attributed non-adherence to high costs. Survey reports suggest that three in ten Americans or their family members did not take their medications as prescribed in 2021 because of cost concerns. The Henry J. Kaiser Family Foundation also found that 52 percent of Americans believed that capping out-of-pocket payments should be a top priority; another 40 percent thought this was an important issue.
Concerns about health equity play an important role as well. Out-of-pocket payments are especially burdensome for those with lower incomes. In 2020, employees with an income of less than 200 percent of the federal poverty level spent 10.4 percent of their income on premiums and cost-sharing.
In two key areas of treatment, cardiology and oncology, financial obstacles to medications have been recognized by professional societies. The American Heart Association (AHA) has admirably focused on adherence issues, with specific goals for improvement and careful analysis of factors associated with non-adherence. They have emphasized the role of cost sharing. An expert group impaneled by the Association found that “[m]edication costs or copayments are inversely associated with adherence, although surprisingly less than the impact of patient and provider predictors.” Accordingly, the AHA is undertaking further evaluation of the relationship between out-of-pocket costs and non-adherence. There is a particular focus on PBM cost-sharing rules around sacubutril/valsartan.
For many years, the primary counterweight to high US brand-name drug spending resides with US insurers and their counterparts/partners in the area of pharmaceuticals, and pharmacy benefit managers (PBMs). Mechanisms to reduce unnecessary costs of medications include the use of formularies to foment price competition between manufacturers; prior authorization of expensive medications to ensure they are clinically reasonable; and differential patient cost sharing to direct patients toward lower-cost and equally effective (often generic) alternatives.
In addition, over the past two decades, more and more employers have taken advantage of so-called high-deductible plans, those with increased out-of-pocket costs for the patient. The downside of trying to induce the beneficiary to be a more rational “shopper” is that the patient may forgo therapy at the pharmacy counter if faced with too high of an out-of-pocket payment. Such non-adherence comes with ill health effects.
To allow more patients in such situations to access their drugs (and to maintain continued revenues), pharmaceutical manufacturers have developed patient assistance programs, including copayment support through coupons accepted at the retail pharmacy. (Copayments and co-insurance are both forms of patient cost sharing; copayments are specified dollar amounts, while co-insurance takes the form of specified percentages of drug prices.) In the past, the use of the coupon was not communicated to the insurer or the pharmacy benefit manager.
But coupons can also frustrate cost-sharing regimes set up by an insurer/PBM to reduce unnecessary or unnecessarily expensive care, for example, when those coupons are used for brand-name drugs that have available low-cost generic alternatives. PBMs thus started to require retail pharmacies to enter the information about the use of the coupon in the system. Armed with this knowledge, PBMs no longer allowed coupons to count toward the cost-sharing the patient was accumulating against a deductible or out-of-pocket maximum. The repository for this information in the PBM systems was known as the accumulator.
As a result, pharmaceutical manufacturers could continue to provide support in the form of copayment coupons, but coupons no longer counted toward the deductibles and out-of-pocket maximums for the patient. Eventually, the coupon would expire when the limits of the pharmaceutical firm’s support program were reached, and the patient would have to start to pay out of pocket again. Thus, accumulators frustrated the full implementation of manufacturers’ copay assistance strategy. Recently, the PBMs have added a new wrinkle, with programs called maximizers that are not passive but actively take advantage of the assistance programs to lower costs for their clients, the self-insured employer. (Maximizers and their differences from accumulators will be more fully explained in part 2 of this article.)
Three recent developments have brought additional light to this manufacturer/PBM tug-of-war over patient assistance programs; they suggest the status quo is unsustainable. First, new health research concerning the relationship between adherence and patient out-of-pocket spending on drugs has highlighted the poor outcomes associated with such barriers. Second, maximizer programs have suddenly grown in popularity, with an impact on patient assistance programs that is quite different than the accumulators. Third, not surprisingly, litigation is underway, which creates more impetus for government intervention and policy change.
In the first part of this two-part article, we review some key data on the relationship between adherence and out-of-pocket costs, as well as the pharmaceutical firms’ efforts to help patients with such costs. In the second part, we review the counterprograms that pharmacy benefit managers have developed—accumulators and maximizers—as well as the litigation that now attends these interventions.
The Effect of Out-Of-Pocket Costs for Drugs on Patient Adherence Numerous studies show that patients are non-adherent to medications, with fewer than half typically continuing to fill chronic care medications at six months. The reasons for this are multifactorial. Many solutions have been tested, but no silver bullets have emerged.
Cost is well recognized as a factor but has only recently become more widely discussed in the literature. For example, in a thorough review on adherence to medications published in 2005, there was relatively little discussion about the role that costs played in the discontinuation of medication use. Rather, the problem of non-adherence has historically been seen as multidimensional, including a series of psychological factors, not easily addressed by simple reminders and electronic devices. From a clinician’s standpoint, financial barriers did not seem to figure into efforts to improve adherence. Researchers have begun to assess social determinants of health to understand adherence failures, but cost sharing has not traditionally been a prominent part of those analyses. Perhaps, most importantly to this area of investigation, one large, randomized trial compared copayments to no copayments, showing the latter boosted adherence without significant differences in major outcomes.
However financial barriers have grown more prominent as drug prices have increased radically and cost-sharing continues to grow. Out-of-pocket costs across the board increased 10 percent in 2021. Moreover, patients themselves have attributed non-adherence to high costs. Survey reports suggest that three in ten Americans or their family members did not take their medications as prescribed in 2021 because of cost concerns. The Henry J. Kaiser Family Foundation also found that 52 percent of Americans believed that capping out-of-pocket payments should be a top priority; another 40 percent thought this was an important issue.
Concerns about health equity play an important role as well. Out-of-pocket payments are especially burdensome for those with lower incomes. In 2020, employees with an income of less than 200 percent of the federal poverty level spent 10.4 percent of their income on premiums and cost-sharing.
In two key areas of treatment, cardiology and oncology, financial obstacles to medications have been recognized by professional societies. The American Heart Association (AHA) has admirably focused on adherence issues, with specific goals for improvement and careful analysis of factors associated with non-adherence. They have emphasized the role of cost sharing. An expert group impaneled by the Association found that “[m]edication costs or copayments are inversely associated with adherence, although surprisingly less than the impact of patient and provider predictors.” Accordingly, the AHA is undertaking further evaluation of the relationship between out-of-pocket costs and non-adherence. There is a particular focus on PBM cost-sharing rules around sacubutril/valsartan.
These issues are playing out even more vividly in the oncology profession, where much patient spending is related to co-insurance instead of copayments. The costs for oncology medications pile up over time, resulting from ongoing therapy. The co-insurance costs continue along with this ongoing therapy.
At the start of the 20th century, the annual cost of cancer drugs was $5,000–10,000 per year. By 2015, the top median price of the 13 cancer drugs approved by the Food and Drug Administration (FDA) was $145,000. This incredible cost increase has helped coin the term “financial toxicity.” The higher prices in turn trigger higher out-of-pocket spending. To illustrate, Stacie Dusetzina evaluated spending under Medicare Part D, which has no out-of-pocket maximum, for 10 high-cost oral oncology agents. Expected out-of-pocket spending ranged between $10,002 and $14,067.
In oncology, cost-sharing affects adherence. Jalpa Doshi and a team from the University of Pennsylvania demonstrated a strong relationship between the level of out-of-pocket payment and abandonment rates, up to nearly 50 percent with out-of-pocket expenditures greater than $2,000. Doshi’s team has also documented broad non-adherence among Medicare beneficiaries, ranging up to rates of 42 percent.
However, it is in the field of health economics where the most eye-opening data are emerging about cost sharing, adherence, and poor health outcomes. This was not the case historically. The massive Health Insurance Experiment of the 1970s and 1980s randomized subjects to different levels of cost sharing and showed rather rational decision-making with no poor health effects. But by the early part of the 21st century, with the growing influence of behavioral economics and its emphasis on irrationality, the assumption that people could make good decisions about their health when faced with financial pressure began to come apart.
In the past five years, there has been more research into out-of-pocket drug costs and non-adherence leading to morbidity and mortality. For example, Zarek Brott-Goldberg and colleagues studied a large, self-insured employer that switched to a high-deductible health plan. There was an immediate spending decrease of approximately 12 percent, but no evidence that patients engaged in rational consumer price shopping. Rather, quantities of care were reduced across the board, including potentially valuable care.
Perhaps even more on point and even more disturbing is a recent National Bureau of Economic Research working paper by Amitabh Chandra, Evan Flack, and Ziad Obermeyer. Using the natural experiment of differences in drug prices facing beneficiaries at the end of their initial year in Medicare—as people sign up for Medicare on the first day of their 65th birth month and the cost-sharing threshold is not pro-rated, people born early in the year are more likely to encounter higher cost-sharing obligations—he and his co-authors analyzed cost sharing and mortality among Medicare beneficiaries. They found wholesale cutbacks in medication use as out-of-pocket costs mounted and up to 30 percent excess mortality related to these choices.
In summary, concerns about cost-sharing inducing poor health through non-adherence to medications are well-known, increasing the importance of the pharmaceutical manufacturer/PBM financial maneuvering.
At the start of the 20th century, the annual cost of cancer drugs was $5,000–10,000 per year. By 2015, the top median price of the 13 cancer drugs approved by the Food and Drug Administration (FDA) was $145,000. This incredible cost increase has helped coin the term “financial toxicity.” The higher prices in turn trigger higher out-of-pocket spending. To illustrate, Stacie Dusetzina evaluated spending under Medicare Part D, which has no out-of-pocket maximum, for 10 high-cost oral oncology agents. Expected out-of-pocket spending ranged between $10,002 and $14,067.
In oncology, cost-sharing affects adherence. Jalpa Doshi and a team from the University of Pennsylvania demonstrated a strong relationship between the level of out-of-pocket payment and abandonment rates, up to nearly 50 percent with out-of-pocket expenditures greater than $2,000. Doshi’s team has also documented broad non-adherence among Medicare beneficiaries, ranging up to rates of 42 percent.
However, it is in the field of health economics where the most eye-opening data are emerging about cost sharing, adherence, and poor health outcomes. This was not the case historically. The massive Health Insurance Experiment of the 1970s and 1980s randomized subjects to different levels of cost sharing and showed rather rational decision-making with no poor health effects. But by the early part of the 21st century, with the growing influence of behavioral economics and its emphasis on irrationality, the assumption that people could make good decisions about their health when faced with financial pressure began to come apart.
In the past five years, there has been more research into out-of-pocket drug costs and non-adherence leading to morbidity and mortality. For example, Zarek Brott-Goldberg and colleagues studied a large, self-insured employer that switched to a high-deductible health plan. There was an immediate spending decrease of approximately 12 percent, but no evidence that patients engaged in rational consumer price shopping. Rather, quantities of care were reduced across the board, including potentially valuable care.
Perhaps even more on point and even more disturbing is a recent National Bureau of Economic Research working paper by Amitabh Chandra, Evan Flack, and Ziad Obermeyer. Using the natural experiment of differences in drug prices facing beneficiaries at the end of their initial year in Medicare—as people sign up for Medicare on the first day of their 65th birth month and the cost-sharing threshold is not pro-rated, people born early in the year are more likely to encounter higher cost-sharing obligations—he and his co-authors analyzed cost sharing and mortality among Medicare beneficiaries. They found wholesale cutbacks in medication use as out-of-pocket costs mounted and up to 30 percent excess mortality related to these choices.
In summary, concerns about cost-sharing inducing poor health through non-adherence to medications are well-known, increasing the importance of the pharmaceutical manufacturer/PBM financial maneuvering.
Pharmaceutical companies have long-operated programs to assist patients with cost sharing. They serve the dual purpose of promoting adherence and boosting pharmaceutical sales. They can accomplish this as a result of an odd combination of standard insurance benefit design and the high price of certain drugs.
Insurance plans today have three forms of cost sharing: a deductible, copayments, and co-insurance. After the passage of the Affordable Care Act, most commercial plans, even those involving self-insurance by large employers, instituted out-of-pocket maximum limits. Once the patient hits the out-of-pocket maximum limit, none of the cost-sharing can be further enforced. These out-of-pocket limits generally apply to all care, including drugs.
Now consider a patient with a policy that has an out-of-pocket maximum of $10,000 and a monthly copayment of $1,000 for a specialty medication. The specialty medication itself costs $70,000 per year. If the patient has to pay the copayment for each monthly prescription, non-adherence is likely. If instead, the patient can use manufacturer assistance to cover some or all of the out-of-pocket costs, the patient may be more likely to fill the prescription. From the manufacturer's point of view, the insurance payment without the out-of-pocket portion still leaves a healthy revenue stream of $60,000. (Chances are, as few as three years previously, $60,000 would have been the annual cost, with drug price inflation being what it is.)
There are two distinct types of patient assistance. The better-known copayment coupon is directed at commercial insurance and is usually organized out of a pharmaceutical manufacturer’s marketing program. It is paid for directly by the manufacturer, with little if any means testing. The copayment coupons cannot be used in insurance paid for by the federal government because the Centers for Medicare and Medicaid Services and other federal payers consider copayment coupons to be kickbacks under US law. That position is being challenged by pharmaceutical manufacturers in federal court, but to this point, the prohibition remains in place. Coupon marketing has now extended directly to the doctor’s electronic medical record, to integrate smoothly with e-prescribing.
By contrast, some patient assistance funds are distributed by nonprofit charities. These charities are generally 501c nonprofit organizations set up by manufacturers or nominally independent nonprofits that receive the bulk of their donations from pharmaceutical companies. The pharmaceutical company can alert the treating doctor to the availability of such funds and refer the doctor and patient to the foundation. Indeed, several websites are available where patients or doctors can access specific information on copayment assistance by medication. Examples of independent patient assistance funds include the Patient Access Network Foundation (PAN), The Assistance Fund (TAF), the Health Well Foundation, and the Patient Advocate Foundation’s Co-Pay Relief Assistance.
Patient assistance foundations are among the largest charities in the US. Although comprehensive information is difficult to identify, the Congressional Research Service has estimated that charitable expenditures by 10 leading manufacturer assistance funds rose from $376 million in 2001 to $6.1 billion in 2014. Over the same period, independent charity assistance funds rose from $2 million to $868 million. This is of course in addition to the direct copay assistance programs designed for commercial insurance. By one estimate, the total for copayment assistance programs increased from $6 billion in 2014 to $18 billion in 2020.
One of the distinctive features of patient assistance foundations is that they can provide support for patients in government programs, so long as there is a demonstration of need on the part of the beneficiary. Indeed, their growth is directly related to the growth of government payment for medications through the Medicare Part D program, initiated in 2003. The federal government has not found independent charity-based assistance programs to violate the anti-kickback statute, as long as they have sufficient independence. This has led to calls for the anti-kickback statute to be reformed to better focus patient assistance programs on those truly in need.
The strategy of assistance programs addresses out-of-pocket spending in light of the government limits on such spending. As noted above, the Affordable Care Act imposed out-of-pocket maximums for many commercial plans, including self-funded plans. In 2022, the limits were set at $8,700 for an individual or $17,400 for a family. By contrast, traditional Medicare was not created to include out-of-pocket maximums. The new Inflation Reduction Act of 2022 effectuates a major change in patient costs by placing a $2,000 cap on Medicare Part D out-of-pocket spending. This cap will bring relief to an estimated 1.2 million beneficiaries. By contrast, Medicare Part B has a 20 percent co-insurance and is generally not capped cost. Part B pays for physician-administered oncology medications, which are some of the highest-price medications in the US health care system. For example, the average Medicare beneficiary spending via Part B in 2019 on lenalidomide (Revlimid) was $5,463; for palbociclib (Ibrance), the figure was $4,137.
Insurance plans today have three forms of cost sharing: a deductible, copayments, and co-insurance. After the passage of the Affordable Care Act, most commercial plans, even those involving self-insurance by large employers, instituted out-of-pocket maximum limits. Once the patient hits the out-of-pocket maximum limit, none of the cost-sharing can be further enforced. These out-of-pocket limits generally apply to all care, including drugs.
Now consider a patient with a policy that has an out-of-pocket maximum of $10,000 and a monthly copayment of $1,000 for a specialty medication. The specialty medication itself costs $70,000 per year. If the patient has to pay the copayment for each monthly prescription, non-adherence is likely. If instead, the patient can use manufacturer assistance to cover some or all of the out-of-pocket costs, the patient may be more likely to fill the prescription. From the manufacturer's point of view, the insurance payment without the out-of-pocket portion still leaves a healthy revenue stream of $60,000. (Chances are, as few as three years previously, $60,000 would have been the annual cost, with drug price inflation being what it is.)
There are two distinct types of patient assistance. The better-known copayment coupon is directed at commercial insurance and is usually organized out of a pharmaceutical manufacturer’s marketing program. It is paid for directly by the manufacturer, with little if any means testing. The copayment coupons cannot be used in insurance paid for by the federal government because the Centers for Medicare and Medicaid Services and other federal payers consider copayment coupons to be kickbacks under US law. That position is being challenged by pharmaceutical manufacturers in federal court, but to this point, the prohibition remains in place. Coupon marketing has now extended directly to the doctor’s electronic medical record, to integrate smoothly with e-prescribing.
By contrast, some patient assistance funds are distributed by nonprofit charities. These charities are generally 501c nonprofit organizations set up by manufacturers or nominally independent nonprofits that receive the bulk of their donations from pharmaceutical companies. The pharmaceutical company can alert the treating doctor to the availability of such funds and refer the doctor and patient to the foundation. Indeed, several websites are available where patients or doctors can access specific information on copayment assistance by medication. Examples of independent patient assistance funds include the Patient Access Network Foundation (PAN), The Assistance Fund (TAF), the Health Well Foundation, and the Patient Advocate Foundation’s Co-Pay Relief Assistance.
Patient assistance foundations are among the largest charities in the US. Although comprehensive information is difficult to identify, the Congressional Research Service has estimated that charitable expenditures by 10 leading manufacturer assistance funds rose from $376 million in 2001 to $6.1 billion in 2014. Over the same period, independent charity assistance funds rose from $2 million to $868 million. This is of course in addition to the direct copay assistance programs designed for commercial insurance. By one estimate, the total for copayment assistance programs increased from $6 billion in 2014 to $18 billion in 2020.
One of the distinctive features of patient assistance foundations is that they can provide support for patients in government programs, so long as there is a demonstration of need on the part of the beneficiary. Indeed, their growth is directly related to the growth of government payment for medications through the Medicare Part D program, initiated in 2003. The federal government has not found independent charity-based assistance programs to violate the anti-kickback statute, as long as they have sufficient independence. This has led to calls for the anti-kickback statute to be reformed to better focus patient assistance programs on those truly in need.
The strategy of assistance programs addresses out-of-pocket spending in light of the government limits on such spending. As noted above, the Affordable Care Act imposed out-of-pocket maximums for many commercial plans, including self-funded plans. In 2022, the limits were set at $8,700 for an individual or $17,400 for a family. By contrast, traditional Medicare was not created to include out-of-pocket maximums. The new Inflation Reduction Act of 2022 effectuates a major change in patient costs by placing a $2,000 cap on Medicare Part D out-of-pocket spending. This cap will bring relief to an estimated 1.2 million beneficiaries. By contrast, Medicare Part B has a 20 percent co-insurance and is generally not capped cost. Part B pays for physician-administered oncology medications, which are some of the highest-price medications in the US health care system. For example, the average Medicare beneficiary spending via Part B in 2019 on lenalidomide (Revlimid) was $5,463; for palbociclib (Ibrance), the figure was $4,137.
The assistance funds and programs can help make medications more affordable for some patients who qualify for them. But while copayment coupons and patient assistance may reduce costs for some individual beneficiaries, they also increase health care costs overall by increasing the use of expensive branded medications, which can be problematic if those medications are not indicated or there are lower-cost medications that would be similarly effective and safe for the patient. So, the question remains: Are they overall a good thing for the health care system? Some have argued that copay assistance diminishes price pressure, undermines benefit designs intended to increase the use of equally effective low-cost drugs, and keeps patients from acting as consumers. Lemore Dafny and colleagues demonstrated this was indeed the case in 2017, finding large total spending increases from a coupon strategy. Building on this analysis, and comparing Medicare Advantage to commercial claims, Dafny, Kong, and Ho recently estimated that coupons increased the quantity sold of targeted medications by 21–23 percent and that including the effect this had on pricing, copayment coupons increased spending on targeted medications by 30 percent.
Thus, while there is clearly some benefit from patient assistance program support for patients’ medication costs, the programs also tend to prop up very high prices. It is in this context that we evaluate in part 2 of this article the new programs developed primarily by the pharmacy benefit managers to address pharmaceutical firms’ patient assistance programs.
Thus, while there is clearly some benefit from patient assistance program support for patients’ medication costs, the programs also tend to prop up very high prices. It is in this context that we evaluate in part 2 of this article the new programs developed primarily by the pharmacy benefit managers to address pharmaceutical firms’ patient assistance programs.