Alternative Funding Programs Affect Our Most Vulnerable Patient Populations

Throughout 2023, alternative funding programs (AFPs) have become a widely discussed topic among health care advocates and stakeholders. A key reason for that is these programs can have detrimental effects on vulnerable patient populations. Let’s review and discuss why you should take note.

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The Rundown on AFPs

An increasing number of employer-sponsored health plans are utilizing AFPs to lower their costs. It has been reported that the proportion of employers who used AFPs grew from 6% in 2021 to 14% in 2022.¹

With an AFP in place, a health plan excludes some or all specialty medications from its formularies. The exclusion of high-cost specialty medications results in a more cost-effective formulary with fewer options for critical medications. This is achieved by labeling specialty medications as not essential health benefits (EHBs), despite prescription drugs being categorized as 1 of the 10 EHBs in the Affordable Care Act (ACA).²

When medications are deemed nonessential and carved out from a health plan’s formulary, beneficiaries are directed to third-party vendors that are not insurance companies. These vendors inform beneficiaries that they will seek assistance for the medication(s) needed through patient assistance programs (PAPs) from pharmaceutical manufacturers or independent charitable foundations.¹ PAPs provide benefits to patients who are either uninsured or underinsured, and patients must meet eligibility criteria to receive assistance.²

However, because of AFPs, the third-party vendors are able to mislead PAP entities by representing patients under the guise of being uninsured. This deceptive practice can result in PAPs’ limited resources being tapped, causing patients who truly need the assistance to not be able to receive it.

Notably, when vendors need to seek approval for assistance, patients often experience delays in treatment. If assistance is found, the value of this assistance will not count toward the patient’s deductible or out-of-pocket maximum. For individuals who should have been covered by their health plans in the first place, this result has a significant negative impact. Ultimately, although lower costs may be an advantage for employers, employees living with serious illnesses and chronic conditions lose out as a result. Additionally, there are ethical and legal concerns with AFPs, as they have been found to discriminate against provisions of the Health Insurance Portability and Accountability Act (HIPAA) and the ACA, as well as FDA regulations surrounding the importation of medications.³

A Deeper Dive Into AFP Practices

Although employers utilize AFPs to save money by excluding coverage of specialty medications, they provide fewer benefits to certain employees, especially those living with chronic conditions and serious illnesses. HIPAA prohibits the exclusion of individuals based on preexisting conditions and specific health factors. HIPAA also mandates that these individuals cannot be charged a higher premium or any other costs. AFPs fall short of complying with both stipulations.²

Despite low-income and higher-income employees having the same premiums, employees with lower incomes are required to seek the help of third-party vendors to find suitable PAPs because they qualify through income eligibility requirements. Although this saves the plan money, it is a form of income discrimination, as low-income employees are not receiving the same benefits and coverage as higher-income colleagues.⁴

Fiduciary responsibilities to beneficiaries also fall short with AFPs. Examples include requiring beneficiaries to sign a power of attorney and to disclose financial and other personal information as a prerequisite to accessing specialty medications. Third-party vendors are also believed to be guiding patients on how to answer PAP application questions, which raises ethical questions.²

Additionally, paperwork must be completed and submitted for PAP approval. This leads to treatment delays if the patient is not approved for assistance. In these instances, if the patient needs to be referred back to their health plan, there is further risk of delay and potential for a gap in therapy.⁵

When PAPs are utilized, drug manufacturers end up covering the entire cost of the drug as well as the pharmacy services cost. Health plans reimburse up to an estimated 30% of the medication cost as a cost avoidance fee to the third-party vendors. This negatively impacts drug manufacturers, who have begun adapting by updating qualification criteria.¹

Potential Regulatory and Legal Implications

The recent focus on AFPs has highlighted a number of legal and regulatory issues. With AFPs, individuals must comply with AFP requirements, yet these requirements do not always meet HIPAA and ACA guidelines. Additionally, there are concerns that AFPs may not be in compliance with Employee Retirement Income Security Act guidelines as well.³ Finally, when AFPs import non–FDA-approved medications for patients, they are in violation of the Federal Food, Drug, and Cosmetic Act.

Efforts are underway to educate federal agencies—such as the Department of Labor, the Federal Trade Commission, and the FDA—about AFP practices. Currently, legislation has not been introduced to stop these practices.²

Earlier in 2023, AbbVie filed a lawsuit against Payer Matrix, alleging that AFP practices by Payer Matrix exploit AbbVie’s charitable assistance programs. The outcome of the lawsuit will undoubtedly be of significant interest to health care stakeholders.⁶

Education Is Key

To address these issues, there are a few key areas that need further attention:

• Employer education is needed. Education about the harmful impact of AFPs on individuals will be critical; it is shortsighted for employers to exclude specialty medications from their formularies in the interest of lowering their costs.
• Patient and provider organization education is also important. Patient advocacy organizations will start hearing more and more from patients who contact them about challenges they are having when trying to access the medications they need. Health care providers should also know that the medications they are prescribing patients may not be reaching them.
• Patients need to be aware of AFP schemes. If told that specialty medications are considered nonessential or excluded from the plan formulary, then patients should be aware that an AFP may be at play. If patients find there may be AFP involvement in their treatment, they can share their story about associated challenges when seeking assistance for medications at panfoundation.org.
• Elected officials need to be informed. As much as possible, it is important to call elected officials in Congress and educate them regarding AFPs and their impact on patients.

The Bottom Line

The National Community Oncology Dispensing Association and the Patient Access Network Foundation believe that AFPs should be abolished. AFPs take advantage of our most vulnerable patients, who have paid their premiums and should have access to their health care provider–prescribed specialty medications. The safety net provided by pharmaceutical manufacturer PAPs and charitable foundations must be preserved for the patients who qualify for their eligibility guidelines and need this assistance the most.

Together, our organizations are committed to continued education about AFPs and advocating for an end to these practices. We encourage the broader stakeholder community to join us in this effort.

References

1. Fein AJ. Employers expand use of alternative funding programs—but sustainability in doubt as loopholes close. Drugs Channels Institute. May 17, 2023. Accessed October 8, 2023. https://www.drugchannels.net/2023/05/employers-expand-use-of-alternative.html

2. Niles A. It’s time for Congress to ban alternative funding programs. Oncolytics Today. 2023;1(10):64-65. https://www.ncoda.org/wp-content/uploads/2023/10/OncolyticsTodayFall23OnlineFINAL-1.pdf

3. Compliance issues with alternative funding programs. Vivio Health. Accessed October 12, 2023. https://viviohealth.com/wp-content/uploads/2022/06/Compliance-Issues-with-Alternative-Funding-V1.01.pdf

4. The high costs of alternative funding programs. Alliance for Patient Access. June 2023. Accessed October 22, 2023. https://allianceforpatientaccess.org/wp-content/uploads/2023/06/AfPA_High-Costs-of-Alternative-Funding-Programs_June-2023.pdf

5. Alternative funding: real savings or real problems? Optum Rx. Accessed October 10, 2023. https://www.optum.com/business/insights/pharmacy-care-services/page.hub.alternative-funding-savings-problems.html

6. Maas A. Alleging ‘fraudulent and deceptive scheme,’ AbbVie files lawsuit against alternate funding company Payer Matrix. AIS Health. May 18, 2023. Accessed October 14, 2023. https://www.mmitnetwork.com/aishealth/spotlight-on-market-access/alleging-fraudulent-and-deceptive-scheme-abbvie-files-lawsuit-against-alternate-funding-company-payer-matrix/

About the Authors

Sarder Sadid, PharmD, is the Associate Manager of Clinical Initiatives and Legislative Affairs at National Community Oncology Dispensing Association (NCODA), based in Syracuse, New York.

Amy Niles, MBA, is the Chief Advocacy Officer at the Patient Access Network Foundation, based in Washington, DC.