Co-pay Accumulator Programs: Behind the Controversy

Specialty medications treat a wide range of conditions, from Crohn disease to cancer, and new specialty products are introduced every year. The drugs that treat high-touch, costly conditions often have a monthly price tag of a few hundred to tens of thousands of dollars and their spend continues to grow, the result of both an increase in drug cost and specialty therapy utilization. With ongoing growth across the board, plan sponsors are continuously searching for ways to minimize the impact on their bottom line.

Pharmacy benefit managers (PBMs) have begun offering plan sponsors a new prescription drug benefit plan design that revises the historical treatment of manufacturer payments for costly specialty medications. These plans are commonly known as co-pay accumulator programs or co-pay accumulator adjustment programs, depending on the PBM and the plan sponsor, and the industry

has witnessed their relatively rapid and widespread adoption over the past few years. One of the most discussed and debated topics in 2018, these programs are an issue that various stakeholders grapple with on a daily basis and a challenge that will likely persist in the coming years.

Also called coupon adjustment, out-of-pocket protection, accumulator adjustment, and variable co-pay, the programs function in the same capacity regardless of their name and seek to dull the adverse financial impact on payers of manufacturer co-pay assistance.

How They Work and the Advantage for Plan Sponsors

Traditional plan designs have allowed for manufacturer assistance to count toward a beneficiary’s deductible and overall out-of-pocket maximum. This assistance has normally been in the form of a co-pay coupon or a co-pay card. Once the beneficiary’s out-of-pocket maximum is reached, the plan sponsor absorbs 100% of any further cost of the medication for the rest of the benefit year.

For example (Table 1), take a very simplistic (and likely unrealistic) traditional plan design, with monthly drug spend on a fictional single specialty medication spread over a 12-month benefit year among plan sponsor, manufacturer, and patient. These numbers are fabricated, and for the sake of simplicity, they ignore any other outside factors that could affect a beneficiary’s deductible and/or out-of-pocket maximum.

Assume this plan has an out-of-pocket maximum of $4000, an annual deductible of $2000, and a coinsurance component of 20% for specialty medications. Also, our fictional manufacturer in this example allows for a maximum coupon program amount of $12,000 for this medication, which itself costs $2000 per month.

In this example (Table 1), the manufacturer is paying toward the beneficiary’s deductible and the coinsurance component. After the annual out-of-pocket maximum is reached, the plan sponsor begins to pay the full cost of the prescription. This is the historical design behind plans that did not include a co-pay accumulator program. As shown, the beneficiary ends up paying nothing for their costly specialty medication, the manufacturer pays a respectable amount, and the plan sponsor shoulders the majority of the cost.

Now consider a very simplistic scenario involving a plan design with a co-pay accumulator component (Table 2). Assume all the same figures in our traditional plan assumption, except that any manufacturer payment does not count toward the beneficiary’s deductible, coinsurance, or out-of-pocket maximum.

Here the plan sponsor’s responsibility is significantly minimized, whereas the manufacturer and the patient are paying substantially more toward the overall yearly cost of this medication. This fact is not insignificant. Even with some manufacturers offering $15,000, $20,000, and even upward of $25,000 in coupon program maximums per year, a beneficiary may max out this coupon in 3 to 4 prescription fills because of the nature of the specialty products in question. Therefore, although a beneficiary may already be 3 to 5 months into a benefit year, they will then normally have $0 paid toward their out-of-pocket maximum for the year and toward their deductible, depending on whether the manufacturer includes any patient out-of-pocket obligation with their particular co-pay offset program (eg, $20 per fill). The patient may have some amount, albeit small, already paid toward both.

The Potential Effect on Patients

The patients affected by co-pay accumulator programs do not include Medicare Part D prescription coverage recipients. This is because manufacturer coupons can induce the purchase of an item or a service, such as the medication in question. Therefore, coupons are barred from use under federal health care programs, such as Part D plans, by the federal Anti-Kickback Statute. Still, the number of patients potentially affected by co-pay accumulators is high.

A Zitter Health Insights study noted that as of early 2018, approximately 60% of covered commercial lives were under payers that had already implemented a co-pay accumulator program, whereas an additional approximately 30% of covered commercial lives were encompassed by plans projected to implement such a program in 2019 or beyond.

In 2016, the American Community Survey of the US Census Bureau found the median US household income to be approximately $57,000. A beneficiary on a costly but life-sustaining specialty product can face dire consequences if they cannot shoulder thousands of dollars in out-of-pocket expenses to reach their deductible, especially for an unexpected expense mid benefit year. This can negatively affect adherence and outcomes, as beneficiaries may have no choice but to stop therapy either on a temporary or permanent basis.

Financial Impacts on Manufacturers

Drug manufacturers need to brace for potentially severe financial repercussions as co-pay accumulator programs are adopted. Historically, manufacturers have not needed to account for 100% maximization of their coupon programs because of the previous plan designs. An underestimate of money they will spend toward their co-pay assistance programs could lead to unexpected effects on financial statements. Most manufacturers are now well aware of these perils and take appropriate steps to account for this likely increasing cost. But failing to consider the potential increase in their specialty medication consumers who will max out their coupon program could lead to dire consequences for financial projections and the meeting or exceeding of shareholder expectations.

Transparency of Co-pay Accumulator Programs

The degree of transparency by plan sponsors regarding co-pay accumulator programs varies. It can often be a challenge for stakeholders to discern whether a plan is actively using such a program across all drug classes, is using a program selectively with only some medications, or has allowed the sponsors to prospectively pivot and use such a program through the wording in their contract, reserving them the right to no longer apply co-pay assistance toward a member’s deductible. As mentioned, the moniker given to such programs is not uniform among plan sponsors and PBMs, which adds to the confusion for any beneficiary who may change plans from one year to the next.

As PBMs continue to champion the adoption of these programs in the coming years, transparency will be paramount in allowing members to make informed choices about their upcoming benefit selections. User-friendly, easy-to-read documents should provide patients with a full grasp of the type of benefits they are choosing, ideally avoiding unexpected and shocking additional monthly drug costs that could balloon into thousands of dollars once their manufacturer coupon assistance is maxed out.

What the Future May Hold

Forced to adapt, manufacturers may continue to find ways to combat decreasing margins directly related to increased costs from more specialty patients maxing out their co-pay assistance cap limits. One obvious, straightforward, yet clearly unpopular option will continue to be increasing drug list prices. Some more novel options manufacturers may consider are prepaid debit cards and/or rebate funds provided directly to patients, an adjustment of rebates to PBMs/plan sponsors in an attempt to offset the additional costs of co-pay assistance program spend, and the use of smaller cap limits on co-pay assistance programs for new products.

Scrutiny of co-pay accumulators will likely increase through 2019 and beyond. Some legal experts consider these programs to reside in a legal gray area, yet a highly transparent and robust disclosure to beneficiaries of the consequences of co-pay accumulator programs could help plan sponsors and PBMs mitigate any potential for legal risk.

As plan sponsors continue to adopt accumulator programs, an interesting topic for future research and ongoing analysis could be any correlation between decreased adherence to high-cost specialty medications and increased non-drug related costs for plan sponsors. As results from prior research related to high-cost specialty medications show, a lack of medication adherence affects not only the patient’s outcome but also a manufacturer’s bottom line, while increasing costs for the payer and the health system via increased trips to the emergency department and inpatient hospitalizations.

By shifting costs back to the beneficiary, does co-pay accumulator adoption ultimately lead to increased costs for payers in other areas because of decreased medication adherence by said beneficiary? The industry—including, potentially, payers—will likely examine this question in the coming years as the prevalence of co-pay accumulator programs continues to grow.

Although the literature has already extensively covered this topic, the hope here has been to provide more awareness and insight into this ever-pressing issue. Throughout the rest of 2019, expect to see continued growth in the adoption of and the controversary surrounding co-pay accumulator programs.