The healthcare landscape is constantly evolving, and one notable change that’s garnering attention is the shift of J-code drugs to pharmacy benefits. This shift has wide-ranging implications for patients, healthcare providers, and insurers alike. In this post, we delve into the benefits and challenges of this move, offering a balanced perspective that is essential for stakeholders in the healthcare industry.

Understanding J-Code Drugs

Before we dive into the specifics, let’s clarify what J-code drugs are. These are typically injectable drugs administered in a physician’s office. They are categorized under ‘J-codes’ in the Healthcare Common Procedure Coding System (HCPCS). These drugs have traditionally been covered under medical benefits but are increasingly being moved to pharmacy benefits.

The Shift to Pharmacy Benefits: Benefits and Challenges

Benefits of the Shift

1. Cost Transparency: Pharmacy benefits often come with clearer cost information, making it easier for patients to understand and manage their expenses.
2. Streamlined Administration: This transition can simplify administrative processes, potentially reducing the paperwork and time involved in drug dispensing.
3. Potential for Lower Costs: Through pharmacy benefits, there might be better negotiation leverage for prices, potentially leading to lower costs for patients.
4. Enhanced Medication Management: Pharmacy benefits could offer better support in medication management, ensuring adherence and improving patient outcomes.
5. Broader Access to Discounts and Rebates: Patients might benefit from discounts and rebates that are more readily available through pharmacy benefits.

Challenges of the Shift

1. Access Issues: Patients might face more restrictions, such as limited networks of preferred pharmacies, impacting their access to necessary medications.
2. Complex Approval Processes: The transition might involve more complex prior authorization processes, potentially delaying treatment.
3. Disruption of Care: Switching systems could disrupt existing care plans, causing inconvenience and potential health risks for patients.
4. Insurance Plan Limitations: Some insurance plans might offer less favorable terms for pharmacy benefits, impacting coverage and costs.
5. Challenges in Coordination of Care: Coordinating care between healthcare providers and pharmacies can be complex and time-consuming.

J-code drugs are typically injectable drugs that are administered primarily in a physician’s office. Moving these to the pharmacy benefit could have several implications. Here’s a table that outlines some potential benefits and challenges:

Implications for Stakeholders

For Patients

Patients need to be aware of how this shift could affect their access to medication and overall costs. Understanding the nuances of their insurance plans is more crucial than ever.

For Healthcare Providers

Providers must navigate the new administrative landscapes, ensuring that they can still deliver the best care while dealing with different billing and authorization processes.

For Insurers

Insurers play a critical role in this transition, balancing the need to manage costs while ensuring patient access to necessary treatments.

For Pharmacists

Pharmacists will likely see an increased role in patient care, requiring a deeper understanding of J-code drugs and associated management protocols.

Conclusion

The transition of J-code drugs to pharmacy benefits is a complex process with both benefits and challenges. It’s essential for all stakeholders to stay informed and adapt to these changes to ensure that patient care remains effective and efficient. As the healthcare industry continues to evolve, staying ahead of trends like this will be key to navigating the future of healthcare successfully.

5 ways to improve your PBM procurement process in 2024 and other notes from around the interweb:

• Federal mandates bring big lawsuit worries for health plan administrators. The Consolidated Appropriations Act of 2021, enacted on December 27, 2020, introduces significant new disclosure mandates for health plan providers, heightening the risk of substantial legal challenges. This Act amends the Employee Retirement Income Security Act of 1974, aiming to enhance transparency in employee health benefit plans. The implementation of various components of this law has been gradual, with compliance deadlines for certain sections only recently becoming due. Jennifer S. Berman, a seasoned employee benefits attorney and compliance consultant, emphasizes the surge in fiduciary responsibilities for sponsors of health and welfare plans. Three years into the enactment of the CAA, plan sponsors are diligently working to fulfill these newly imposed duties. This legislation represents more than a mere federal requirement for health plan administrators. It carries the potential for significant class-action lawsuits against plans that fail to comply with the updated legal requirements.

• 5 ways to improve your PBM procurement process in 2024. Many self-funded plan sponsors struggle to manage the cost of pharmacy benefits and rely on non-transparent contract guarantees to hold PBMs accountable. Meanwhile, drug spending continues to compound at an astonishing rate in defiance of the savings promised during the procurement process. As a former pharmacy program director for a plan covering more than 16,000 lives, I can tell you that it is possible to stop the “games” PBMs play, control costs, and ensure that all contractual guarantees are met, especially in scenarios where a PBM won’t guarantee an all-in per member per month (PMPM) cost for the year. Understanding the problem is a part of the solution, but making meaningful changes to the way plan sponsors and brokers evaluate PBMs is where the real opportunity lies.

• 3 thing to know about specialty pharmacy in 2024. Specialty drugs may be covered by a medical benefit (what patient-members likely think of as “their insurance”) or pharmacy benefits. There’s often a gray area for where specialty falls, but it can relate to whether the drug is being administered in a clinical setting, like a doctor’s office, outpatient clinic, or infusion center. Reimbursement for these drugs can also vary between average wholesale price (AWP) for pharmacy reimbursement and average sales price (ASP) for the medical benefit. It’s complex to compare, and both ASP and AWP are used in the health care industry, but they’re different. ASP is a government-regulated tool that uses manufacturer sales information including discounts, such as rebates. AWP is the average price that wholesalers sell drugs to pharmacies, prescribers, and others. A government report found the median percentage difference between ASP and AWP to be 49%.

• New limits on prior authorization hailed as good first step. New federal rules requiring health insurers to streamline requests to cover treatments are being hailed as a good first step toward addressing a problem that’s increasingly aggravated patients and doctors. Health insurers will have to provide coverage decisions on urgent treatment requests within 72 hours for patients in Medicare Advantage, Medicaid or Affordable Care Act plans under federal rules finalized Wednesday. The deadline is seven days for non-urgent requests. Insurers’ requirements for their sign-off on some physician-ordered care is a major tension point with providers and has faced recent scrutiny from Congress. The new protocols, which largely take effect in 2026, may cut the review process in half for some insurers.

The upcoming modifications in the Medication Therapy Management (MTM) program by CMS are expected to significantly expand eligibility, with an estimated increase in eligible Medicare beneficiaries from 4.5 million to 11 million. CMS doubles down on medication therapy management (MTM), with program expansion, as self-funded employers remain indifferent to MTM’s vast benefits.

The new eligibility criteria, taking effect in 2025, will include (1) require Part D sponsors to include all core chronic diseases in their targeting criteria, codify the current 9 core chronic diseases in regulation, and add HIV/AIDS for a total of 10 core chronic diseases, (2) lower the maximum number of covered Part D drugs a sponsor may require from 8 to 5 drugs and require sponsors to include all Part D maintenance drugs and (3) revise the cost threshold methodology based on the average annual cost of 5 generic Part D drugs ($1,004 in 2020). These changes are projected to add approximately $336 million annually to plan costs.

MTM is a key strategy to leverage pharmacy-led initiatives to reduce medical costs. By focusing on identifying and resolving Drug Therapy Problems (DTPs), pharmacists can play a crucial role in conducting comprehensive medication reviews (CMRs), enhancing both health outcomes and cost efficiency. The savings generated can then be reinvested into the MTM program, potentially making it self-sustaining.

The revised MTM guidelines will require Part D plans to include members with up to three chronic conditions, taking at least five Part D drugs, and meeting a lowered annual spending threshold. This will necessitate a more comprehensive approach in CMRs, including real-time consultations through telehealth or in-person visits. To optimize their pharmacy benefit management program, self-funded employers should focus on four main strategies:

1. Technological Integration in Pharmacy Workflows: Utilizing platforms that combine medical and pharmacy claims data can help identify a wider range of DTPs, enabling more effective CMRs and facilitating cost reduction.
2. Infrastructure Scalability: Evaluating current technology and infrastructure for their ability to handle increased demand and provide scalable solutions is crucial.
3. Proactive Member Eligibility Identification: Tools that can predict future eligibility and manage enrollment processes will be essential for efficient MTM service delivery.
4. Continuous Program Monitoring: Implementing tools for real-time monitoring and analysis will help in identifying cost-saving opportunities and ensuring the effectiveness of the MTM program.

Self-funded employers would serve themselves extremely well by taking a page from the CMS playbook. By embracing a data-driven approach and focusing on efficiency and scalability, self-funded employers can adopt a CMS-like medication therapy management (MTM) expansion, achieving total cost of care savings and maintaining high-quality service for members with multiple medications and conditions.

Employer Health Plans Fear State PBM Crackdown Preemption Threat and other notes from around the interweb:

• Employer Health Plans Fear State PBM Crackdown Preemption Threat. Employers looking ahead to a continued push by state and local governments to regulate pharmacy benefit managers more tightly in 2024 are set to back stricter federal law preemption of these measures. PBMs, which manage prescription drug plans of behalf of health insurers, have been criticized over lack of transparency and inflated costs to health plans, but the federal government has not yet enacted legislation to rein in these middlemen. Groups representing companies with self-insured health plans say the states’ attempts to fill the void on PBM legislation threaten preemption protections under the federal Employee Retirement Income Security Act. What’s more, maintaining a nationally uniform regulatory system under ERISA, which turns 50 in 2024, is necessary to avoid a problematic patchwork of state laws, the employer groups say.

• 3 thing to know about specialty pharmacy in 2024. Specialty drugs may be covered by a medical benefit (what patient-members likely think of as “their insurance”) or pharmacy benefits. There’s often a gray area for where specialty falls, but it can relate to whether the drug is being administered in a clinical setting, like a doctor’s office, outpatient clinic, or infusion center. Reimbursement for these drugs can also vary between average wholesale price (AWP) for pharmacy reimbursement and average sales price (ASP) for the medical benefit. It’s complex to compare, and both ASP and AWP are used in the health care industry, but they’re different. ASP is a government-regulated tool that uses manufacturer sales information including discounts, such as rebates. AWP is the average price that wholesalers sell drugs to pharmacies, prescribers, and others. A government report found the median percentage difference between ASP and AWP to be 49%.

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Why such ‘high markups’? Senators seek drug price probe of insurers who own PBMs. The senators urged Inspector General Christi Grimm to determine if large insurance companies are using their vertically integrated pharmacies to evade federal requirements that limit the percentage of premium dollars spent on profits and administration, known as the Medical Loss Ratio, or MLR. The letter follows an investigation by the Wall Street Journal revealing significant markups of generic drugs at specialty pharmacies owned by CVS Aetna (which operates the Caremark PBM), Cigna (which owns Express Scripts) and UnitedHealthcare, which owns a PBM and specialty pharmacy. The Journal’s analysis found that the three companies charged up to twenty-seven times more than a generic reference pharmacy for a selection of nineteen drugs. For example, a monthly supply of the generic version of Tarcera, a lung cancer drug, costs $73 at the generic reference pharmacy, compared to $4,409 through Cigna.

In an era where healthcare expenditures are skyrocketing, particularly due to the soaring prices of specialty medications, stakeholders across the spectrum are grappling with financial strategies to manage these burgeoning costs. This blog delves into the complexities surrounding the economics of healthcare, emphasizing the pivotal role of innovative insurance solutions in this ever-evolving landscape. Navigating the waters of stop-loss insurance requires a keen cost-management process and knowledgeable staff.

The healthcare industry is witnessing an unprecedented rise in the cost of specialty medications. These drugs, essential in combating various chronic and life-threatening conditions, demand extensive research and development, often targeting smaller patient populations. This necessity for intensive investment has led to these medications now representing a sizable portion of healthcare spending.

The Dilemma for Employers: Cost Containment Strategies

Employers, particularly those managing self-funded healthcare plans, face the daunting task of balancing quality healthcare provision with financial sustainability. Initiatives like patient assistance programs offer some respite, but the reliance on traditional stop-loss insurance reveals inherent shortcomings. This insurance, designed to mitigate large claim impacts, often falls short in offering long-term, comprehensive protection, particularly in managing the costs of specialty medications.

A critical aspect often overlooked in stop-loss insurance is ‘lasering’ – a practice where insurers exclude high-cost claims or claimants from coverage. This practice, while not directly affecting members due to continued benefits, leaves employers financially exposed. The implications are profound, especially when considering catastrophic drug claims that can escalate employer liabilities exponentially.

Imagine a company, XYZ Corp, operates a self-funded health plan for its employees. In a given year, an employee’s child is diagnosed with a rare illness requiring an expensive treatment costing $500,000. XYZ’s stop-loss insurance has a specific deductible of $200,000 per claimant, meaning the insurer will cover costs above this threshold.

However, mid-year, the insurer applies lasering to this claimant, increasing the specific deductible to $400,000 for the next policy year due to the high cost. Now, if the child’s treatment continues to be expensive, XYZ will be responsible for costs up to $400,000.

This is where supplemental stop-loss insurance comes in. It can provide coverage for the gap between the original specific deductible and the increased amount due to lasering. For example, it might cover costs between $200,000 and $400,000, protecting XYZ from bearing the full financial burden of this unexpected increase in healthcare costs.

Conclusion: Charting a Course through Complex Healthcare Financial Waters

As the healthcare industry continues to evolve, understanding and navigating the intricacies of healthcare economics becomes crucial. The rise in specialty medication costs and the challenges of traditional stop-loss insurance underscore the need for comprehensive, forward-thinking solutions. Supplemental stop-loss insurance stands out as a key strategy in this context, offering a safety net for employers and ensuring the sustainability of healthcare provisions.

CMS letter to pharmacy benefit management companies and other notes from around the interweb:

• CMS letter to pharmacy benefit management companies. The Centers for Medicare & Medicaid Services (CMS) values your partnership in providing health care coverage and access to essential treatments, including prescription medications, to millions of people. However, we are hearing an increasing number of concerns about certain practices by some plans and pharmacy benefit managers (PBMs) that threaten the sustainability of many pharmacies, impede access to care, and put increased burden on health care providers. We are writing to share these concerns and to encourage you to work with providers and pharmacies to alleviate these issues and safeguard access to care.

• NC wanted to share information on drug pricing. Here’s how it got shot down. For a brief few weeks, N.C. State Health Plan members had a rare window into the secretive world of drug pricing. Days before the health plan trustees met to discuss whether the plan could afford to continue covering obesity medications manufactured by pharmaceutical giant Novo Nordisk, staff posted online pages of pricing information they had prepared based on an analysis of expenditures. Notably, the documents estimated the discount, or “rebate,” Novo Nordisk had agreed to give NCSHP for these drugs — a piece of information that is considered a trade secret in the pharmaceutical industry.

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Why such ‘high markups’? Senators seek drug price probe of insurers who own PBMs. The senators urged Inspector General Christi Grimm to determine if large insurance companies are using their vertically integrated pharmacies to evade federal requirements that limit the percentage of premium dollars spent on profits and administration, known as the Medical Loss Ratio, or MLR. The letter follows an investigation by the Wall Street Journal revealing significant markups of generic drugs at specialty pharmacies owned by CVS Aetna (which operates the Caremark PBM), Cigna (which owns Express Scripts) and UnitedHealthcare, which owns a PBM and specialty pharmacy. The Journal’s analysis found that the three companies charged up to twenty-seven times more than a generic reference pharmacy for a selection of nineteen drugs. For example, a monthly supply of the generic version of Tarcera, a lung cancer drug, costs $73 at the generic reference pharmacy, compared to $4,409 through Cigna.

Warrants in outcomes rebates are a financial mechanism used by pharmaceutical manufacturers in their contracts with payers, such as PBMs, insurance companies or government healthcare programs. These warrants are essentially a form of guarantee or insurance that the pharmaceutical companies provide regarding the performance or effectiveness of their drugs. Here’s how outcomes-based rebates in pharmaceuticals work and why they are used:

1. What are Warrants in Outcomes Rebates?
   • Warrants in outcomes rebates are contractual agreements between a pharmaceutical manufacturer and a payer (i.e. PBM, health plan). In these agreements, the manufacturer promises a rebate or financial return if the drug does not meet specified outcomes or performance metrics.
   • These outcomes or metrics are typically related to the drug’s effectiveness in treating a condition, the improvement in patient health, or achieving certain health benchmarks.

2. How Do They Work?
   • When a pharmaceutical company sells a drug, it can include a warrant in the contract that promises a rebate if the drug does not achieve the agreed-upon outcomes.
   • The specific outcomes are predefined and could be based on clinical trial data, real-world evidence, or agreed-upon health metrics.
   • If the drug fails to meet these benchmarks, the pharmaceutical company provides a rebate to the payer. This rebate could be a partial or full refund of the drug’s cost.

3. Why Do Pharmaceutical Manufacturers Rely on Them?
   • Risk Sharing: Warrants in outcomes rebates allow pharmaceutical companies to share the risk of drug performance with payers. This can be particularly important for expensive drugs or those with variable outcomes.
   • Market Access: By offering these warrants, manufacturers can make their products more attractive to payers, potentially increasing market access and acceptance.
   • Building Trust: These agreements can build trust with payers and prescribers by showing confidence in the drug’s effectiveness.
   • Support for Premium Pricing: For drugs that are highly effective but expensive, warrants can justify the high cost by tying the price to actual performance.
   • Encouraging Innovation: They can encourage innovation by aligning the financial incentives of the manufacturer with the actual health outcomes of patients.

To manage the risk associated with outcomes-based rebates in pharmaceuticals, pharmaceutical companies may purchase insurance policies. These policies can cover the potential financial losses that arise if the drug fails to meet the agreed-upon outcomes and a rebate is due. The insurance essentially transfers a portion of the financial risk from the pharmaceutical company to the insurance provider.

Overall, warrants in outcomes rebates represent a move towards value-based pricing in the pharmaceutical industry, where the focus is on paying for the actual value or benefit provided by a drug, rather than just the drug itself. This approach can lead to more sustainable healthcare spending and better alignment of incentives among manufacturers, payers, and patients.

Hospitals are dropping Medicare Advantage plans left and right and other notes from around the interweb:

• Hospitals are dropping Medicare Advantage plans left and right. Medicare Advantage provides health coverage to more than half of the nation’s seniors, but a growing number of hospitals and health systems nationwide are pushing back and dropping some or all contracts with the private plans altogether. Among the most cited reasons are excessive prior authorization denial rates and slow payments from insurers. Some systems have noted that most MA carriers have faced allegations of billing fraud from the federal government and are being probed by lawmakers over their high denial rates. “It’s become a game of delay, deny and not pay,” Chris Van Gorder, president, and CEO of San Diego-based Scripps Health, told Becker’s. “Providers are going to have to get out of full-risk capitation because it just doesn’t work — we’re the bottom of the food chain, and the food chain is not being fed.”

• PBMs Should Brace for a Copay Accumulator Program Shift. Starting in 2020, the Centers for Medicare & Medicaid Services (CMS) allowed insurers to use copay accumulators for brand-name drugs that have a suitable generic alternative. However, for plan year 2021, CMS changed the rules to permit copay accumulators for all drugs, regardless of generic availability. This broader rule was challenged in the D.C. Circuit Court and overturned. As a result, the 2020 regulation is back in effect, meaning copay accumulators can only be applied to brand drugs that have a medically appropriate generic equivalent.

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy. Pharmacy benefit managers evolved in parallel with the pharmaceutical manufacturing and health insurance industries. The evolution of the PBM industry has been characterized by horizontal and vertical integration and market concentration. The PBM provides key functions: formulary design, utilization management, price negotiation, pharmacy network formation, and mail order pharmacy services. Criticism of the PBM industry centers around the lack of competition, pricing, agency problems, and lack of transparency. Legislation to address these concerns has been introduced at the state and federal levels, but the potential for these policies to address concerns about PBMs is unknown and may be eclipsed by private sector responses.

PBM copay accumulator programs are a relatively recent development in the health insurance industry, particularly in the United States. These programs have significant implications for patients, especially those requiring expensive, specialty medications. Copay accumulator programs are policies implemented by some health insurers and pharmacy benefit managers (PBM). Under these programs, any payments made by a third party (such as a drug manufacturer’s copay assistance program) do not count towards a patient’s deductible or out-of-pocket maximum.

Understanding Copay Accumulator Programs

• Patients who rely on manufacturer copay assistance to afford expensive medications find themselves facing higher out-of-pocket costs once the assistance is exhausted. This can happen mid-year, leaving patients suddenly responsible for large expenses.
• The increased cost burden can lead to non-adherence to medication regimens, as patients may skip doses or stop taking medications due to cost.

The Role of Pharmacy Benefit Managers (PBMs)

PBMs, who manage prescription drug benefits on behalf of health insurers, play a crucial role in the implementation of copay accumulator programs.

• PBMs may have financial incentives to promote copay accumulator programs. By not allowing manufacturer assistance to count towards deductibles, they effectively extend the period during which patients pay out-of-pocket, potentially increasing the PBMs’ share of drug costs covered by patients.
• PBMs may use the existence of manufacturer assistance programs as leverage in price negotiations with drug manufacturers, arguing that these programs reduce the effective price of drugs.
• Employers, especially those providing self-funded health insurance plans, are often persuaded by PBMs to adopt copay accumulator programs. PBMs may present these programs as cost-saving measures.
• There is often a lack of transparency in how PBMs communicate the impact of these programs to employers and, subsequently, to the employees. This lack of clarity can lead to unexpected expenses for patients who are unaware of the program’s details.

How Copay Accumulators Work

In a copay accumulator program, when a patient uses a drug manufacturer’s copay card or coupon to pay for a medication, this amount does not count towards their deductible or out-of-pocket maximum. Once the copay assistance is exhausted, the patient must pay out-of-pocket until their deductible is met.

Example:

Imagine a patient, Alex, has a $3,000 annual deductible. Alex uses a medication that costs $1,000 per month. Alex has a copay card from the drug manufacturer that covers $900 of the cost each month. For the first three months, Alex pays $100 out-of-pocket (the remaining cost after copay card), totaling $300. However, since the $2,700 paid by the copay card doesn’t count towards the deductible, Alex still has the full $3,000 deductible remaining. Once the copay card is maxed out, Alex must pay the full $1,000 per month until the deductible is met.

How Copay Maximizers Work

Copay maximizers set a minimum out-of-pocket cost for all patients using a manufacturer’s copay card, regardless of the actual drug cost. The program spreads the value of the copay card across the year, ensuring that it counts towards the deductible but also maximizing the time the patient uses the copay assistance.

Example:

Consider another patient, Jordan, with a similar $3,000 deductible. Jordan’s medication costs $1,000 per month, with a copay card covering up to $2,700 annually. Instead of using the $900 per month from the copay card, the insurer sets Jordan’s minimum monthly out-of-pocket cost at $225 ($2,700 / 12 months). This way, the copay card lasts the entire year, but Jordan consistently pays more each month. The payments go towards the deductible, but Jordan’s out-of-pocket costs are spread throughout the year.

Key Differences and Impacts

Accumulator programs can lead to a sudden, large out-of-pocket expense once the copay assistance runs out, while maximizer programs spread out costs but ensure higher consistent payments from the patient. Both strategies can lead to increased out-of-pocket costs for patients, especially those needing high-cost medications. They can also lead to confusion and financial strain, as patients may not fully understand how their payments are being applied towards their deductibles.

Conclusion

Copay accumulator programs represent a complex and contentious issue in healthcare. While PBMs and insurers may argue that these programs are necessary to control costs and ensure fair pricing, the direct impact on patients, particularly those requiring expensive treatments, is often negative. Increased costs can lead to medication non-adherence, potentially worsening health outcomes.

The role of PBMs in these programs, coupled with the lack of transparency and the push to get employer buy-in, highlights the need for greater scrutiny and regulatory intervention to protect patient interests. In summary, both copay accumulators and maximizers are cost-management strategies used by insurers and PBMs that can significantly alter the financial burden on patients, often leading to higher out-of-pocket expenses over time.

PBMs Should Brace for a Copay Accumulator Program Shift and other notes from around the interweb:

• PBMs Should Brace for a Copay Accumulator Program Shift. Starting in 2020, the Centers for Medicare & Medicaid Services (CMS) allowed insurers to use copay accumulators for brand-name drugs that have a suitable generic alternative. However, for plan year 2021, CMS changed the rules to permit copay accumulators for all drugs, regardless of generic availability. This broader rule was challenged in the D.C. Circuit Court and overturned. As a result, the 2020 regulation is back in effect, meaning copay accumulators can only be applied to brand drugs that have a medically appropriate generic equivalent.

• Plan Sponsors Have a Fiduciary Duty to Employees that Includes Scrutiny of PBM-Owned Rebate Aggregators. Drug manufacturer rebates can be a valuable tool for controlling the rising costs of prescription drugs. Most manufacturers offer a rebate program through which they agree to return a part of the drug’s list price to plans in exchange for access to the plans’ drug “formulary”. Rebates are intended to flow through to the plan sponsors and benefit patients, reducing their overall drug spend. The rebate process has been hijacked by PBMs and their sister-aggregators. PBMs utilize rebate aggregators to negotiate drug manufacturer rebates on behalf of the plans they administer. In 2022, just three PBMs along with their rebate aggregators, controlled 79 percent of the market. Some of the largest rebate aggregators include Zinc (owned by CVS Caremark), Ascent (owned by Express Scripts), and Emisar (owned by United Healthcare).

• Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy. Pharmacy benefit managers evolved in parallel with the pharmaceutical manufacturing and health insurance industries. The evolution of the PBM industry has been characterized by horizontal and vertical integration and market concentration. The PBM provides key functions: formulary design, utilization management, price negotiation, pharmacy network formation, and mail order pharmacy services. Criticism of the PBM industry centers around the lack of competition, pricing, agency problems, and lack of transparency. Legislation to address these concerns has been introduced at the state and federal levels, but the potential for these policies to address concerns about PBMs is unknown and may be eclipsed by private sector responses.

• Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update. Based on 2020 data and newly acquired 2021 data for people with a commercial drug benefit tied to a medical benefit and the PBMs used by insurers, the updated analysis presents market insight on five PBM services performed for insurers: rebate negotiation, retail network management, claim adjudication, formulary management, and benefit design. Insurers face a make-or-buy decision—they can perform these functions in-house or buy them from a PBM. The AMA Policy Research Perspectives report, “Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update”, found that insurers use a PBM for three of them—rebate negotiation, retail network management and claims adjudication—and therefore assessed market competition for those three product markets.