Copay Accumulator Threat Looms For Pharma
Unwinding the associated risk is key for drug companies
Looking ahead to 2019, some significant challenges are on the horizon for pharma as the debate over drug prices intensifies and payers and pharmacy benefit managers take a tougher stance on formulary management. Among the tools being used by payers to bend the cost curve of higher-priced drugs are copay accumulator programs—and, based on some initial results, look for the use of those programs to increase.
How Copay Accumulators Work
Generally, copay accumulator programs strengthen a plan’s formulary by penalizing patients for choosing drugs on higher or specialty tiers. If the drug in question is covered on a high tier, the manufacturer offers coupons or copay cards to commercially insured patients to offset the higher out-of-pocket cost. In an ideal situation (for the patient and pharma), the coupons help the patient meet the deductible. Once past that hurdle, more beneficial coverage kicks in, and the patient pays significantly less for their prescription. Patients get the drug that works best for them, and the drug company sees higher adherence patterns and possibly increased market share. Win/win, right? Payers don’t see it that way.
For payers (insurers and their employer clients), coupons and copay cards threaten the negotiated rates and rebates for drugs given preferential coverage—the carefully orchestrated mechanism designed to keep costs down and increase profit margins. To reduce that threat, major PBMs are using copay accumulator programs that prevent coupons or copay cards from being applied to a patient’s deductible.
Here's how it works: When the patient uses a coupon and pays a low copay (as low as $5 in some cases) and the manufacturer kicks in the difference ($250 to $5,000 in some cases), the money goes to the PBM or plan and the patient’s deductible is reduced by the copay amount only. If that deductible is several thousand dollars, the likelihood of hitting that threshold diminishes. If the coupon has a maximum value or number of uses, the patient will face a much higher price to fill a prescription, and the chance of abandoning a therapy or switching to another drug goes up. If the coupon has no maximum value or number of uses, the drug manufacturer is potentially on the hook for a much larger amount than was budgeted for patient assistance. Keep in mind, the drug company may also be paying a rebate to the payer and in those cases, the cost of the coupon program increases significantly.
The Maximizer Strategy
Another approach to the copay accumulator model is to use a “maximizer” strategy. In the maximizer scenario, the plan may spread the value of a drug company’s coupon or copay card over a 12-month period. The coupon still doesn’t apply to the deductible and the plan absorbs a portion of the cost, but not as much as when no copay accumulator is in place (see chart). For pharma, the maximizer program costs as much as the copay accumulator scenario, but with the benefit of a patient remaining on therapy. The question then becomes whether it's financially feasible for the drug manufacturer.
Potential Risk Looms
While the names of these programs seem innocuous (UnitedHealth Group’s Coupon Adjustment: Benefit Protection Program or Express Scripts' Out of Pocket Protection Program or CVS/caremark’s Specialty Copay Card Program) and the programs may seem counterintuitive, the threat is significant and pharma is largely flying blind. A manufacturer will know its coupon program usage, but won’t see the effect of accumulator programs until it’s too late to make an adjustment. It’s also not likely to have visibility into a competitor’s comparative risk or which therapy areas are likely to be hit the hardest.
Top Therapies Exposed to CoPay Accumulator Programs
Nationally, the top five therapy areas for coupon or copay card use in 2018 according to claims data analysis through Decision Resources Group’s Copay Accumulator Threat Assessor are:
- Autoimmune/inflammatory diseases
- High-blood cholesterol
- Opioid addiction
- Urinary disorders
Of those, autoimmune is consistently among the top spending categories noted by PBMs in annual drug trend reports and may be an easy target for copay accumulator programs.
In 2017, Prime Therapeutics conducted a case study of a copay accumulator program with a large, undisclosed employer group, focusing on autoimmune drugs Enbrel and Humira, that generated $386,000 in savings over a four-month period (Prime Therapeutics case study, released October 2018). The employer group later expanded the program to include 19 autoimmune drugs, generating an additional $1.8 million in savings over a 10-month period.
The Importance of Geographic Differentiation
Another part of the risk equation is geographic differentiation because there are wide variations in coupon use depending on population mix. According to the DRG Copay Accumulator Threat Assessor, coupon usage for autoimmune/inflammatory disease drugs is highest in Indiana (51%), South Dakota (49%), South Carolina (48%), Alabama (45%), and Texas (40%).
The next step is figuring out a drug’s risk exposure by payer or PBM by knowing how prevalent coupon usage is by payer and the size of the population at risk. Using the autoimmune example for Indiana, the DRG Copay Accumulator Threat Assessor shows that Express Scripts is the largest PBM in the state, and 56 percent of those pharmacy lives are covered by a plan with a higher-deductible health plan. Patients with higher deductibles will be at highest risk of abandoning therapy or switching drugs if a copay accumulator is being used because they will face the highest out-of-pocket expense.
That these programs will expand seems to be the most likely scenario. The response by pharma will vary, but it’s going to require an assessment of launch strategy and weighing price concessions or rebates against the value of patient assistance programs. Some drug companies have introduced debit cards and other direct-to-consumer programs, but those strategies can be tricky. Taking the long view, making a case for the cost-effectiveness of patient adherence to drugs versus the medical cost is valid argument for pharma—but if plans take a short-term view of cost, it’s a difficult argument to make. In any case, knowing the risk involved and where it’s going to be felt the most is the first step to unwinding what could be a thorny problem for pharma in the very near future.
Dave Raiford is a senior director at DRG.