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Clinical Laboratories and Pathology Groups

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Clinical Laboratories and Pathology Groups

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Walmart and Home Depot Employ Copay Accumulators to Keep Employee Healthcare Costs Down and Encourage Utilization of Generic Prescription Drugs

While clinical laboratories may not be directly affected by copay accumulators, anything that affects patients’ ability to pay for healthcare will likely impact lab revenues as well

Here’s a new term and strategy that some big employers are deploying in an attempt to control the choice of health benefits provided to their employees. The term is “copay accumulator” and it is intended to offset efforts by pharmaceutical companies to minimize what consumers must pay out-of-pocket for expensive prescription drugs.

Clinical laboratory managers and pathologists will have a front row seat to watch this next round in the struggle between industry giants for control over how patients pay for drugs and treatment regimes.

Pharmaceutical companies on one side and health insurers and employers on the other side have played brinksmanship over medication copays for years. Now at the center of this struggle are copay accumulators, a relatively new feature of plans from insurers and pharmacy benefit managers (PBMs) on behalf of the large employers they serve.

More than 41-million Americans use copay accumulators, and about nine million use similar though limited copay maximizer programs, Zitter Health Insights, a New Jersey-based pharma and managed care consultancy firm, told Reuters.

Now, big employers are getting in on the game. Walmart (NYSE:WMT) and Home Depot (NYSE:HD) are among a growing number of companies using copay accumulators and copay maximizers to keep their healthcare costs down and encourage employees to seek lower-cost alternatives to expensive brand prescriptions (generic drugs).

About 25% of employers currently use such programs, and 50% of employers are anticipated to be doing so in just two more years, the National Business Group on Health told Reuters.

What Are Copay Accumulators and How Do They Work?

In response to popular drug company discount cards, insurance companies developed the “copay accumulator.” Here’s how it works.

Typically, patients’ insurance plan deductibles can be thousands of dollars. Thus, even after plan discounts, patients often pay hundreds, even thousands of dollars each month for prescribed medications. Insurance companies see a beneficial side to this, stating the cost encourages patients to be aware of their medications and motivates them to try lower-cost non-branded alternatives (generic drugs), all of which saves insurance plans money.

However, many patients with high-deductibles balk at paying the high cost. They opt to not fill prescriptions, which costs pharmaceutical companies money.

To encourage patients to fill prescriptions, drug companies provide discount cards to help defray the cost of the drugs. The difference between the discounted payment and the full price of the drug is paid by the pharmaceutical company. But these discount cards interfere with insurance companies’ ability to effectively track their enrollees’ drug usage, which impacts the payers’ bottom lines.

Thus, health insurance companies developed the copay accumulator, which Dark Daily explained in, “Copay Accumulators Is a New Tactic in Struggle Between Payers and Pharma at Patients’ Expense,” October 24, 2018.

When a patient uses a drug discount card at the point-of-sale, the sale is noted by the patient’s health insurer and the insurer’s copay accumulator program kicks in. It caps the total accumulated discount an enrollee can take for that medication and prevents any patient payments to apply toward the plan’s deductible. Once the drug company’s discount card threshold is reached, the patient bears the full cost of the drug, a ZS Associates Active Ingredient blog post explained.

Geoffrey Joyce, PhD
“There are no good guys here. This is about control of the market,” said Geoffrey Joyce, PhD (above), Chair, Department of Pharmaceuticals and Health Economics, University of Southern California, told the Los Angeles Times. “The loser is the patient.” (Photo copyright: Association for Public Policy Analysis and Management.)

Critics of copay accumulators point out that patients could end up paying full price for extremely expensive prescriptions they previously accessed with discount cards, while simultaneously making no progress toward fulfilling their insurance deductibles. Or, they will simply stop taking their medications altogether.

“A medication which previously cost $7 may suddenly cost hundreds or even thousands of dollars because the maximum amount of copay assistance from the [drug] manufacturer was reached,” noted Ken Majkowski, Pharm.D, Chief Pharmacy Officer at FamilyWize (a company that offers its own prescription savings programs), in a blog post. “Since the health plan will no longer allow the copay amounts to contribute to the patient’s deductible, the cost of the medication remains very high.”

Major Employers Implement Their Own Copay Accumulator Programs

Enter the next goliath into the fray—the large employer. Executives at Walmart and Home Depot say discount drug coupons drive up healthcare costs and give their employees and their family members no incentive to explore lower cost alternatives, Reuters reported.

Walmart’s pharmacy benefits are managed by Express Scripts, a prescription benefit plan provider that fills millions of prescriptions annually, according to the company’s website.  Meanwhile, Home Depot’s pharmacy benefits are operated by CVSHealth, which focuses on therapies for cystic fibrosis, hepatitis C, cancer, HIV, psoriasis, pulmonary arterial hypertension, and hyperlipidemia, Reuters noted.

Insurance Associations Weigh-In

Health insurance company representatives say the need for copay accumulators begins with the high price of pharmaceuticals. Insurers are not the only ones concerned about these costs. The American Hospital Association (AHA), the Federation of American Hospitals (FAH), and the American Society of Health-System Pharmacists (ASHP) recently released a report showing total drug spending per hospital admission increased by 18% between 2015 and 2017, and some drug categories rose more than 80%.

University of Chicago National Opinion Research Center (NORC) compiled the data for the report.

“The bigger question is why do we need copay coupons at all? It’s very important to recognize the problem starts with the [drug] price. This is the real underlying problem,” Cathryn Donaldson, Director of Communications, America’s Health Insurance Plans (AHIP), told the Los Angeles Times.

In their blog post, ZS Associates advised drug companies to “push-back” on the copay accumulators. The Evanston, Ill.-based consultancy firm recommends pharma executives change the way they run the discount cards—such as paying rebates directly to patients instead of working through pharmacies.

Medical laboratory leaders need to be aware of programs, such as copay accumulators, and the associated issues that affect patients’ ability to pay for their healthcare. Because large numbers of patients struggle to pay these high deductibles, it means clinical laboratories will be competing more frequently with hospitals, physicians, imaging providers, and others to get patients to pay their lab test bills.

—Donna Marie Pocius

Related Information:

Walmart, Home Depot Adopt Health Insurer Tactic in Drug Copay Battle

Five Steps to Address the Pain Points of Copay Accumulator Programs

They’re Called Copay Accumulators, and They’re a Way Insurance Companies Make You Pay More for Meds

Understanding Copay Accumulators

Walmart and Home Depot are Adopting this Insurer Tactic

Recent Trends in Hospital Drug Spending and Manufacturer Shortages

Copay Accumulators is a New Tactic in Struggle Between Payers and Pharma at Patient’s Expense

Copay Accumulators Is a New Tactic in Struggle Between Payers and Pharma at Patients’ Expense

Though patients get a big discount when paying for drugs, copay accumulators prohibit discounts from applying to plan deductibles, extending time it takes for enrollees to reach full plan coverage

There’s a new insurance/payer industry tactic in town and Dark Daily thinks clinical laboratories and anatomic pathology groups should know about it. It’s called a “copay accumulator” and it was designed by payers in response to pharmaceutical company copay assistance cards and discount coupons.

How do Copay Accumulators Work?

Many consumers use manufacturer copay assistance programs, copay cards, and coupons to afford expensive brand-name medications. As payers attempt to make consumers pay a higher portion of drug costs, pharmaceutical companies have responded by offering financial aid to patients in the form of copay assistance cards and coupons. These discounts insulate patients from having to pay the full deductible required by their health insurance plans for medicines prescribed by their doctors.

However, payers say these deductibles were designed to motivate patients to monitor the price of prescribed drugs and discourage the overutilization of costly medicines. A primary goal of price transparency and precision medicine.

The upside to payers is, with a copay accumulator in place, the amount of those manufacturer discounts does not count toward the patient’s insurance deductible. And the longer it takes for patients to reach their deductibles, the longer the insurer gets to collect copays, which adds to the controversy of copay accumulators.

Also, prohibiting drug manufacturer discounts from counting toward a patient’s insurance deductible prolongs the time patients have to wait before full coverage begins. Thus, more upfront costs are shifted to consumers.

“Copay accumulator programs are nothing more than insurance scheme[s] that leave patients financially exposed while benefiting payers’ bottom lines,” Stephen J. Ubl, President and Chief Executive Officer, Pharmaceutical Research and Manufacturers of America (PhRMA), told the LA Times.

Others, however, claim manufacturer discounts are simply marketing schemes used by pharmaceutical companies to keep drug costs high.

“The true issue remains that drug pricing continues to skyrocket, with no clear explanation on how those prices are set,” Cathryn Donaldson, Director of Communications, America’s Health Insurance Plans (AHIP), told the LA Times. “Copay coupon programs hide the true impact of rising prescription drug costs.” (Photo copyright: AHIP.)

Patients Stuck in the Middle

Physicians and patient advisory groups worry that shifting more drug costs to patients may affect therapy adherence and cause confusion for consumers.

“Accumulators are seen as a way to keep manufacturers in line and force them to negotiate better deals,” Randy Vogenberg, PhD, Principal, Institute for Integrated Healthcare (IIH), told Managed Care.

“But the Achilles heel for the pharmacy benefits manager is that you’re hurting the patient, who is stuck in the middle,” continued Vogenberg. “Patients may end up not taking or getting a drug, which is not good for anyone. And it’s not really affecting pricing because patients are still hurting. Unfortunately, it makes the third-party payer look like a crook.”

Managed Care notes that, according to a recent survey of 170 employers conducted by the National Business Group on Health (NBGH), 29% of employers plan on using copay accumulators in 2019. That’s up from the 17% of employers who are currently using them.

“They are not universal yet,” Steve Wojcik, Vice President of Public Policy at the NBGH, told Managed Care. “But they will probably continue to be one tool that employers use to keep costs down.”

Drug Costs Down, Cost to Patients Up

The struggles between payers and big pharma could be heating up. Studies show utilization of copay accumulators may be negatively impacting drug company revenue. Research conducted by Sector and Sovereign (SSR) found that retail drug prices in the United States fell 5.6% during the first quarter of this year. During the same period last year, prices fell just 1.7%. SSR’s report states that most of the decline in prices is due to copay accumulators.

“Unless manufacturers adapt their copay support programs fairly drastically, net price declines may worsen in 2019,” SSR analyst Richard Evans told Reuters.

Clinical laboratories might not directly feel the effects of copay accumulators. Nevertheless, anything that impacts patients’ ability to pay, especially those on high-deductible health plans, should be on the radar of smart lab managers and stakeholders.

—JP Schlingman

Related Information:

Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit

Backlash Against Copay Accumulators

Copay Accumulators: The Deductible Double-Dip

They’re Called ‘Copay Accumulators,’ and They’re a Way Insurers Make You Pay More for Meds

Insurance Tactic Drags Down U.S. Drug Prices in 2nd Quarter