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

Feb 1, 2019 | Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Management & Operations

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.

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