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
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
“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.
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
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
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
Growing interest in more transparency for the prices of prescription drugs is reflected in a study published in the Journal of the American Medical Association (JAMA) that highlights disparities in pharma prices for patients, pharmacies, and payers
Consumer demand for increased transparency in the prices patients, health insurers, and others pay for healthcare services continues. The Kaiser Family Foundation (KFF) reports that patients are facing higher deductibles, higher premiums, and increasingly complex—and opaque—pricing for everything from medical laboratory tests and routine checkups to prescriptions and out-of-network care. (See Dark Daily, “KFF Study Finds HDHPs and Increased Cost-Sharing Requirements for Medical Services are Making Healthcare Increasingly Inaccessible to Consumers,” April 20, 2018.)
However, while reference pricing and pricing databases help savvy patients compare prices across a range of procedures, much about pharmaceutical pricing remains shrouded in mystery. This is why calls for greater transparency in how prescription drugs are priced are increasing as well.
The Trump administration, state governments, and advocacy groups have each targeted drug costs as a problem in the current healthcare system. And a March 2018 study published in the Journal of the American Medical Association (JAMA) may further fuel the fires facing big pharma.
Overpayments and the Silence Behind Them
Analyzing 9.5 million claims from Optum’s Clinformatics Data Mart over the first half of 2013, researchers found that approximately 23% of all claims involved overpayments—situations in which the co-pay charged to the patient exceeded what the insurer paid the pharmacy to fill the prescription.
While data from 2013 might not reflect the current state of pharmaceutical pricing, the study brings exposure to trends in both politics and media coverage surrounding the industry.
The study authors found that overpayments totaled $135-million in 2013. Generic medications saw a higher portion of overpayments with more than one in four generic prescriptions costing patients more than what payers paid the pharmacy. However, in the 6% of claims involving branded medication, overpayments were nearly twice as high with an average overpayment of $13.46 per claim.
The researchers also cited data from a National Community Pharmacists Association (NCPA) survey of 628 pharmacies in which 49% claimed to have seen 10-50 occurrences of “clawback fees” in the past month. A further 35% reported seeing more than 50 clawback fees in the past month. These “fees” are part of contractual obligations that payers can use to recoup such overpayments to pharmacies.
Other contractual arrangements, such as “gag clauses” (AKA, non-disclosure agreements), wherein pharmacists cannot disclose to patients when their copay exceeds the cost of filling the prescription without coverage, have garnered coverage in the media.
The Hill recently outlined efforts from senators to stop this practice for both traditional insurance plans and Medicare Advantage and Part D participants. “Americans have the right to know which payment method—insurance or cash—would provide the most savings when purchasing prescription drugs,” Senator Susan Collins (R-Maine) told The Hill.
Rebates, Secretive Deals, and Red Tape in Government Crosshairs
Rebates are another contested aspect of current pricing models. Traditionally, pharmacy benefit managers (PBMs) serve as a middleman between pharmaceutical companies and pharmacies to negotiate prices and maintain markets. PBMs negotiate deals for insurers in the form of rebates. Insurers, however, are using these savings to offer lower premiums, rather than forwarding the savings directly to the customer.
UnitedHealthcare unveiled plans to pass these rebates directly to consumers in early March, The Hill reported.
In a press release, Department of Health and Human Services (HHS) Secretary Alex M. Azar II stated, “Today’s announcement by UnitedHealthcare is a prime example of the movement toward transparency and lower drug prices for millions of patients that the Trump Administration is championing. Empowering patients and providers with the information and control to put them in the driver’s seat is a key part of our strategy … to bring down the price of drugs and make healthcare more affordable.” (Photo copyright: Washington Post.)
The Trump Administration also recently outlined their new “American Patients First” plan for reducing drug prices and out-of-pocket costs for patients.
Key elements of their proposed approach include:
- Eliminating gaming of regulations, such as the Risk Evaluation and Mitigating Strategies (REMS) requirements manufacturers use to avoid sending samples to creators of generics;
- Promoting biosimilars;
- Allowing greater substitution in Medicare Part D;
- Including list prices in pharma advertising;
- Restricting rebates through Anti-Kickback Statue revisions; and,
- Eliminating gag clauses or clawback fees.
However, pharma industry coverage of the plan is mixed. MarketWatch sees little to worry about, predicting, “[the plan] isn’t expected to hurt drug makers or pharmacy-system middlemen.” Meanwhile, Forbes claims, “[the plan] represents a sea of change in pharmaceutical pricing policy, one that will have a significant effect on drug prices in the future.”
Anatomic pathology groups, medical laboratories, and other diagnostics providers can view this as yet another example of healthcare providers trying to shore up financials and protect profits by protecting sensitive pricing information, as the industry faces increasing scrutiny. Nevertheless, regardless of the outcome, these latest trends emphasize the role that transparency is likely to play—and how clinical laboratories will be impacted—as healthcare reform progresses, both in terms of public relations and regulatory requirements.
Frequency and Magnitude of Co-payments Exceeding Prescription Drug Costs
Impact of Direct and Indirect Remuneration (DIR) Fees on Pharmacies and PBM-Imposed Copay Clawback Fees Affecting Patients
Copay Exceeds Drug Cost in 23% of Claims: JAMA Research
You’re Overpaying for Drugs and Your Pharmacist Can’t Tell You
Oregon, the Latest State to Tackle High Drug Prices, Pushes through Transparency Law
Governor Brown Signs HB 4005, Creating New Transparency in Drug Pricing
UnitedHealthcare Will Pass Drug Rebates Directly to Consumers
Senators Target ‘Gag Clauses’ That Hide Potential Savings on Prescriptions
FDA Commissioner Says ‘Rigged’ System Raises Drug Costs for Patients, Discourages Competition
FDA Puts Drug Supply Chain on Notice
The FDA Commissioner Just Laid Out How ‘Everybody Wins’ in the US Healthcare System except the Patients
Your Guide to the Trump Drug Price Plan: Who It Affects and How
The Trump Plan to Reduce Prescription Drug Prices Will Have a Major Impact
American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs
Secretary Azar Statement on UnitedHealthcare Drug Discount Announcement
Reference Pricing and Price Shopping Hold Potential Peril for Both Clinical Laboratories and Consumers
Consumers Now Use Medical Cost Websites to Price Shop for Clinical Pathology Laboratory Tests and Other Medical Procedures
KFF Study Finds HDHPs and Increased Cost-Sharing Requirements for Medical Services Are Making Healthcare Increasingly Inaccessible to Consumers