Kevin L. Hagan and Amy Niles, PAN Foundation

Alternative funding programs (AFPs) are being used by health plan sponsors to lower their costs, but they are hurting the very patients they should be serving. By forcing the search for funding of specialty drugs elsewhere, patients often must delay treatment that should be covered by their health plan. They also put additional strain on a limited safety net of patient assistance programs that qualifying patients deserve.

With AFPs, health plan sponsors exclude some or all specialty medications from coverage, labeling them as non-essential health benefits (EHBs). This happens despite prescription drugs being one of 10 EHB categories included in the Affordable Care Act (ACA). Without coverage, a patient’s out-of-pocket spending on these drugs no longer counts toward the deductible or out-of-pocket maximum.

Instead, the plans direct patients to separate non-health insurance companies or vendors, that then attempt to connect patients with financial assistance from a pharma manufacturer or charitable assistance foundation. At times, they direct patients to illegally import medications from outside the US.

Patients are told drugs are non-essential

Although specialty medications are FDA-approved drugs, and, therefore, should be covered by all health plans under the ACA, some health plan sponsors deem them non-essential to help reduce their own healthcare-related costs. What one plan deems to be “non-essential,” another plan may not.

Patients required to provide personal info

Vendors require patients to provide details such as household size and annual income to help determine the type of third-party financial assistance they may be eligible for. If patients refuse, the vendors will not help them, leaving patients on the hook for cost.

Patients encouraged to disguise themselves

Vendors help patients disguise themselves as uninsured so that they can apply for patient assistance programs to cover the cost of the prescriptions. No patient should ever be forced to do this, nor should a vendor disguise themselves as a patient.

AFPs tap into limited resources needed by the most vulnerable

Manufacturer and charitable assistance programs are intended for individuals who are uninsured or underinsured, not for individuals who have health insurance that should cover their needed medications. AFPs threaten the sustainability of safety net programs intended for patients most in need by jeopardizing the availability of limited funds.

Patients may incur significant drug costs

Once referred to a vendor, patients have a choice to work with them, or not. If the patient works with the vendor but they are unable to secure funding for them, then the patient may be faced with having to self-pay for the prescribed medication. If the patient chooses not to work with the vendor, they will be responsible for 100% of the drug cost. In each of these scenarios, the cost paid by the patient will not count toward their deductible or out-of-pocket maximum.

Patients may experience delays in treatment

If the vendor determines that the patient is not eligible for assistance from a pharma company or charitable foundation, the patient can ask the health plan for an exception to cover their drug. However, weeks may pass, resulting in a delay in initiation or continuation of treatment, with no guarantee of coverage. Unfortunately, there is no proposed regulation or legislation to ban AFPs. The most important thing patient advocates can do is to make sure elected officials are aware of AFPs and their impact on patients. We encourage patients to be mindful of the language used to describe covered benefits in their plans. We
must work together to ensure that all patients can access and afford their prescribed medications, specialty or otherwise.

Kevin L. Hagan is president and CEO and Amy Niles is chief advocacy and engagement officer; both at PAN Foundation.

Articles

While an option for financial assistance, patients should consider the challenges.

AFP Caution Flag for Patients

Several important and historic reforms to the Medicare program are in sight, thanks to the passage of the Inflation Reduction Act (IRA) in August 2022. For the millions of patients living with life-threatening, chronic, and rare diseases, these reforms can’t come soon enough. But we also know, for far too many, challenges in affording their out-of-pocket prescription medication costs will continue.

As a result of the IRA, patients’ liability for 5% of the cost of their medication in the catastrophic phase of their Medicare Part D benefit will be removed beginning in 2024, resulting in an annual Part D cap at the catastrophic threshold, equal to about $3,250 in out-of-pocket costs. In 2025, this cap is lowered to $2,000. Additionally, in 2025, health plans will be required to offer individuals the opportunity to opt-in to a “smoothing program,” enabling them to spread their out-of-pocket costs over the course of the year. The impact of these reforms on patients’ ability to afford their treatments will be significant and should be celebrated.

However, we hear every day from patients about how these reforms are critical steps toward improving access. Many also share that the cap at catastrophic in 2024 and the $2,000 cap in 2025 will continue to present affordability challenges for them and others. That’s why, in the months following the passage of the IRA, the PAN Foundation conducted a national poll to hear directly from patients about the potential impact the reforms will have on them.

According to our poll, about 75% of adults said that it would be difficult to afford $2,000 in out-of-pocket prescription costs each year. Concerns were especially high among Black and Hispanic adults, adults with incomes of less than $50,000, and adults with chronic or rare diseases. For many, these continued affordability challenges may result in having to make difficult decisions—such as choosing between taking their medications as prescribed or buying less food for their families.

In addition to hearing directly from patients, we also wanted to better understand the potential impact of these new reforms based on existing data. That’s why PAN commissioned research by Avalere Health to examine the projected beneficiary utilization and spending by Medicare Part D beneficiaries under the new reforms. The Avalere analysis found:

More than 2.6 million non-low-income subsidy Medicare Part D beneficiaries will have out-of-pocket spending high enough to reach the new $2,000 annual out-of-pocket cap on prescription drugs in 2025, the year it goes into effect.

Additionally, about 800,000 beneficiaries in 2024 and more than 200,000 beneficiaries in 2025 will spend more than 10% of their income on prescription medications each year.

A higher share of beneficiaries who qualify for Medicare based on disability, as well as greater shares of Hispanic and Black beneficiaries, will have high spending levels early in the calendar year.

Paired with our national polling, these findings confirm what we already suspected—even with the Medicare reforms in place, many patients will still face real challenges affording their out-of-pocket Rx costs. To further illustrate this point, we want to introduce you to a real-life patient facing affordability challenges, George Valentine (view more here: https://bit.ly/42T5qky).

George is a retired, 71-year-old Medicare beneficiary living with chronic lymphocytic leukemia. While he acknowledges that the impending $2,000 annual cap will be helpful, he knows it will still be a significant burden for those living on a fixed income, like himself. He reminds us that patients are facing a whole host of other healthcare-related costs. For George, last year, this included the cost-sharing requirements associated with his 60+ physician office visits and the 150+ labs and diagnostic tests he underwent.

As we reflect on the millions of patients across the country like George, we must recognize the critical role charitable patient assistance foundations will continue to play. Because until everyone can get the healthcare they need and deserve, our work is not done.

1. PAN Foundation, “National Poll: Many Adults Will Struggle to Afford Medications Even with Medicare Reforms,” 

https://www.panfoundation.org/national-poll-many-adults-will-struggle-to-afford-medications-even-with-medicare-reforms

2. PAN Foundation, “Despite Historic Medicare Reforms, Charitable Assistance Programs Still Critical for Many,” 

https://www.panfoundation.org/despite-historic-medicare-reforms-charitable-assistance-programs-still-critical-for-many

3. PAN Foundation, “George Valentine: The Need for Predictable Out-of-pocket Costs,” 

https://www.panfoundation.org/georges-story

Kevin L. Hagan is President and CEO and Amy Niles is chief advocacy and engagement officer; both at PAN Foundation.

The Medicare Part D cap in 2025 won’t solve patients’ need for financial assistance.