The Changing Face of Today's PAPs

Pharmaceutical CommercePharmaceutical Commerce - January/February 2011

Once reserved for uninsured, many patient-assistance programs have evolved to meet the needs of the under-insured. On the horizon: the potential effects of healthcare reform law

Established to provide access to critical therapies for patients who cannot afford to pay, and to support the physicians who serve them, charitable patient-assistance programs (PAPs) sponsored by drug manufacturers have become an essential component in the healthcare safety net. Today, the majority of biopharmaceutical companies offer PAPs for most of the branded products in their portfolios, and physicians have come to expect them.

As a general rule of thumb, “Through their PAPs, pharma manufacturers give away drugs whose list price represents a growing percentage of total sales,” says Kevin O’Leary, senior principal, pricing & reimbursement for IMS Health (Norwalk, CT). “Typically, the manufacturer’s cost-of-goods is relatively small compared to list prices, and patients enrolled in PAPs do not represent lost sales, because they would not otherwise have been able to purchase the drug.”

“Biopharma companies are extremely conservative on how PAPs can and cannot be used to support other brand-marketing activities, and since these programs are designed to serve purely philanthropic goals, all companies maintain a strong line against any overt exploitation of PAP information for other marketing purposes,” says David Hileman, VP of the Specialty Care Group (which includes the RxCrossroads business) of Omnicare, Inc. (Covington, KY).

In fact, because drug manufacturers are sensitive to any insinuation that they might be trying to exploit their charitable operations for commercial gain, they maintain a strict internal separation (including separate governance) between their philanthropic and commercial activities, and most rely on third-party service providers to help design and administer their PAPs.

“In my career, I’ve worked with our pharma clients to carry out countless ROI studies to evaluate every type of marketing initiative out there but in all of my years, I’ve never seen our clients carry out an ROI study on a PAP,” says Tom Foley, director of business development at RxHope/National Patient Services (Scottsdale, AZ). “Drug companies all know that they have an obligation to provide a means for needy patients to have access to their lifesaving medications.”

While the direct potential business impact of a robust PAP offering cannot be measured, it also cannot be denied. “All things being equal, if you’re a drug company that is perceived to be very benevolent, this will have a halo effect in the marketplace among patients, physicians and even shareholders,” says John Doster, EVP and managing director of The Franklin Group (Somerset, NJ), an inVentiv Health company. “If your company has established a solid reputation as a strong and benevolent partner in supporting needy patients, there will certainly be a positive effect in the minds of all stakeholders — patients, prescribers, payors, even shareholders.”

And while PAPs started out distributing free meds via a controlled distribution process, business and regulatory drivers have increased the use of a variety of types of copay assistance with loyalty or benefit cards, and here the distinction between nonpromotional philanthropy and marketing enhancements blurs. Industry critics argue that copay assistance undercuts the cost controls effectuated by formulary tiers of drug plans and artificially raise the use of branded products over generics. But, given the urgency of underinsured consumers to access healthcare, but critics and advocates are treading carefully.

“There is a much-needed place in our industry for PAP and copay-assistance programs, most importantly for new-to-market, more-advanced products,” says Rick Randall, President of RxHope/National Patient Services. “With formulary restrictions limiting patient access to new and improved brands for patients, the pharmaceutical companies are challenged in their efforts to introduce potentially more effective and in some cases lower-cost alternatives to physicians and patients.” He belittles the claim that financial assistance undercuts good medicine. “In many cases, the support programs may be the only way a patient can afford the product that will provide the best results.”

Plan ahead

Industry experts emphasize the need to develop the PAP strategy early on in the commercialization process of any biopharmaceutical product. “Planning for a successful PAP should start early in the product-lifecycle as part of the product’s broader reimbursement and access strategy,” says Heather Morel, VP and GM, Reimbursement & Access Services for McKesson Specialty Care Solutions (Scottsdale, AZ). “Understanding the reimbursement landscape, including all of the channels by which patients may receive the drug, all of the possible payers for the drug, and all of the potential obstacles that may keep patients from getting the drug are key inputs to the PAP and reimbursement strategy.” She notes that having a complete picture of the target patient population (patient types, co-morbid conditions, population size) is also critical to optimizing the scope and design of any PAP.

“Even smaller startup companies that are preparing to launch their first revenue-generating products need to come forward with a PAP to show their commitment to the marketplace and patients in that therapeutic space,” says Hileman of Omnicare. “The initial PAP budget can be small, but it needs to be there right from the start.”

It is also essential to sustain up-to-date awareness of PAP and copay-assistance programs among physicians — and importantly, their office staffs — “since prescribers are so often the front-line advocate to let patients know about drug-specific PAP options and help them manage the application process to become enrolled,” says Tracy Foster, president of Lash Group (Charlotte, NC), a business unit of AmerisourceBergen Consulting Services. However, many industry observers note that to eliminate the perception of inducement pressure, sales reps do not routinely handle the outreach efforts to educate physicians about PAPs. Rather, efforts to maintain physician awareness typically rely on the use of web-based options, fax, phone and mail blasts and so on.

Changing patient demographics

At the end of 2009, the unemployment rate was 10% — more than double the 4.6% rate in January 2007 — and the recession and accompanying decline in employer-sponsored coverage left 50 million Americans without health insurance in 2009, according to the Kaiser Family Foundation (Washington, DC). With the economic downturn in the U.S., the number of patients filling prescriptions through PAPs grew by 50% from a recent low of 1.6 million patients in September 2007 to a recent high of 2.4 million in April 2009, with total prescription volume rising by 39% during that period, according to IMS Health. IMS notes that many were first-time enrollees relying on PAPs to ensure uninterrupted access to their medications after having lost employer-sponsored health insurance.

According to the Partnership for Prescription Assistance (; Washington, DC), a central access point of PAPs that was established in 2005 by PhRMA, the wholesale value of the free medications provided through PAPs provided by PhRMA member companies from 2005 through 2009 (the latest period for which complete data are available) topped $17.8 billion — and this does not include the value of additional charitable copay assistance and other discount programs that these companies and foundations are increasingly offering.

The one-stop portal enables patients and physicians to access information about PAPs and obtain applications for 475 public and private PAPs (including 200 programs offered by pharmaceutical companies). “PPA was designed to take the mystery out of the process and provide a single point of access,” says Edward Belkin, public affairs VP at PhRMA, who notes that to date, the group has helped nearly 7 million people connect with individual PAPs. Beyond medication assistance, the PPA website also allows patients and their advocates to obtain information other types of support, such as public and private copay assistance programs and more than 10,000 free healthcare clinics and practices nationally.

Targeting the ‘under-insured’

While PAPs were historically reserved for truly indigent, uninsured patients, this is no longer the case, especially as more Americans are caught in the grips of the economic downturn and the cost of medications continues to rise. In recent years, all drug manufacturers have continued to re-evaluate the definition of “needy,” and consequently, the majority of PAPs have altered the income and eligibility criteria from earlier years. Similarly, many drugs have added copay assistance and other discount programs to their charitable offerings.

“As the economy has worsened in recent years, we’ve seen a growing number of people who are at comparatively higher incomes compared to the historic patient population for PAPs, but having lost employment or prescription drug coverage, these people still have a demonstrable need for assistance paying for their prescription drugs,” adds Foster of Lash Group. “Much more commonly, PAP assistance is being sought by working-class Americans who are facing medication-related deductibles, copays and other out-of-pocket expenses that are disproportionately large compared to their household income.”

“Today, it appears much more common to see PAPs serving younger people who are holding several jobs to make ends meet, single moms, and working-class people who are between jobs,” says Belkin of PhRMA.

While every drug manufacturer sets its own business rules and eligibility criteria to govern its drug-specific PAPs, “We have seen dramatic changes in the income criteria associated with these programs in recent years,” Foster adds. “Five to ten years ago, it was the norm for PAP applications to start with a single question: ‘Do you have insurance?’ If the answer was yes, the patient was denied. Today, it is much more common for the qualification decision to reflect a more-detailed assessment of income and actual out-of-pocket medical expenses as a function of that income level.”

In 2009, AstraZeneca’s AZ&Me Prescription Savings Programs — which includes PAPs providing drugs for asthma and COPD, infections, cancer, high blood pressure and high cholesterol, mental illness and migraines and heartburn — helped 507,475 people fill 3.8 million prescriptions, resulting in $796.6 million of savings for the patient, according to the company.

Similarly, the Merck Helps programs — which include the Merck Patient Assistance program, Merck Vaccine Program, Merck Vaccine Patient Assistance Program, ACT Program for Oncology and Hepatitis C medicines, and SUPPORT Program for HIV/AIDs medicines — provide medicines and vaccines free of charge to eligible individuals (primarily the uninsured) who earn up to 400—500% of the federal poverty level, depending on the program), who, without assistance, could not afford needed Merck medicines.

Patients may qualify for Merck’s PAP and Vaccine PAP if they have a household income of $58,280 or less for couples, or $88,200 or less for a family of four, “even if the financial situation is temporary due to unemployment or other reason,” says the company. Patients may qualify for the ACT Program and the SUPPORT Program if they have a household income of $54,150 or less for individuals, and up to $110,250 for a family of four.

PAPs after Medicare Part D

As of April 2009, nearly 28 million beneficiaries had enrolled in Medicare Part D. Historically, PAPs excluded insured patients so — by definition — the implementation of universal prescription-drug coverage for seniors starting in 2006 created a fundamental change in the way many PAPs could be administered. Predictably, after the initial implementation of Part D in January 2006, the industry “saw a substantial drop-off in PAP enrollment during the 2006—2007 time period,” says Doster of The Franklin Group.

However, after the dust settled, it became clear that there would still be some residual need for assistance among many Medicare Part D enrollees, and PAP enrollment has rebounded, says Doster, with patient volume increasing by an average rate of 10—12%/yr over the last two years.

Initially, the concern among drug makers and regulators was that the convergence of the two subsidy programs could violate anti-kickback statutes — especially inside the “doughnut hole” coverage gap (between $2,830 and $6,440 of prescription costs out of pocket). The original concern, according to HHS’ Office of Inspector General (OIG), was that free or reduced-cost drug donations made by manufacturer PAPs could be construed as an illegal inducement to seniors and their physicians, leading enrollees to switch to a particular branded drug, and sticking the federal government with the higher cost once the patient had passed through the doughnut hole and resumed receiving Part D drug coverage.

“We have seen that Medicare Part D continues to present a challenge for many seniors because of the significant cost exposure they face in the doughnut hole,” says O’Leary of IMS Health. After considerable debate, industry and regulators have found a way to for the two subsidy programs to co-exist without running afoul of the law.

According to OIG guidance, patients reaching the doughnut hole may apply for and receive free medications or copay assistance from drug manufacturers, but those receivables cannot be counted toward the patient’s true out-of-pocket expenses (TROOP), so technically PAPs cannot be used to get patients “through the doughnut hole.” Instead, in the typical scenario that is used by many PAPs today, once a Medicare Part D patient reaches the doughnut hole and seeks PAP assistance, the PAP must continue to cover the patient’s drug needs until the end of the calendar year. At the start of the new calendar year, the patient goes off the PAP rolls and Medicare Part D coverage resumes until they hit the doughnut hole for that year, and so on.

“Basically, if you accept them at the start of the doughnut hole, they’re yours until the end of the year,” says Hileman of Omnicare.

O’Leary of IMS Health notes that with pending healthcare reform, the Part D doughnut hole is expected to be phased out by 2020, and when this happens, demand for free-goods PAP assistance by seniors to meet the shortfall in the doughnut hole is likely to diminish, too.

Healthcare reform

Healthcare reform, once implemented, is expected to change the PAP landscape in several ways. In accordance with The Patient Protection and Affordable Care Act of 2010, all Americans will have some form of health insurance by 2014. “Today, uninsured patients are currently the primary beneficiaries of PAPs, and with healthcare reform, the ranks of the uninsured in the U.S. are expected to shrink by 32 million, or two-thirds, by 2019,” says O’Leary of IMS Health. “It is reasonable to expect that PAP demand will decline by at least that much, because those who are more likely to need care will be the most likely to enroll in Medicaid or other subsidized commercial plans.”

However, many expect that healthcare-reform protections will be anything but universal and that residual need will emerge among the newly insured. “Surely there will be an avalanche of patients coming into some type of paying insurance plan, but for many, the coverage will simply not be enough to cover all of the medications they need,” Doster of The Franklin Group.

“Our experience with Medicare Part D implementation back in 2006 provides a great proxy for what we might expect to see happen in 2014,” says Foster of Lash Group. “As an industry, we learned that not everyone will qualify for a program — some people will remain uninsured and some people with new insurance will still find themselves with insufficient prescription drug coverage. As a result, there will still be patients with residual need for PAP support.”

The challenge for drugmakers will be to understand exactly what the new prescription coverage will look like — will there be more emphasis on generics, higher copays for branded products? While there will be expanded coverage, “the complexity of the system will still be difficult for many to navigate, leaving many patients with residual needs,” adds Morel. She says that biopharma companies are conducting scenario modeling to evaluate how the existing criteria for their PAPs will need to change to meet the residual need that will emerge after 2014 — again, likely placing greater emphasis on the underinsured rather than just uninsured patients.

“As we approach 2014, we expect to see another step-down in terms of the volume of free medications dispensed through PAPs, but we expect to see a huge step up in terms of the need for copay assistance programs,” says Hileman of Omnicare.

Of course, no one really knows for sure how healthcare reform will play out in the new Congress, and whether the “Obamacare” law requiring individuals to procure health insurance may ultimately be repealed.

“Many of our pharma client companies had great success helping needy patients’ transitions to coverage during the introduction of so many competing Medicare Part D options, so we expect to see more of this as people move through healthcare reform,” says Foster of Lash Group.

Delivering the goods

Historically, drop-shipment to physicians’ offices has been the standard drug-delivery mechanism used by most PAPs. However, this approach creates an inventory-reconciliation and dispensing burden for physician practices (especially because the drugs are often shipped in bulk without the patient’s name on them and must be inventoried and stored until the patient comes to retrieve them). To sidestep these issues, many drug manufacturers and their third-party PAP administrators partner with specialty mail-order pharmacies to carry out shipments of, for instance, a 30- or 90-day supply, directly to the patient.

But the mail-order option may be problematic in some situations, for instance, when needy patients have an unstable or transient home situation. More recently, the use of electronic benefit cards has emerged as an elegant solution for PAPs, says Foster of Lash Group. This option allow patients who are enrolled in a given PAP to get their prescriptions filled at any retail pharmacy, as the cards are coded with necessary adjudication information.

An important advantage of electronic benefit cards is that “They provide the only delivery mechanism that is compatible with electronic prescribing,” says Foster. In the traditional drop-shipment to the physician or mail-order delivery to the patient, PAP-dispensed drugs flow outside of the realm of e-prescribing tools. “PAPs are not recognized nodes in the e-prescribing world so there is literally no way for physicians to transmit a prescription to a PAP program,” she explains. By comparison, once the registered patient receives the electronic benefit card from the manufacturer PAP, his or her physician can transmit the prescription electronically to the retail pharmacy, and the payment reconciliation will be handled electronically between the pharmacy and the drug maker.

Because there will be additional costs associated with the use of electronic benefit cards compared with drop-shipment or mail-order dispensing, individual drug manufacturers will have to weigh the option on a program-by-program basis. For instance, “If we ship the product, the cost is based on a fee for service plus the manufacturer’s cost for the product,” says Hileman of Omnicare. “But if the script is filled at a retail pharmacy, the cost to the PAP sponsor is the fee for service plus the replacement cost to replenish the drug for the pharmacy.”

Hileman notes the electronic benefit card option tends to work very well for acute care products (“It’s perfect for the physician who says I need to put this patient on Cipro right away, how can we do this?” he says) and for controlled substances (to reduce the risk of theft of diversion).

Tom Foley of National Patient Services points out that free trial cards, which are processed at a pharmacy, have an advantage over the conventional practice of giving out samples: the pharmacist can provide counseling and a check for drug-drug interactions or other types of drug utilization review. Analysis of fulfillment data allows the manufacturer both to monitor the utilization of the program, and to potentially (once additional study is performed) derive health outcomes data.

Copay assistance versus coupons

While charitable copay-assistance and discount programs and coupons offered by drug manufacturers share a common goal — to increase patient access to costly medications — they are not synonymous. Similar to free-goods PAPs, drug-company-sponsored, copay-assistance and discount programs require that the patient meet the program’s income and eligibility criteria. These programs are typically increasingly being offered for patients who are marginally insured but may be facing disproportionately high out-of-pocket expenses for prescription medications every month.

In contrast, manufacturer coupons are issued by the brand team and are potentially available for anyone, without reference to income or eligibility (with some exclusions for some patients receiving federal or state assistance). Typically, individual coupons reduce or eliminate the patient’s copayment for a given medication for some limited time, or enable the patient to get a free trial prescription of a given medication so they can evaluate the drug’s potential efficacy or side effects.

Either way, the ability to achieve cost parity at the point of care “allows physicians to prescribe based on the clinical merits or needs of the patient and not be limited by the patient’s insurance status or inability to pay,” says Foster of Lash Group. Such cost parity can be especially useful when such assistance is available for competitive products in the same therapeutic group.

Coupons serve the need of brand-marketing teams in several ways. In addition to increasing patient access by reducing up-front costs (thereby increasing product uptake), the manufacturer receives net revenue of wholesale acquisition cost (WAC) of products minus the coupon value for every sale, explains O’Leary of IMS Health, adding: “As long as the coupons are being used by new patients who would not have otherwise used the drug, the value of the coupons is clear.”

However, critics contend that while charitable copay-assistance programs and branded drug coupons are not identical, they both have the potential to drive healthcare costs higher, by encouraging physicians to prescribe branded products when generic alternatives are available. Since the copay assistance can neutralize the higher out-of-pocket costs to the prescriber for second- and third-tier products, the cost-control aspect of tiered formularies is defeated.

Others disagree, noting that a range of clinical and economic benefits can arise when the physician and the patient are given greater “cost parity” for competing medication options at the point of care. Moreover, drug adherence rises when cost issues for the patient can be reduced; better adherence improves outcomes and ultimately reduces healthcare costs.

“When patients who would otherwise would have no access to prescription medications are able to gain access through one or more PAPs, you can expect to see improved patient outcomes (and savings in related healthcare expenses),” says Foster of Lash Group. “In this way, increased access to medication can bring long-term economic as well as therapeutic benefits. This is especially true for patients with chronic conditions that can be controlled with proven medications.” PC


“From a provider perspective, a well-run PAP has generous eligibility guidelines, minimal documentation requirements, and fast turnaround in terms of eligibility determination and delivery of drug,” says O’Leary of IMS Health. “From a manufacturer perspective, a well-run PAP ensures that all other potential sources of third-party payment (private, public and foundations) have been exhausted, and only patients who cannot afford to pay out of pocket are enrolled in the program.” This helps to keep overhead costs to a minimum and ensures that the designated PAP budgets are reserved to help the neediest patients.

“While it is an indirect effect, the ease of the program, ease of the interface, and level of service to patients and physicians can all provide differentiation from similar products in a crowded therapeutic space,” adds Hileman of Omnicare. “Doctors and their staffs tend to favor programs that are easier to deal with.”

Many of today’s PAPs are designed and administered by third-party companies working in partnership with the drug manufacturer. Dedicated service providers such as Lash Group (a division of AmerisourceBergen Consulting Services), McKesson Specialty Care Solutions, The Franklin Group (inVentiv Health company), Omnicare/RxCrossroads, RxHope/National Patient Services (TripleFin Companies), and others provide economies of scale and targeted experience and expertise to optimize these complex programs.

While each PAP is designed to meet a manufacturer’s unique requirements, experts agree that the best most successful PAPs share these common traits:

* Clearly defined income criteria and eligibility requirements. Program-specific parameters should be clearly defined and easy to understand. “This is critical because many patients seeking assistance are elderly, uneducated or indigent,” says one industry insider.

* Reduced ‘hassle factor’ during the enrollment-handling process. The use of Web-based tools make it easier for patients, physicians and other providers to find information about relevant programs and support the patient through the enrollment process.

* Fast turnaround time — days rather than weeks.

* Trained assistance specialists with both clinical and reimbursement expertise — The goal is to exhaust all possible alternatives for healthcare and prescription drug coverage, including state and federal programs, charitable foundations and manufacturer-sponsored PAPs. “Many of our clients’ drug-specific PAPs are set up to act as a national referral service for all possible program options,” says Foster of Lash Group, who notes that this will put such PAPs in good shape to help needy patients secure the most robust healthcare in 2014.

* Robust reporting and analytics for manufacturers — Dynamic data related to patient demographics, feedback on the enrollment process, and speed to therapy, can and should be analyzed to track utilization, improve the enrollment process and streamline drug delivery.

* Outreach for both physicians and their office staff. More often than not, it is the back-office staff who are more likely to work directly with patients to support the enrollment process, so they should be targeted during the outreach process

* A service partner that can react quickly. Drug companies should seek PAP administrators that are nimble enough to not only staff up or down quickly to deal with changes in enrollment volume, but are able to respond quickly to react to unexpected situations, such as product recalls, that can arise suddenly.

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