[Editor's note: This story originally was published by Real Clear Health.]
By Peter Pitts & Jason Zerncik
Real Clear Health
The debate over healthcare costs is nothing new. But like many topics where every-day Americans find themselves at the intersection of policy and economic matters, the COVID-19 pandemic has only further heightened the impact of a critical drug pricing rule finalized by the Centers for Medicare and Medicaid Services (CMS) in the closing days of 2020.
Recent years have seen an increased prevalence of high deductible health plans, defined by the IRS as $1,400 or more per year for an individual and $2,800 or more for a family plan. The 2020 Kaiser Family Foundation Employee Benefits Survey shows the average deductible for individual annual coverage has increased 25% over the last five years and 79% over the last ten. 26% of covered workers had an annual deductible of $2,000 or more in 2020.
To offset commercially insured patients’ out of pocket costs, pharmaceutical manufacturers offer copay assistance coupons for many drugs. These coupons pay a portion, or in some cases, the entire amount that a patient’s health plan assesses for a drug via copays and deductibles. For costly specialty medications, especially those without generic alternatives, coupons are often critical for patients to access the care they need.
A 2020 Massachusetts Health Policy Commission study noted that coupons increase adherence to prescribed therapies, which has the potential to decrease healthcare spending on emergency department visits, hospitalizations, and other care needs brought about by not taking one’s medication. The study also concluded that eliminating coupons – without substantial protections for patient affordability – would likely create serious challenges for many patients.
Unfortunately, the recently finalized CMS rule could do exactly that. An unintended consequence? Perhaps. But hardly an unexpected one.
The complexity of the rule and its intersection with other equally complex drug pricing policies highlights a situation that is unclear at best and certainly a challenge for industry leaders and politicians, let alone physicians, pharmacists … and patients.
The CMS rule requires that pharmaceutical manufacturers ensure the benefit of their coupons goes solely to the consumer (patient). Effective in 2023, if a coupon’s full value is not realized by the patient, the pharmaceutical manufacturer will be required to count it as a discount to the drug’s Medicaid price. However, the complexity of intertwining policy matters makes this a bit murky.
Pharmaceutical manufacturers are required to give state Medicaid programs their “best price” – the lowest price they offer to any other purchaser of a drug. Pharma companies typically negotiate rebates with insurers’ pharmacy benefit managers (PBMs) in exchange for preferential tiering, or favorable coverage, especially in competitive therapeutic classes. Various price concessions are factored in when computing the “best price in market” that drug manufacturers must match for Medicaid.
While it may seem puzzling how anyone but a patient could benefit from copay assistance coupons, a recent trend among insurers reveals the back-and-forth struggle over cost shifting within the pharmaceutical industry that leaves patients stuck in the middle – and PBMs recouping the value of coupons via a tool known as “copay accumulators.”
Copay accumulators are tactics employed by health plans in which the plan does not count the value of a manufacturer coupon toward a patient’s deductible. To illustrate, if a patient has a $1,500 deductible and receives $500 of copay assistance on a prescription claim, the patient’s deductible is not decreased by $500. It remains the same. An endless, bottomless copay.
Most coupon programs have an annual benefit cap, so it is not uncommon for patients whose plans incorporate accumulators to exhaust the support funding at some point in the year and then be faced with having to pay their full deductible. This creates the type of cost hurdles that force everyday Americans to decide between paying their rent or mortgage or seeking medical care.
But it gets worse. Under the CMS rule, a coupon in an accumulator scenario is considered a price concession to an entity other than a consumer since it lowers the health plan’s cost for the drug. As a result, the CMS rule would require the full coupon value to be factored into Medicaid discounts. The result is that coupon programs could soon become financially untenable for manufacturers, causing patients to lose generous benefit amounts for specialty therapies.
The policy problem is the rule’s requirement that pharmaceutical manufacturers ensure that health plans give patients credit for the value of coupons. This sounds like a good idea, but health plans perform accumulator adjustments after prescription claims are processed, independent of the pharmaceutical manufacturers’ control. While drug makers would prefer, and certainly encourage, health plans to credit patients for their coupons, their ability to “ensure” this happens, as the rule prescribes, is nearly impossible. That’s got to change.
The Biden Administration needs to act. Establishing policy that helps patients gain affordable access to prescription drugs is, and should remain, a top priority. But the CMS rule goes about it the wrong way. “Robbing Peter to pay Paul” is never good policy – and certainly not in healthcare. While a reduction in Medicaid pricing is a positive outcome, many commercially insured patients could lose a vital support line to their critical medicines. It is unrealistic to believe that pharmaceutical manufacturers will be able to continue offering copay assistance as they currently do if their coupons are subject to this rule.
Further complicating matters, the recently passed American Rescue Plan (ARP), aka, the COVID relief bill, contains a repeal of the cap on Medicaid rebates beginning in 2024. Currently, rebates may not exceed 100% of a drug’s Average Manufacturer Price. Under ARP, this logical stipulation is removed, creating the potential that drug manufacturers could be forced “upside down” on products to remain covered under Medicaid plans – rather than offering “best price,” they could potentially have to pay the government to offer their medicines to patients.
Given the availability of this negotiating lever on the horizon for states, adding the additional impact of manufacturer coupons being subject to rebate inclusion is an unwise and dangerous provision that only stands to harm those whom coupons are intended to benefit – American patients.
Peter J. Pitts is a Visiting Professor at the University of Paris School of Medical School and President of the Center for Medicine in the Public Interest. He is a former Associate Commissioner of the US Food & Drug Administration and member of the United States Senior Executive Service.
Jason Zemcik is Senior Director of Product Management at TrialCard, a biopharmaceutical solutions firm and leading provider of copay assistance programs on behalf of pharmaceutical manufacturers. He was named to the Medical, Marketing, and Media (MM+M) 40 Under 40 List of healthcare marketers in 2021 and is a frequent speaker, author, and panelist on topics impacting manufacturer copay assistance programs.
[Editor's note: This story originally was published by Real Clear Health.]
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