Copayments Not Counting Toward the Deductible Could Have Unintended Consequences

Jeremy Schafer
Ami Gopalan

Mrs. Anderson considers herself to be “living with cancer.” For the past year and a half since her diagnosis, she has been treated with an oral drug that keeps her cancer at bay. Even with her commercial insurance, Mrs. Anderson would struggle to afford her deductible and coinsurance were it not for the help of a copay assistance program offered by the manufacturer. With her treatment costing more than $14,000 per month, Ms. Anderson tends to hit her out-of-pocket maximum of $6,550 early in the year.

This year, things changed. Ms. Anderson noticed in January after getting her prescription that while the copay assistance program seemed to be functioning normally, the deductible didn’t budge despite her out-of-pocket payment. The same thing happened in February. By June, she had hit the copay program annual limit, and a big, unaffordable drug bill arrived.

Mrs. Anderson is not real, but we invented her to illustrate the experience of many patients whose drug coverage is managed by a PBM.

Doing the math

Base assumptions:

  1. The oral oncologic costs $14,000 per month.
  2. Mrs. Anderson’s plan has 25% coinsurance for a drug in this tier.
  3. Mrs. Anderson benefits from a copay assistance program that limits her out of pocket expense to $25 per month.
  4. The copay assistance program has an annual cap of $20,000.
  January February March April May June July August Sep–Dec* TOTALS
Cost of medication $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $56,000 $168,000
Coinsurance (25%) $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $14,000  
Scenario 1: With copay assistance counted as part of out of pocket maximum
Copay assistance: $25 monthly patient payment, $20,000 maximum benefit $3,475 $3,025 $0 $0 $0 $0 $0 $0 $0 $6,500
What Mrs. Anderson pays (annual maximum $6550) $25 $25 $0 $0 $0 $0 $0 $0 $0 $50
Payer outlay for medication† $10,500 $10,950 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $56,000 $161,450
Scenario 2: With copay assistance not counted as part of out of pocket maximum
Copay assistance $25 monthly payment, $20,000 maximum benefit $3,475 $3,475 $3,475 $3,475 $3,475 $2,625 $0 $0 $0 $20,000
What Mrs. Anderson pays (annual maximum $6550) $25 $25 $25 $25 $25 $875 $3,500 $2,050 $0 $6,550
Payer outlay for medication† $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $11,950 $56,000 $141,450
*September–December cells consolidated for space.
†Possible rebates not included.

Doesn’t count against the deductible

Starting this year, many PBMs rolled out a new type of cost-share program that will not count copay assistance dollars toward a patient’s deductible and out-of-pocket maximum. Any money Ms. Anderson pays out of her own pocket including clinic visits, medical procedures, and prescription drugs will continue to count toward her deductible and out-of-pocket maximum; however, any contribution made by a manufacturer through a drug copay assistance program will not count. Copay assistance programs are increasingly used by patients like Ms. Anderson to cover copay or coinsurance expenses; meaning these new PBM programs are having impact.

From the manufacturers’ point of view, copay programs end up supporting patients for more months of the year since meeting the out-of-pocket maximum takes longer. The result has been savings for some payers because manufacturers wind up paying more of the annual drug cost.

But for Mrs. Anderson and others like her, new cost-sharing programs might result in some hardship. In the past, a copay assistance program would discontinue only after the patient has met his or her out-of-pocket limit, which can happen early in the year. The employer and the payer would then foot the bill for drugs and medical services for the remainder of the year, shielding her from many medical bills.

Jeremy Schafer

Jeremy Schafer

In the new scenario, the copay program could pay more per month, every month, until the program’s limit is reached. The program limits vary by manufacturer but range from $10,000 to $30,000 or more. But because the copay program contribution isn’t counted toward the deductible or out-of-pocket maximums, Ms. Anderson can end up paying more of her medical bills than she did before.

A menu to pick from

Based on public information (which, admittedly, there isn’t much of) and our own conversations with people who work in the industry, these programs are being implemented by major PBMs, including Optum, CVS, Prime, and Express Scripts. They are usually limited to members utilizing the PBM’s exclusive specialty pharmacy network.

Ami Gopalan

Ami Gopalan

PBMs have a menu of cost-share programs for patients to consider. The programs range from a version that merely precludes the copay assistance from counting toward the deductible to one that actually adjusts the patient’s cost share to maximize the copay program annual benefit limit. Therapeutic categories targeted so far include inflammatory conditions, multiple sclerosis, cancer, hemophilia, and hepatitis C. Interestingly, both preferred and nonpreferred drugs appear to be targeted by these programs, resulting in payers benefiting from upfront savings as well as back-end rebates.

We both previously worked for payer organizations, so we understand the rationale for creating and implementing these cost-share programs. They allow benefit design to work as intended by ensuring that only the patient’s actual expenditures count toward out-of-pocket limits instead of counting both the patient and manufacturer’s contributions.

Effects on adherence

But there may also be some unintended consequences.Payers may recall the annual peaks and valleys in Medicare D drug utilization as patients navigated the donut hole or decreases in adherence at the beginning of the year with the implementation of a high-deductible plan design. Similar situations could develop here. Patients with specialty conditions are frequently on multiple drugs and have a higher use of health care resources. If patients struggle to afford their out-of-pocket expenses, they may stay adherent to the expensive drug that has the copay assistance but not to other drugs or services. Moreover, adherence to the specialty drug could fall off sharply if patients hit the copay program limit and cannot afford therapy. The result could be a negative impact on patient health.

Payers have the capability to monitor a patient’s utilization of drugs and health care services. We would encourage payers implementing cost-share adjustment programs to monitor their members for instances of forgoing necessary services. In addition, payers should be aware of copay program limits and have solutions for patients who hit the maximum as multiple studies have linked high out-of-pocket cost with nonadherence. Solutions could include helping patients get connected to additional cost-share support programs for the medication or implementing per prescription cost share caps of less than $200.

Cost-share adjustment programs mark the latest innovation in the back and forth between payers and manufacturers. In the era of value-based care, payers should be mindful of the potential impact of new programs and monitor for any unintended consequences.

Jeremy Schafer is a senior vice president at Precision for Value, and Ami Gopalan is a vice president at the company. Precision for Value is a market access–focused agency headquartered in Gladstone, N.J.

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