With rising pharmacy costs, self-funded employer groups and their brokers are looking for cost-containment solutions to address high-cost prescription claims, particularly for specialty drugs, on their plans.
The rising costs aren’t going away anytime soon. In 2011, specialty drugs made up about 17% of the total pharmacy costs for an average employer. A decade later, that figure had already climbed over 50% — and it’s still rising — even though these drugs represent just a tiny fraction of claims. Inflation hasn’t helped, and neither has the Inflation Reduction Act. According to reports, “the inflation-rebate and negotiation provisions would increase the launch prices for drugs that are not yet on the market relative to what such prices would be otherwise.” Brokers, employers, and plan sponsors are all desperate for relief.
The truth is that there are a variety of solutions on the market that aim to reduce pharmacy spend, and they all need to be evaluated against the plan’s specific goals and member needs. One of these is alternative funding programs, which have been a topic of conversation in the industry for the past few years and continue to gain interest from plans feeling the pressure of specialty costs.
There is potential for alternative funding to result in meaningful savings, but this won’t be true for every business or every alternative funding program. Here’s what you need to know to evaluate alternative funding sources and determine whether they’ll be an effective choice for your overall pharmacy benefit.
Is there another option? Yes — Alternative Funding Programs.
Alternative funding solutions act to limit plan sponsors’ cost exposure to expensive medications via advocacy-based programs and are technically a form of copay assistance and an increasingly popular mechanism for off-setting pharmacy costs. These programs are typically focused on a set list of specialty drugs, but they can also include other high-cost medications.
They operate on the principle that it’s possible to save on costs by sourcing specialty drugs outside of the limitations of the employer’s pharmacy benefit plan, but this is no certainty and leveraging these programs should come with careful consideration. There’s potential for savings, to be sure, but not all programs are created equal, and pharmacy benefits can be beholden to complex rules. Even the most genuine efforts to offer affordable, high-quality benefits could suffer unpredictable financial, clinical, or member experience consequences. Furthermore, these programs have been receiving many mixed reviews as of late.
The best that you can do is to understand your options, how they work, and what to look for when evaluating alternative funding vendors. It’s crucial that whatever you decide for your benefits program, it’s the best fit for the needs of your organization and your employees.
How alternative funding works: Four ways to cover drug costs outside of the benefit.
The work of your alternative funding program kicks off when a plan sponsor removes coverage for claims for a specialty drug and another channel for financial coverage must be secured. Here are a few of the possible vendor models for securing that funding (in part or in full):
- Copay Assistance Programs: While not strictly an alternative funding option, an alternative funding program may enroll the patient in accumulator and/or maximizer programs such as copay assistance programs (CAPs) to absorb some of the costs of an “uninsured” drug. These are typically part of a PBM benefit but manage the claims differently by taking advantage of copay assistance available from manufacturers.
- Federal or State Pharmaceutical Assistance Programs: Obtaining a medication at no or a lower cost is sometimes possible through a PAP if the alternative funding program and the patient succeed in an application for assistance.
- Foundations, Charities, and Nonprofits: Philanthropic groups can sometimes take on some or all of the financial burden for the patient after the alternative funding program offers a referral.
- International Drug Sources: Drugs obtained from sources outside of the country can sometimes be cheaper than domestically sourced specialty drugs.
Alternative funding programs may be able to offer your business any combination of these approaches. What they all have in common is that they offer plan sponsors options as they’re trying to reduce their pharmacy spend. They also have some limits and caveats — there’s no promise that the alternative funding program will be able to reduce costs, and it’s possible valuable time is lost while the search for a solution plays out.
Be careful and follow the dollars.
An alternative funding program may or may not be the best choice for your benefits program. As usual, the specifics are what count the most. A good decision for your plan starts with due diligence. Carefully evaluate the cost of a renewal offer side-by-side with another that includes alternative funding and make sure you understand your options as well as the financial impact of the alternative funding program.
A full financial evaluation will reveal where costs come from so that you can effectively weigh the pros and cons of each option. It’s also wise to examine multiple alternative funding options for cost and terms. Only then can you arrive at a plan with the best overall value for your organization and your employees.
Want to learn more about alternative funding and what it takes to evaluate the impact of alternative funding programs on your overall benefits programs? Download the guide from Truveris and dive into the details.