By Dane Schroeder, Group Account Director and Donielle Gangoli, Associate Creative Director, McCann Health Managed Markets 

Health care costs: an ongoing problem for all stakeholders

Developing ways to address rising health care costs and drug spend has been a focus for all industry stakeholders for many years. In particular, payers, pharmacy benefits managers (PBMs) and employers are constantly evolving their attempts to mitigate costs via utilization management tactics.

The evolution of payer cost mitigation strategies:

• Utilization management 
• Site of care mandates
• Accumulators & maximizers
• What's next? 

Many of these methods meet the goal of driving down drug costs for employers and payers—but are often detrimental to patients, resulting in increased patient cost share and reduced adherence.

Specialty drug spend: an easy target

Specialty drugs are often a focus for cost mitigation techniques because of their high cost but low utilization within the overall population. However, specialty drugs are often the only treatment that can be used for certain conditions— and there are often no lower-cost alternatives available.

Specialty drugs contribute to almost half of the national drug spend while only four percent of the population are prescribed specialty drugs. ^1,2

Enter the alternative funding model
 

Several PBMs and third-party vendors are targeting smaller, self-pay employers to implement a new type of cost-saving measure: alternative funding models.

These models implement a specialty carve-out that requires patients to use manufacturers’ patient assistance programs to gain access to their prescribed therapies. The vendors generally charge employers a per-patient fee or a percentage of the financial assistance savings for their services.

How alternative funding models work

Set up: A specialty carve-out is put into place for a select set of specialty drugs, so these drugs are no longer covered by the health plan. Most of these carve-outs include about 300 products.

Loss of coverage: The patient becomes functionally uninsured for the carved-out products and receives a denial for the prescription.

Alternative funding option: The alternative funding vendor contacts the patient to begin the enrollment process for a manufacturer patient assistance program to secure either free drug or financial assistance for the uncovered drug.

• Approval: If accepted, the patient receives their specialty drug via the patient assistance program, which may take 2 to 4 weeks.
• Denial: If not accepted, the plan generally covers the specialty drug via an exception process.

There is growing interest in alternative funding models³
 

Alternative funding models come with significant risks to patient access

Alternative funding models exploit the true intent of patient assistance programs, which were created to help patients who genuinely could not afford the cost of care—not to save money for plan sponsors.

Manufacturers earmark a set amount of their budget for these programs and do not necessarily account for increased use by insured patients who should have coverage for these products. Some may not be able to—or have the desire to—increase their budgets in response to this increased utilization.

Continued proliferation of alternative funding models could limit the availability of patient assistance programs, taking away an important means to treatment for patients in need.

Potential risks