Accumulators And Maximizers: A New Front In The Battle Over Drug Costs (Part 1)

The high cost of brand-name medications is one of the critical issues in US health care. The past two decades have witnessed ever-higher launch prices for new drugs, accompanied by substantial annual increases in those drugs during their patent-protected market exclusivity periods. These trends have been especially pronounced for so-called specialty medications, expensive products that are often infused or used to treat conditions such as cancer or human immunodeficiency virus infections. Drug prices in the US are far higher than in other comparable industrialized countries because manufacturers can freely establish prices for US patients. Manufacturers argue that prices reflect high research and development expenses for medications and the substantial risk of failure, particularly for early-stage products.

For many years, the primary counterweight to high US brand-name drug spending resides with US insurers and their counterparts/partners in the area of pharmaceuticals, pharmacy benefit managers (PBMs). Mechanisms to reduce unnecessary costs of medications include use of formularies to foment price competition between manufacturers; prior authorization of expensive medications to ensure they are clinically reasonable; and differential patient cost sharing to direct patients toward lower-cost and equally effective (often generic) alternatives.

In addition, over the past two decades, more and more employers have taken advantage of so-called high-deductible plans, those with increased out-of-pocket costs for the patient. The downside of trying to induce the beneficiary to be a more rational “shopper” is that the patient may forgo therapy at the pharmacy counter if faced with too high of an out-of-pocket payment. Such non-adherence comes with ill health effects.

To allow more patients in such situations to access their drugs (and to maintain continued revenues), pharmaceutical manufacturers have developed patient assistance programs, including copayment support through coupons accepted at the retail pharmacy. (Copayments and co-insurance are both forms of patient cost sharing; copayments are specified dollar amounts, while co-insurance takes the form of specified percentages of drug prices.) In the past, the use of the coupon was not communicated to the insurer or the pharmacy benefit manager.

But coupons can also frustrate cost sharing regimes set up by an insurer/PBM to reduce unnecessary or unnecessarily expensive care, for example, when those coupons are used for brand-name drugs that have available low-cost generic alternatives. PBMs thus started to require retail pharmacies to enter the information about the use of the coupon in the system. Armed with this knowledge, PBMs no longer allowed coupons to count toward the cost sharing the patient was accumulating against a deductible, or out-of-pocket maximum. The repository for this information in the PBM systems was known as the accumulator.

As a result, pharmaceutical manufacturers could continue to provide support in the form of copayment coupons, but coupons no longer counted toward the deductibles and out-of-pocket maximums for the patient. Eventually, the coupon would expire when the limits of the pharmaceutical firm’s support program were reached, and the patient would have to start to pay out of pocket again. Thus, accumulators frustrated the full implementation of manufacturers’ copay assistance strategy. Recently, the PBMs have added a new wrinkle, with programs called maximizers that are not passive but actively take advantage of the assistance programs to lower costs for their clients, the self-insured employer. (Maximizers and their differences from accumulators will be more fully explained in part 2 of this article.)

Three recent developments have brought additional light to this manufacturer/PBM tug-of-war over patient assistance programs; they suggest the status quo is unsustainable. First, new health research concerning the relationship between adherence and patient out-of-pocket spending on drugs has highlighted the poor outcomes associated with such barriers. Second, maximizer programs have suddenly grown in popularity, with an impact on patient assistance programs that is quite different than the accumulators. Third, not surprisingly, litigation is underway, which creates more impetus for government intervention and policy change.

In this first part of this two-part article, we review some key data on the relationship between adherence and out-of-pocket costs, as well as the pharmaceutical firms’ efforts to help patients with such costs. In the second part, we review the counterprograms that pharmacy benefit managers have developed—accumulators and maximizers—as well as the litigation that now attends these interventions.

The Effect Of Out-Of-Pocket Costs For Drugs On Patient Adherence

Numerous studies show that patients are non-adherent to medications, with fewer than half typically continuing to fill chronic care medications at six months. The reasons for this are multifactorial. Many solutions have been tested, but no silver bullets have emerged.

Cost is well recognized as a factor but has only recently become more widely discussed in the literature. For example, in a thorough review on adherence to medications published in 2005, there was relatively little discussion about the role that costs played in discontinuation of medication use. Rather, the problem of non-adherence has historically been seen as multidimensional, including a series of psychological factors, not easily addressed by simple reminders and electronic devices. From a clinician’s standpoint, financial barriers did not seem to figure into efforts to improve adherence. Researchers have begun to assess social determinants of health to understand adherence failures, but cost sharing has not traditionally been a prominent part of those analyses. Perhaps, most importantly to this area of investigation, one large, randomized trial compared copayments to no copayments, showing the latter boosted adherence without significant differences in major outcomes.

But financial barriers have grown more prominent as drug prices have increased radically and cost sharing continues to grow. Out-of-pocket costs across the board increased 10 percent in 2021. Moreover, patients themselves have attributed non-adherence to high costs. Survey reports suggest that three in ten Americans or their family members did not take their medications as prescribed in 2021 because of cost concerns. The Henry J. Kaiser Family Foundation also found that 52 percent of Americans believed that capping out-of-pocket payments should be a top priority; another 40 percent thought this was an important issue.

Concerns about health equity play an important role as well. Out-of-pocket payments are especially burdensome for those with lower incomes. In 2020, employees with an income of less than 200 percent of federal poverty level spent 10.4 percent of their income on premiums and cost sharing.

In two key areas of treatment, cardiology and oncology, financial obstacles to medications have been recognized by professional societies. The American Heart Association (AHA) has admirably focused on adherence issues, with specific goals for improvement and careful analysis of factors associated with non-adherence. They have emphasized the role of cost sharing. An expert group impaneled by the Association found that “[m]edication costs or copayments are inversely associated with adherence, although surprisingly less than the impact of patient and provider predictors.” Accordingly, the AHA is undertaking further evaluation of the relationship between out-of-pocket costs and non-adherence. There is particular focus on PBM cost-sharing rules around sacubutril/valsartan.

These issues are playing out even more vividly in the oncology profession, where much patient spending is related to co-insurance as opposed to copayments. The costs for oncology medications pile up over time, the result of ongoing therapy. The co-insurance costs continue along with this ongoing therapy.

At the start of the 20th century, the annual cost of cancers drugs was $5,000–10,000 per year. By 2015, the top median price of the 13 cancer drugs approved by the Food and Drug Administration (FDA) was $145,000. This incredible increase in costs has helped coin the term “financial toxicity.” The higher prices in turn trigger higher out-of-pocket spending. To illustrate, Stacie Dusetzina evaluated spending under Medicare Part D, which has no out-of-pocket maximum, for 10 high-cost oral oncology agents. Expected out-of-pocket spending ranged between $10,002 and $14,067.

In oncology, cost sharing clearly affects adherence. Jalpa Doshi and a team from the University of Pennsylvania demonstrated a strong relationship between the level of out-of-pocket payment and abandonment rates, up to nearly 50 percent with out-of-pocket expenditures greater than $2,000. Doshi’s team has also documented broad non-adherence among Medicare beneficiaries, ranging up to rates of 42 percent.

But it is in the field of health economics where the most eye-opening data are emerging about cost sharing, adherence, and poor health outcomes. This was not the case historically. The massive Health Insurance Experiment of the 1970s and 1980s randomized subjects to different levels of cost sharing and showed rather rational decision making with no poor health effects. But by the early part of the 21st century, with the growing influence of behavioral economics and its emphasis on irrationality, the assumption that people could make good decisions about their health when faced with financial pressure began to come apart.

In the past five years, there has been more research into out-of-pocket drug costs and non-adherence leading to morbidity and mortality. For example, Zarek Brot-Goldberg and colleagues studied a large, self-insured employer that switched to a high-deductible health plan. There was an immediate spending decrease of approximately 12 percent, but no evidence that patients engaged in rational consumer price shopping. Rather, quantities of care were reduced across the board, including potentially valuable care.

Perhaps even more on point and even more disturbing is a recent National Bureau of Economic Research working paper by Amitabh Chandra, Evan Flack, and Ziad Obermeyer. Using the natural experiment of differences in drug prices facing beneficiaries at the end of their initial year in Medicare—as people sign up for Medicare on the first day of their 65th birth month and cost-sharing threshold are not pro-rated, people born early in the year are more likely to encounter higher cost-sharing obligations—he and his co-authors analyzed cost sharing and mortality among Medicare beneficiaries. They found wholesale cutbacks in medication use as out-of-pocket costs mounted and up to 30 percent excess mortality related to these choices.

In summary, concerns about cost sharing inducing poor health through non-adherence to medications are well-known, increasing the importance of the pharmaceutical manufacturer/PBM financial maneuvering.

Pharmaceutical Company Programs To Assist Patients

Pharmaceutical companies have long operated programs to assist patients with cost sharing. They serve the dual purpose of promoting adherence and boosting pharmaceutical sales. They can accomplish this as a result of an odd combination of standard insurance benefit design and the high price of certain drugs.

Insurance plans today have three forms of cost sharing: a deductible, copayments, and co-insurance. After the passage of the Affordable Care Act, most commercial plans, even those involving self-insurance by large employers, instituted out-of-pocket maximum limits. Once the patient hits the out-of-pocket maximum limit, none of the cost sharing can be further enforced. These out-of-pocket limits generally applied to all care, including drugs.

Now consider a patient with a policy that has an out-of-pocket maximum of $10,000 and a monthly copayment of $1,000 for a specialty medication. The specialty medication itself costs $70,000 per year. If the patient has to pay the copayment for each monthly prescription, non-adherence is likely. If instead the patient can use manufacturer assistance to cover some or all of the out-of-pocket costs, the patient may be more likely to fill the prescription. From the manufacturers point of view, the insurance payment without the out-of-pocket portion still leaves a healthy revenue stream of $60,000. (Chances are, as few as three years previously, $60,000 would have been the annual cost, with drug price inflation being what it is.)

There are two distinct types of patient assistance. The better-known copayment coupon is directed at commercial insurance and is usually organized out of a pharmaceutical manufacturer’s marketing program. It is paid for directly by the manufacturer, with little if any means testing. The copayment coupons cannot be used in insurance paid for by the federal government because the Centers for Medicare and Medicaid Services and other federal payers consider copayment coupons to be kickbacks under US law. That position is being challenged by pharmaceutical manufacturers in federal court, but to this point, the prohibition remains in place. Coupon marketing has now extended directly to the doctor’s electronic medical record, to integrate smoothly with e-prescribing.

By contrast, some patient assistance funds are distributed by nonprofit charities. These charities are generally 501c(3) nonprofit organizations set up by manufacturers or nominally independent nonprofits that receive the bulk of their donations from pharmaceutical companies. The pharmaceutical company can alert the treating doctor to the availability of such funds and refer the doctor and patient to the foundation. Indeed, a number of websites are available where patients or doctors can access specific information on copayment assistance by medication. Examples of independent patient assistance funds include the Patient Access Network Foundation (PAN), The Assistance Fund (TAF), the Healthwell Foundation, and the Patient Advocate Foundation’s Co-Pay Relief Assistance.

Patient assistance foundations are among the largest charities in the US. Although comprehensive information is difficult to identify, the Congressional Research Service has estimated that charitable expenditures by 10 leading manufacturer assistance funds rose from $376 million in 2001 to $6.1 billion in 2014. Over the same time period, independent charity assistance funds rose from $2 million to $868 million. This is of course in addition to the direct copay assistance programs designed for commercial insurance. By one estimate, the total for copayment assistance programs increased from $6 billion in 2014 to $18 billion in 2020.

One of the distinctive features of patient assistance foundations is that they can provide support for patients in government programs, so long as there is a demonstration of need on the part of the beneficiary. Indeed, their growth is directly related to the growth of government payment for medications through the Medicare Part D program, initiated in 2003. The federal government has not found independent charity-based assistance programs to violate the anti-kickback statute, as long as they have sufficient independence. This has led to calls for the anti-kickback statute to be reformed to better focus patient assistance programs on those truly in need.

The strategy of assistance programs addresses out-of-pocket spending in light of the government limits on such spending. As noted above, the Affordable Care Act imposed out-of-pocket maximums for many commercial plans, including self-funded plans. In 2022, the limits were set at $8,700 for an individual or $17,400 for a family. By contrast, traditional Medicare was not created to include out-of-pocket maximums. The new Inflation Reduction Act of 2022 effectuates a major change in patient costs by placing a $2,000 cap on Medicare Part D out-of-pocket spending. This cap will bring relief for an estimated 1.2 million beneficiaries. By contrast, Medicare Part B has a 20 percent co-insurance and is generally not capped cost. Part B pays for physician-administered oncology medications, which are some of the highest-price medications in the US health care system. For example, the average Medicare beneficiary spending via Part B in 2019 on lenalidomide (Revlimid) was $5,463; for palbociclib (Ibrance), the figure was $4,137.

The assistance funds and programs can help make medications more affordable for some patients who qualify for them. But while copayment coupons and patient assistance may reduce costs for some individual beneficiaries, they also increase health care costs overall by increasing the use of expensive branded medications, which can be problematic if those medications are not clearly indicated or there are lower-cost medications that would be similarly effective and safe for the patient. So, the question remains: Are they overall a good thing for the health care system? Some have argued that copay assistance diminishes price pressure, undermines benefit designs intended to increase use of equally effective low-cost drugs, and keep patients from acting as consumers.

Leemore Dafny and colleagues demonstrated this was indeed the case in 2017, finding large total spending increases from a coupon strategy. Building on this analysis, and comparing Medicare Advantage to commercial claims, Dafny, Kong, and Ho recently estimated that coupons increased the quantity sold of targeted medications by 21–23 percent, and that including the effect this had on pricing, copayment coupons increased spending on targeted medications by 30 percent.

Thus, while there is clearly some benefit from patient assistance program support for patients’ medication costs, the programs also tend to prop up very high prices. It is in this context that we evaluate in part 2 of this article the new programs developed primarily by the pharmacy benefit managers to address pharmaceutical firms’ patient assistance programs.

Authors’ Note

Troyen Brennan was previously employed by CVS Health and has stock and stock options in a number of health insurance companies. Aaron Kesselheim has had grants from Arnold Ventures.