Copay Accumulator Update: Widespread Adoption As Manufacturers and Maximizers Limit Patient Impact

In January, I alerted you to an important new benefit design trend in Copay Accumulators: Costly Consequences of a New Cost-Shifting Pharmacy Benefit. It is by far the most widely read article ever published on Drug Channels.

New data from Zitter Health insights (ZHI) suggest that these programs are widely used. Nearly one-third of commercially-insured lives are enrolled in plans that have implemented copay accumulator adjustment or closely-related copay maximizers. (We explain the benefit design math behind maximizers below.)

ZHI also found that a surprising number of plans are already set up to use these programs, but have not done so yet. And many more are planning implementation for 2019 and beyond. Check out the full data below.

Manufacturers have stepped up with more financial support to shield patients from the worst aspects of these benefit designs. This support further inflates the gross-to-net bubble. Plan sponsors’ use of maximizers instead of accumulators has also blunted the impact on patients.

Accumulators, maximizers, and large copay support programs are inefficient solutions to flaws in the U.S. drug channel system. Alas, it looks like they are all now a common—but possibly not even fully utilized—feature of the benefit design landscape.

ACCUMULATE THIS

Normally, a manufacturer’s payments from a copay program count toward a patient’s deductible and annual out-of-pocket maximum. Once these annual limits are reached, the plan pays for all subsequent prescriptions.

Plan sponsors are adopting one of two alternative approaches that adjust how the plans treat the manufacturer’s copay offset program:

• Copay accumulator adjustment: A manufacturer’s payments do not count toward the patient’s deductible and out-of-pocket maximum obligations. The manufacturer funds prescriptions until the maximum value of the copayment program is reached. After that point, the patient’s out-of-pocket costs begin counting toward their annual deductible and out-of-pocket maximum.

• Copay maximizer: A manufacturer’s payments do not count toward the patient’s deductible and out-of-pocket maximum obligations. The maximum value of the manufacturer's copayment program is applied evenly throughout the benefit year. The patient’s out-of-pocket costs are determined by the copay program and never reach their annual deductible and out-of-pocket maximum.

TO THE MAX

Both accumulators and maximizers appear to have become very popular.

The chart below summarizes Zitter Health Insights’ (ZHI) research from 49 plans and PBMs with 147 million covered lives. For 2018, almost 60% of commercially-insured patients are enrolled in plans that have the capability to implement one of these two approaches. However, some plans with the ability to implement accumulators and maximizers have not yet done so.

• 44% of commercial lives are enrolled in plans with copay accumulators. Almost two thirds (28% out of 44%) of these lives are in plans that have implemented accumulators for 2018.

• 14% of commercial lives are enrolled in plans that also have copay maximizers. Less than half (6% of out of 14%) are in plans that have implemented maximizers for 2018.

• An additional 28% of lives are projected to face accumulators and/or maximizers in 2019 and beyond.

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These data are provided by Zitter Health Insights in its Special Report: Copay Accumulator Programs. (You can sign up for for more information or to receive the report.) The ZHI estimates are much higher than other private figures I have seen.  Contact ZHI at the link above for more information on the data and methodology. You can also download a more detailed methodology slide from https://drugch.nl/zitter.

FOLLOW THE COPAY DOLLAR

Let’s run some numbers to illustrate the financial impact of these programs. Here are the assumptions:

• Consider a benefit design in which the patient has 30% coinsurance on a specialty drug prescription, a $3,000 deductible, and a $6,000 annual out-of-pocket maximum. The patient is prescribed a specialty medication that costs $3,000 per month. For simplicity of presentation, assume that there are no other healthcare expenses that reduce the deductible and out-of-pocket maximum.

• The manufacturer establishes a copay offset program that pays nearly 100% of the patient’s out-of-pocket costs. The patient is responsible for only $25 per prescription, up to the plan’s limits. The program has a maximum annual value of $15,000. The manufacturer also negotiates a 20% rebate to the plan sponsor.

The detailed analyses below show the flow of funds for the traditional scenario compared with scenarios for copay accumulator adjustment and copay maximizer. If the eyestrain-o-vision font is too hard to read, click here to download a PDF with the analysis.

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As you can see, the results of the accumulator scenario are similar to the figures that I provided in my January article. However, this accumulator example includes a $25 patient out-of-pocket obligation under the manufacturer’s copay offset program, whereas my previous example had no patient out-of-pocket costs.

When compared with the accumulator scenario, the maximizer scenario is equivalent for the manufacturer, worse for the plan, and much better for the patient.

• Under the maximizer program, the total value of the manufacturer’s copay program is divided into equal monthly installments. The manufacturer therefore earns at most 38% of the drug’s list price in the maximizer scenario. That’s comparable to the accumulator scenario. In practice, the manufacturer will earn even less, due to channel fees and other discounts.

• The patient is responsible for only the $25 out-of-pocket expense. The patient’s out-of-pocket costs increase, from $125 in the conventional scenario to $300 in the maximizer scenario. However, that’s far below the $6,000 annual out-of-pocket maximum that the patient pays in the accumulator scenario.

• In the accumulator scenario, the plan’s total expenses drop by 66% compared with those of the conventional scenario. The plan does not pay the full cost of the prescription until the last two months of the year. In the maximizer scenario, however, the plan’s total expenses drop by 41%. The plan does not pay for the full cost of the prescription at any point during the year.

HOW MANY WRONGS MAKE A RIGHT?

If the Zitter figures are accurate, the financial consequences for manufacturers will be severe. I wonder how many companies have budgeted for 100% utilization of their copay offset programs by an unexpectedly larger share of patients.

This entire situation combines many of the worst aspects of our crazy drug channel system:

• Unreasonable out-of-pocket costs for patients
• High list prices for specialized therapies
• Hidden rebates retained by plan sponsors
• Manufacturer copay programs that offset skewed benefit designs
• Patients who may not be aware of changes to their benefit designs (per Hidden Policies: The Search for Copay Accumulator Policies in Florida Qualified Health Plans)

I expect manufacturers to implement certain strategies that will significantly limit the ability of plans to use accumulators and maximizers. Such moves will be another tit-for-tat move in the ongoing battle over patient out-of-pocket support programs. This unhealthy dynamic often shortchanges patients with serious medical conditions and adds complexity to the U.S. drug channel.

The classic proverb laments that two wrongs don’t make a right. But I guess three lefts do?