Co-pay programs are working to reduce out-of-pocket drug costs.
Co-pay programs working to reduce out-of-pocket drug costs.
A lthough the Build Back Better plan is dead, parts of it with more bipartisan support may resurface. One such part concerns price controls on the drug industry, as many policy-makers in both parties seem to believe that drug pricing generates health-care inequities.
Indeed, many policy-makers support proposals aimed at addressing inequities throughout the economy, including in housing, labor markets, or health care. Yet when it comes to ensuring affordable access to innovative prescription drugs due to a lack of adequate insurance coverage, anti-industry lawmakers are against an attempt by pharmaceutical companies to lower the costs to the patient, but they do not offer a better solution themselves.
Pharmaceutical companies often offer co-pay assistance to help commercially insured patients afford the co-payments that health plans impose on them for innovative prescription drugs. In an era when many insurance plans do not provide adequate coverage, the drug industry has come to the rescue. These co-pay cards are made available to commercially insured patients to help them access and stay on certain medicines for often life-threatening conditions. They come in to reduce large co-pays after determining the financial burden implied by the patient’s plan. In a study I co-authored, we find evidence of the figure below showing that, in recent years, co-pay assistance has reduced the amount that patients have had to meet with co-pays, even though overall co-pay amounts have been increasing.
The last few years have seen an increase in overall out-of-pocket expenses for drugs due to the rise of high-deductible plans and cutbacks in drug benefits. Drug manufacturers have responded to this insurance trend by increasing co-pay assistance to patients. In the same study we find that while total out-of-pocket exposures for prescription drugs have increased, the amount that patients have actually had to pay has fallen when co-pay assistance is taken into account.
As the figure illustrates, without co-pay programs, patients would have faced increased out-of-pocket spending before Covid-19. The availability of co-pay assistance instead decreased out-of-pocket exposure. During the first year of the pandemic, out-of-pocket spending dropped across the board, but co-pay assistance helped reduce payment costs even further.
Overall, out-of-pocket exposures were reduced by about 24 percent due to industry co-pay assistance.
Because total co-pays rose over the period we studied, and because demand falls as price increases, it follows that adherence to treatment and corresponding health outcomes would have been harmed without industry co-pay assistance. We found that due to co-pay assistance, adherence increased by between 4.8 and 16.7 percent. We estimated that this increased utilization improved health outcomes, such as increased longevity or reduced morbidity, by 1.0 to 3.3 percent. This evidence suggests that the reductions in out-of-pocket exposures offered by co-pay assistance have substantial benefit to the patients receiving them in an environment of rising overall out-of-pocket expenses.
Nevertheless, the policy community is skeptical toward stimulating co-pay assistance, and current CMS rules allow health plans to exclude such assistance to count toward patients’ deductibles. The main rationale offered is that such assistance drives patients toward more expensive drugs, such as brand-names rather than generics, and thereby raises overall premiums even though it improves affordability for patients at the time of sickness. However, less than half a percent of all prescriptions that utilize co-pay assistance have a generic available.
In addition, many argue that co-pays perform a useful role as a way discouraging excessive use of drugs covered by insurance that makes them cheap or costless. But demand for drugs — especially life-saving drugs — is often highly price-insensitive. Inadequate insurance coverage simply imposes financial risks on patients without imposing any spending discipline.
Insurance is supposed to eliminate one area of financial risk, due to health-care costs, faced by a patient who is already contending with health risks. But with high co-pays for the drugs that patients need to thrive or survive, it does not. More importantly, disincentivizing pharmaceutical use is a goal often directly incompatible with greater access for low-income individuals to critical medicines. Drug companies have stepped in to offer a temporary solution to mitigate the damage caused by the deterioration of meaningful insurance coverage.
Despite this evidence, there has been a widespread legislative failure to protect patients from high out-of-pocket costs. One example of this concerns “accumulator adjustment programs,” which allow insurers to effectively make customers pay out of pocket twice for drugs. By using accumulator adjustment programs, some insurers have stopped counting manufacturer co-pay assistance toward deductibles and out-of-pocket maximums, while still counting any other source of financing co-pays. The plans accept the co-pay assistance provided to patients by the manufacturers but prevent the assistance from counting toward contributions when calculating deductibles and out-of-pocket spending.
Such double charging should be stopped, and twelve states have limited or banned these programs. The federal government should follow suit. Fortunately, federal legislation has recently been introduced to address this. Policy-makers must act to limit the use of accumulator adjustment programs just as they encourage helping underserved communities by other measures.
While co-pay assistance benefits commercially insured patients who are facing increased out-of-pocket costs due to shifts in benefit designs, for many patients — particularly the insured in vulnerable populations — such co-pay assistance is critical to ensure access to their prescriptions. Without co-pay assistance, they may abandon treatment. If you care about health equity and ensuring access to care, particularly in underserved communities, you should support co-pay assistance no matter who is financing it.