In Episode 459, host Stacey Richter speaks with healthcare attorney Bill Sarraille about co-pay maximizers and accumulators, mechanisms designed to extract maximum co-pay support dollars from pharmaceutical companies.
They discuss the financial implications for patients, plan sponsors, and pharmacy benefit managers (PBMs), emphasizing the legal and ethical issues and potential patient harm due to high out-of-pocket costs and surprise expenses.
Sarraille provides five key pieces of advice for plan sponsors and highlights the importance of transparency and proper utilization management to minimize patient access problems and legal risks. Listen or read the show notes on our site for the full list.
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Co-pay maximizers and accumulators are programs designed to capture maximum co-pay assistance from phara. Maximizers spread pharma co-pay support evenly throughout the year, ensuring plan sponsors benefit while, in theory, patients face minimal costs. More on how that can go wrong in the episode.
Accumulators, however, design their plan to deplete pharma dollar support quickly, surprising patients with significant out-of-pocket expenses mid-year when they go visit the pharmacy.
These programs usually exclude pharma assistance dollars from deductibles, potentially causing financial hardship because when pharma is paying your co-pay, those payments don't count against your deductible.
09:31 What should plan sponsors be aware of right now?
14:01 What is the justification for maximizers, and why is this at odds with the purpose of insurance?
18:05 Where does the issue of “fairness” land within cost containm
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Stacey Richter (00:00):
Episode 459, "Cost Containment by Co-Pay
Maximizer or Co-Pay Accumulator.
Points to Ponder."
Today, I speak with Bill Sarraille.
American Healthcare Entrepreneurs andExecutives You Want to Know, Talking.
(00:26):
Relentlessly Seeking Value.
If you have zero clue what co-paymaximizers and or co-pay accumulators
are and the financial incentivesinvolved for PBMs and planned sponsors
here, after you're done listeningto this episode, go back and listen
to the show with Joey Dizenhouse.
Also, the episode called "Co-PayCards Gone Wild" with Dea Belazi.
(00:46):
Both these shows couldfill in some blanks.
Here's the micro mini of the co-paymaximizer slash accumulator deal.
These are vehicles that are designed byvendors who are also sometimes called
maximizers or sometimes they're also PBMs.
But these programs are designed toget as much money out of pharma as
possible in the form of co-pay support.
(01:09):
So, here's how the maximizersare supposed to maximize plan
sponsors getting pharma money.
Say for some drug, the pharmacompany has, I don't know, $12,000
max in co-pay support availableto patients in total per year.
Pharma does always cap the dollarsthat are available for patients.
So in this hypothetical,12k a year is available.
What a forthright or well run maximizerwill do is figure out, you know, if
(01:34):
there's 12k max available, then they'llset a co-pay, so there's variable co-pays
for patients, so they'll set a patientco-pay of like $1,000 a month, which adds
up to 12k over 12 months of the year.
Get it?
Every single month, the patient hasa $0 co-pay, but the plan maximizes
the dollars that the plan gets.
(01:56):
Or you know, maybe they'llcharge $1,025 a month.
So the patient has some small, thinair quote skin in the game, and
the plan sponsor just banked 12K.
Sounds great.
Right?
Well, sure, when it works as promised,and we'll get to this in a moment.
Accumulators, on the other hand, have nosuch, Hey, let's make sure the patient
actually gets their meds guardrails.
(02:16):
They hear that the pharma is offering12k, and the accumulator vendor, and their
plan sponsor clients also, are like, cool,let's get that money as fast as possible.
So they make the co-pay for that drug, Idon't know, like hypothetically $3,000.
Great, now the patient runs outof that co-pay money in May.
And don't forget, and or let meinform you, for both maximizers and
(02:39):
accumulators, dollars paid by thepharma generally don't count to the
plan deductible for the patient.
So now the patient walks into thepharmacy, if in an accumulator or
in a poorly run maximizer program,they walk into the pharmacy in May.
And are told that if they want their drug,they're going to need to pay the $3,000
co-pay that was set out-of-pocket everymonth until they reach their deductible.
(03:03):
With some of these co-pay maximizer slashaccumulator plans, the plan sponsor may
be a little bit out of the loop relativeto what is actually going on here.
The plan sponsor may think that membersare doing fine, you know, they're
getting their drug every month, sothey may be surprised to learn about
this running out of money in May issue.
And what is true moreoften than it's not true.
(03:23):
This $3,000 or whatever, hundreds orthousands of dollars payment due co-pay,
the patient learns about it at thepharmacy counter or will try to get chemo.
It comes as a complete surprise the factthat they owe three grand or whatever.
What patient just shrugs and pays up inthat moment because they happen to have
their entire deductible or thousands ofdollars lying around and at the ready.
(03:46):
What a shock to find thisout at the pharmacy counter
or at the infusion clinic.
Some of these maximizer programs are alsostarting to veer back into accumulator
zones, like they're doing things suchas saying that the member must pay their
out-of-pocket max or their deductibleor 30 percent of the cost of the drug,
(04:07):
right, like some number before the planwill allow the patient to use the co-pay
reimbursement program to begin with.
So, there's other things that areemerging right now, which, again, cause
the patient to have a very, very largeout-of-pocket in order for them to get
a drug which they have been prescribedand ostensibly, at least, need.
(04:29):
Allegedly, and sometimes for sure,dollars raked in from pharma make
it across the PBM slash maximizer,vendor, middleman trench all the
way over to the plan sponsor.
For sure, especially for theadministrative only maximizer vendors,
yeah, you're going to have the dollarsactually making it to the plan sponsor.
But sometimes the vendor runningthese programs is paid spread, right?
(04:51):
So the more expensive the drug andthe richer the co-pay card program,
the more the vendor will make becausethey take a percentage of savings.
So the more expensive, the moresavings, therefore, the more
the vendor is going to make.
In these cases where the vendoris paid a spread, can I take
perverse incentives for $600, Alex?
Right?
But in sum, again, there's a lot tothis conversation with Bill Sarraille,
(05:12):
so please do listen to the whole thing.
Bill offers five main piecesof advice, so I'm just going to
cover them right here up front.
Spoiler alert, I guess, but justto keep them all in one place.
Point of advice number one, lookinto what is going on with a
maximizer and or accumulator program.
First of all, is the plansponsor paying spread?
And also, how are these programs beingmarketed to members and how aggressively?
(05:36):
Because there are a lot of plansponsors having way more negative
impact than they suspect they are.
So that's point of advice numberone, really look into actually
what is happening on the groundswith some of these programs.
Number two, point ofadvice, eliminate surprise.
Any plan sponsor listening, and BrianReid also says this very crisply
in an episode a month or so ago.
(05:57):
If a plan sponsor wants to do stufflike this, like force a patient to
pay hundreds or thousands of dollarsout-of-pocket, if at any point during
the year they are going to wind upwith thousands of dollars in co-pay
or co-insurance to get their Crohn'sdisease med or cancer med or whatever,
be really upfront about this at least.
It's really important if we reallywant to make sure that patients
(06:17):
are taking maintenance meds.
And getting the medications that they'reprepared for the reality that at a
certain point during the year, theyare going to have a really big bill.
Third piece of advice,there is legal risk here.
So also Bill's advice is check intowhether accumulators and or maximizers
are unlawful under the ACA and or bydeceptive practices rules, when maximizers
(06:41):
or accumulators are teed up as a benefit.
And it again, reference point ofadvice number two, it's not explained
that dollars they get from pharmawill be taken by the plan and not
applied to the patient deductible.
I was just reading about the crazyaggressive marketing tactics that
some of these vendors are using to getmembers to sign up and yeah, definitely
look into deceptive practice rules.
(07:03):
Four, if it's utilization managementthat we're trying to achieve here,
then your utilization managershould be utilization managing.
These maximizers are not meantto impact utilization management.
Patients really cannot differentiateas per study after study, it's very
difficult for patients to differentiatehigh value from low value care or meds.
(07:27):
So pretty much the impact of having apatient with thousands or hundreds of
dollars of out-of-pocket spend to get amed isn't going to be to ensure that the
right people are taking the right med.
Point is, use the righttool for the right job.
So if we're trying to keep patientsaway from low value meds, the tool
for that is utilization management.
(07:47):
Also be aware, if the PBM says itcannot do utilization management or
you lose your rebates and or is pushinginto a maximizer accumulator program
to do this instead, that's kind of aclue that they cannot do it because
they are taking money from pharma tonot have any restrictions on a drug.
Read the article in the New York Times.
(08:08):
Gift link in the show notes, you'rewelcome, about how PBMs took secret
payments for the free flow of opioids,and Chris Crawford also talks about
this sort of same ish thing in anupcoming show relative to GLP 1s.
But, if you're trying to doutilization management, then
do utilization management.
Last point of advice, use ourunderstanding of this whole goings
on as a rationale or a way totamp down perverse incentives.
(08:31):
We want to wind up with patients gettingcharged a percentage of net prices, not
a percentage of some wildly inflatedlist price with this whole accumulator
maximizer contributing to, you know,just more wildly inflated list prices.
So the co-pay programs can be biggerand someone can make even more money
off of the percentage of savings.
(08:52):
And plan sponsors addicted to rebatesnow have another bucket of cash.
Like this is just another example of howperverse incentives pervade the system.
And we should certainly be aware of that.
Bill Sarraille was a healthcareattorney for many years.
He retired from his law firm on the firstof last year, and now he's doing the
things he wanted to do before but couldn'tbecause his billable rate was too high.
(09:15):
Bill is teaching at the Universityof Maryland Law School and doing
some regulatory consulting, etc.
He's working with avariety of patient groups.
My name is Stacey Richter.
This podcast is sponsoredby Aventria Health Group.
And here is my conversationwith Bill Sarraille.
Bill Sarraille, welcome toRelentless Health Value.
Bill Sarraille (09:30):
Well, thanks for having me.
Stacey Richter (09:31):
I am really looking forward to speaking with you about
accumulators slash maximizers.
What's going on right now that plansponsors might want to be aware of?
Bill Sarraille (09:44):
Well, from my perspective, patients are being
harmed in a variety of different ways.
Sometimes, in a program that spreadsout the entire cost of the coupon
supported portion of the drugcost over the 12 months, we have
situations where patients later inthe year are experiencing problems.
(10:09):
Other times, we have situations wherethere really isn't an attempt to
smooth the coupon dollars over thecourse of the year and the patient is
experiencing an access problem muchearlier in the year, maybe by mid
year or even in the first quarter.
Stacey Richter (10:27):
When you say experiencing a problem, you mean they go in to
get their drug, They show up with themanufacturer coupon because we're talking
about these specialty pharmacy products.
A lot of times the co-insurance thatthe plan sponsors put against these are
based on a percentage of the list price.
The list prices, as weknow, they're very high.
(10:47):
So when you're saying they wind up with aproblem, what you mean is, they show up at
the pharmacy and they're told their drugcosts thousands of dollars or something.
Bill Sarraille (10:55):
Well, that's one problem, but it's not the only problem.
The issue is that from the patient'sperspective, and I think from
the law's perspective, they havecompletely satisfied their deductible
and their out-of-pocket maximum.
And so whatever service they're goingto, whether it's for a specialty drug
(11:15):
or for a retail general med drug, orif it's just to go to a physician's
office or for a minor procedure inthe hospital outpatient department,
no matter what the service is, theyunderstood that their entire deductible
and their entire out-of-pocket maximumhad been fulfilled and suddenly it's not.
(11:39):
That's the problem fromthe patient's perspective.
Stacey Richter (11:42):
So, in other words, the patient knew that pharma was paying their
deductible, and now the patient thinks thedeductible is met, except that it's not?
Bill Sarraille (11:51):
Yes.
People tend to think that the only waythat there can be a problem for a patient,
is that at some point in the year, theygo to get the coupon supported drug, and
now the coupon doesn't work for them,perhaps because of the manufacturer's
terms, where the manufacturer hasplaced a ceiling on the coupon.
(12:15):
But that's not the onlyproblem that can occur.
The reality is because, at leastin my experience, plans in PBMs do a
very poor job, and maybe not even alawful job, of trying to explain to
patients what in fact is going tobe their treatment of manufacturer
(12:36):
assisted payments by patients.
The issue that I'm talking about, wherepatients think, not having been adequately
informed by their plan or PBM, that infact they are not going to get credit for
coupon assisted payments that they make.
They are coming into treatmentsituations thinking that they have
(12:59):
met their deductible, and thinkingthat they have met the out-of-pocket
maximum, and they have not.
And for, unfortunately, a number ofthose patients, they don't have the
money to actually access the care.
And so this becomes anaccess problem for them.
Stacey Richter (13:17):
It's interesting what you're saying, and I know there's
going to be a lot of plan sponsors.
Who are listening, who are thinkingthe things that some plan sponsors
when discussing these accumulatorsslash maximizer programs or just co-pay
cards in general, tend to, to thinkand, and let's just go down the laundry
list just to get these on the floor.
And I'm not passing judgment here, right?
Because these are really toughtimes we live in and, and
(13:39):
pharma costs are accelerating.
Like I was talking to someone theother day who said her pharmacy costs
have doubled in the past five years.
So this is certainly an issue,trying to keep premiums down.
You know, family premiums haveexceeded $26,000 or it's like
$25,500, almost $26,000 a year, right?
So you have premiumsbecoming unaffordable.
There's just, there'sobviously a lot of issues here.
(14:01):
One of the big reasons why these maximizerslash accumulator programs get put into
place to begin with is, is basicallyto get double the deductible, right?
Because if the pharma company is payingthe deductible and then the patient
is paying the deductible, now theplan can access two deductibles and
those two deductibles then go to lowerpremiums for the entire patient pool.
(14:23):
So that's good.
Kind of one thing.
Bill Sarraille (14:25):
The point that was made was that, you know, maximizers are a way
to enable sick patients to make healthcaremore affordable for healthy patients.
And what I would say back to that isthat's not the purpose of insurance.
And it certainly isn't consistentwith either the law or the policy
(14:45):
of the Affordable Care Act.
That is fundamentally at odds with boththe relevant legal structure and the
policy that Congress put into place.
People can think that that shouldhappen, that sicker patients should
be making payments that make premiumsfor healthier patients less expensive.
(15:07):
But that's not a current reflectionof the law as Congress has passed
it and I don't personally thinkthat that's the right policy.
I think that basically is an invitationto discriminate in favor of healthy
patients to the detriment of sick patientswhich in the pre-existing condition
(15:27):
change and in multiple other changesincluding the provision that forbids
discrimination and based on health status.
We see law actually movingin the opposite direction.
So I don't have more to say about that.
If people disagree with what Congress wasactually trying to do, then they disagree
with what Congress was trying to do.
And the law can be changed,but that's not the law.
Stacey Richter (15:50):
The other plan sponsors thing is the notion that if one patient
is taking a specialty pharmacy drug andgets their deductible paid for them,
that's kind of unfair to somebody whoneeds a knee replacement or something
like that, who actually has to paytheir deductible by themselves.
So, then you create a situation wherethere's kind of this disparity, where
(16:11):
some people get their deductiblepaid for them and others do not.
Bill Sarraille (16:14):
The concept is that it's unfair that some patients are able
to be supported and some are not able tobe supported with manufacturer coupons.
Again, you know, as a lawyer, atleast by training, if not currently
in practice, what I would say to thatis, well, that's a wonderful policy
(16:35):
slash philosophical observation.
But it seems irrelevant to mebecause what the statute says is the
following (16:43):
The terms cost sharing include deductibles, co-insurance,
co-payments, or similar charges.
These are the cost sharing that have tobe counted for purposes of a deductible
at an out-of-pocket maximum under the law.
And that's where the clause ends.
The terms cost sharing includedeductibles, coinsurance,
(17:06):
co-payments, or similar charges.
That's it.
It doesn't say, unless a drugmanufacturer is the source of the dollars.
And, you know, talk about fairness, Imean, if we are to interpret that language
to exclude manufacturer dollars that thepatient uses to pay any of those charges,
then the statute would have to be read thesame way for any other third party source.
(17:31):
A father couldn't pay anadult child's cost sharing.
A charity that doesn't get anymoney from a manufacturer couldn't
pay the cost sharing for a patient.
We're stuck with the language we havein front of us, and the language in
front of us doesn't make a distinctionabout the third party source.
(17:51):
It simply says that the plan or the PBMis obligated to recognize cost sharing
that includes deductibles, coinsurance,co-payments, or similar charges.
So I don't think the fairness questionis the right question, but if we want
to talk about fairness, what it wouldmean is the quite unfair result that
no one could help that patient in need,and that can't be the right answer.
Stacey Richter (18:15):
And then the third thing that often gets brought up is
that this whole "skin in the game",where if somebody's deductible gets
paid for them, then they wind upaccessing the healthcare system, and
maybe in a way which is excessive.
Because their deductible is paid, so theygo get excessive medical treatment because
they no longer have a deductible to pay.
Bill Sarraille (18:37):
I agree, it gets raised all the time, is this
notion of "skin in the game".
That one makes my head explode.
Because what I hear when I hearskin in the game is, Oh yes.
It's a medically necessary service,but we're hoping that by putting this
barrier in place, we can convincepeople not to access the medically
(19:00):
necessary care that they have beenprescribed by their physician.
And that is, if we want to use theword unfair, I think we could use
the word unfair, but I'm just goingto stick with unlawful on that one
because that is a fundamental breachin the relationship that is supposed
to exist between an insurance company,its agents, and an insured person.
Stacey Richter (19:24):
So those are the three things that plan sponsors bring up.
Bill Sarraille (19:26):
Those do not resonate with me, unfortunately, at any level.
Stacey Richter (19:31):
There's this element of surprise, which constantly exists here.
And that is actually a big deal,that it would be one thing if
the patients understood thatthis was how the plan operated.
But it seems like very often when thepatient shows up with their co-pay
card, they are told that the co-paycard no longer works because the benefit
(19:52):
has been maximized and that benefithas gone to the plan and they are now
responsible to pay their deductible.
Like there's shock at that point in time.
Brian Reid said this as well
There feels like there'ssomething wrong with that.
Bill Sarraille (20:04):
I appreciate the comment that, you know, whatever one might
think of issues one, two, and three,that we shouldn't have a situation
where a patient shows up for care andthey're hit with a bill that literally
could be $10,000 that they're expectedto pay in order to access care.
And this is why I believe that many ofthese programs are presented in a way
(20:29):
which creates issues in terms of deceptiveand unfair trade practice act liability.
Stacey Richter (20:35):
And I want to dig in on that for a sec, but I think the
last point that you're making is justsimply, if this is, you know, there's
a lot of hard questions that arebeing asked here and I was talking to
someone the other day who was basicallysaying the drug costs were so high
that the employer laid off workers.
You know what I mean?
So like, these are really difficult, I'mgoing to use the word trade offs, it's
(20:59):
this zero sum game here that is at leasthow it's being played out right now.
But the element of surprise isan overlying factor here, and you
just connected the dots betweendeceptive practices, which I'm
on the edge of my seat, to here.
So maybe get into that a littlebit, that irrespective of like
(21:21):
what someone's choosing to do here.
If people get taken by surprise thatthat's a, a thing in and of itself?
Bill Sarraille (21:28):
Well, it certainly can be.
Yes.
Even when there is something that attemptsto provide some level of disclosure about
these programs, the word that sometimes isused to describe the program is a benefit.
Well, I don't think that any averageconsumer would read that language
and draw from that the paradeof horribles that unfortunately
(21:50):
they can subsequently experience.
So yeah, I think that there are in factsome real legal issues that are presented
here, not simply by the fact that theseprograms don't do what I think they have
to do under the ACA, where the plan issubject to the ACA of course, and honor
these payments from both the deductibleand an out-of-pocket maximum perspective.
(22:12):
But separate and apart from that, justin terms of the obligation, obviously,
not to deceptively induce a patientinto carrying the insurance or staying
with the insurance or making paymentstowards the insurance that they think
that they're getting a policy thatallows them to use this coupon assistance
(22:37):
and they are not in fact getting aninsurance that allows that to be the case.
I think another important issuefor employers to consider is
whether they're potentially inviolation of the ADA by implementing
accumulator and maximizer programs.
The ADA does apply to benefit designsemployed by employers, to the extent
(23:03):
that the employer is taking particularbenefit positions which reflect
a disability based distinction.
So in a situation where a treatmentor a procedure is used extensively or
nearly exclusively, to treat a particulardisability, the negative creation or
(23:24):
alteration of an existing benefit designcan, in fact, be seen as a subterfuge to
discriminate against disabled employees.
And I have a real concern that thatis exactly what's going on in at
least a significant percentage ofaccumulator maximizer benefit redesigns.
(23:48):
They do focus on a high number ofinterventions, particularly drug
interventions, that are very muchassociated with disabled status.
So I think that's a really importantissue for employers to consider
in evaluating these programs.
Stacey Richter (24:04):
There are nuances here obviously.
I think in the states where accumulatorshave been banned, the specifics there,
if the drug is the only drug thatis available, then they're banned.
But if it's a case where there's sixcompetitors, or there's a standard
of care, then accumulators are okay.
(24:27):
I also just kind of want to dip a toe intothe fact that there are some drugs which
are on a value formulary, you know, thereare some plans that are really trying to
create value formularies and they havedetermined that some drugs are not really
of value and they're trying to not havepeople take those drugs and this is one
of the means by which they are doing that.
Bill Sarraille (24:50):
From my perspective, that sounds like a plan and a PBM that
isn't doing what it is supposed to do.
So if the actual concern is thatthey think that they can deliver the
same therapy at a lower cost, that'swhat utilization management is for.
(25:11):
Taking advantage of patients lack ofunderstanding about the position that
the insurer is taking, I think, indisregard of the plain language of the
federal statute is not the means bywhich they should achieve that end or
that they have to achieve that end.
Plans and PBMs are expected toengage in utilization management.
(25:35):
One of those elements of utilizationmanagement could be a step edit, where
if they believe that, in fact, onetherapy is just as good as another and
is lower cost to the plan, that they can,in fact, require that the patient fail
first on that less expensive drug beforemigrating to the more expensive drug.
(25:57):
But do your job, Plan.
Do your job, PBM.
Don't victimize the patient as aresponse to your failure to do the
thing that you're being paid to do.
Stacey Richter (26:08):
So if I wanted to get very cynical about this whole thing.
If there is a plan who has a maximizer butnot utilization management, it would make
me very curious whether that maximizerwas being paid a spread because, and
what being paid a spread is, is thatthat maximizer gets some percentage of
(26:30):
the savings or the cost of the drug.
Because if you think about it thatway, it would be very profitable
for that maximizer to not haveany utilization management, right?
Like, let the patient get prescribedthe really expensive drug.
Take the available pharma dollars,right, like I can get them, I mean,
some of it goes to the plan, but someof it also goes to the maximizer.
(26:51):
Now I have a whole lot of money.
I mean, patient's still gonna wind up nothaving a script in May or June, but the
maximizer got a lot of money before that.
Bill Sarraille (27:00):
I know you know, because you, you have devoted your podcast
to this subject over and over again.
We have incredibly perverseincentives that manifest
themselves throughout the system.
You know, part of what I see asparticularly objectionable about
accumulator and maximizer programsis the way that it interplays
(27:23):
with some of the other perverseincentives that you're talking about.
You know, if you have a drug with agiven list price, it's already providing
a 50 percent rebate to that plan.
The plan then imposes a 40 percentco-insurance on the patient.
The, we'll start with $1,000 postrebate, a $500 drug, 40 percent of
(27:49):
the list price, the patient pays $400.
Ridiculous.
The patient is paid 80 percent ofthe total actual cost of the product.
And then they're being lied toon top of that, being told that,
oh, you're only paying 40%.
What they don't realize is they'repaying 40 percent of a made
up number that doesn't apply.
Stacey Richter (28:09):
You can definitely see why over half of Americans with
commercial insurance right now areconsidered functionally uninsured.
That they're paying all thismoney for insurance that they
then can't afford to use.
What I'm hearing you, and again, I just,I really want to emphasize to listeners
is that you have plan sponsors who aretrying to figure out how to solve for
these rapidly escalating pharma costs.
(28:32):
But I think the point that you're makingis there's different ways to do that
and doing it in such a way where eitherthe patient's caught in the middle
or the patient's caught by surpriseis maybe not as palatable or legal.
Bill Sarraille (28:47):
I don't think it's either palatable or legal from my perspective.
Look, I, we, we are on theverge of a premium explosion.
That's just the reality of the situation.
That is not just a functionof pharmaceutical prices.
It would be lovely if we could justpoint our finger in one very specific
(29:09):
direction and magically, poof, theproblem could go away without having
to face the harsher realities.
But that is, I think,completely inconsistent with
the actual data out there.
Stacey Richter (29:22):
That's definitely pretty clear, like most employers,
most self insured employers who lookthrough their data will discover.
You know, like Marilyn Bartlettfrom Montana, 48 percent of
her spend was acute hospitals.
I've heard as high as 56 percentare not just acute hospitals,
but just like hospital care.
So hospital care is generally speaking,I don't think I've ever encountered
(29:43):
a plan sponsor who didn't say thatdollars going to hospitals was their
biggest category of spend, but notrising as fast as pharmaceutical trend.
I was talking to someone theother day whose pharma spend
doubled in the past five years.
So, like, just not necessarily howmuch of that money is making its
way back to pharma, but just thetrend for a self insured employer,
(30:04):
the pharma trend is quite high,which is obviously of a concern.
Now, it's still 25%, 23 percent ofoverall planned spend a lot of times,
whereas hospitals are 50%, let's just say.
So obviously hospitals are thehighest category here, but if you're
just talking about trend, that's whysome employers are super concerned.
Bill Sarraille (30:25):
I totally get that.
I would say from my perspective, even ifyou look at the drug spend, in many cases
you're often looking at spend that isin fact influenced by hospital charges.
Hospitals, not insignificantly becauseof 340B, but certainly in part because of
340B, are making tremendous inroads intothe specialty pharmacy marketplace and
(30:52):
are among other third parties involved,the PBMs as well as a significant
issue contributing to that spend.
So even if we focus and you'reright to get us to focus on the
drug specific spend, uh, as you'reindicating that's a multifaceted
component with multiple players whoare contributing to those costs.
Stacey Richter (31:14):
Totally understood.
So let's get to the adviceportion of this conversation.
Again, we've got rock hard place goingon here, but there's probably better or
worse ways to do many things and managingpharma trend is certainly one of them.
So if I'm going to sort of distillthis conversation down into some
(31:34):
pieces of advice that I'm hearingyou say, one of them is, can't have
this element of surprise, right?
Like that's not fair to havepeople who have to get sick and
be standing at a pharmacy counteror waiting to get their infusion.
It can't be in that moment where theyfigure out that they actually don't
have coverage for a treatment, right?
(31:54):
So there has to be something that isdone so that the benefits, you know,
if a plan is using accumulators orusing maximizers and they're doing it
in this way, then it would seem to bethe fair thing to do to just make sure
everybody in the plan is aware of it.
That's the first thingI'm hearing you say.
Bill Sarraille (32:11):
It's definitely one of the things I'm saying.
It's not the first thing I'm saying.
The first thing I'm saying isthat if you're covered by the
ACA, I think this is unlawful.
If you're not in fact covered bythe ACA, then you certainly would
be covered by state and federal lawsthat create liability for unfair and
deceptive trade practices, which caninclude communications in the context
(32:34):
of insurance in at least some instances.
So yes, I certainly think that a goodstep would be to at least rub our
poor patient's nose in the fact thatthey are ultimately still going to be
responsible for an incredibly importantcontribution in the form of both
(32:55):
deductibles and out-of-pocket maximums.
Stacey Richter (32:57):
So number one, be upfront about it so you're not taking people
by surprise and they do understandwhat benefits they actually have.
That's only fair.
The second thing if you don't, somaybe this is part B of the first
one, if you don't, there's, there'ssome legal risk there, right, because
it's, it could be deemed deceptive,especially if a maximizer or whatever
(33:18):
is teed up as a benefit, which Idefinitely have seen in some cases,
Bill Sarraille (33:22):
Yeah, I mean, I think we're headed to some
pretty serious litigation here.
I mean, I think we're in a holding patternwhere obviously we had one district
court ruling that focused not on thestatute, but instead on the regulation.
We have HHS declaring that it'snot going to enforce that policy
as a matter of federal law.
(33:43):
We have some state insurancecommissioners who have said, well,
that's great that you're not, but I am.
And at some point in the newadministration, probably not that
far into the new administration,we're going to have a new rule.
I think there's going to be abunch of litigation at that point.
I would be surprised if that litigationis just between patient groups and the
(34:03):
government as it was on the first goround, my thought will be that there
will be litigation against employers,there'll be litigation against plans,
there'll be litigation against PBMs.
That's, I think, where we're headed.
Stacey Richter (34:17):
And specifically around this, like, maximizer slash
accumulator type activity litigation?
Bill Sarraille (34:23):
Yes, I think so.
Stacey Richter (34:24):
What was the one case that you had mentioned?
You said that there was a case.
Bill Sarraille (34:28):
Yes, it was brought by three patient advocacy organizations and
three patients against the Departmentof Health and Human Services in the U.S.
District Court for theDistrict of Columbia.
It basically struck down HHS's rule,which said that its regulation could be
(34:51):
interpreted as both permitting ACA coveredplans to count these amounts towards the
out-of-pocket maximum and deductibles.
And that it also permitted thesame insurers not to count the
same amounts towards deductiblesand out-of-pocket maximums.
And what Judge Bates said was, Well,that's kind of the definition of arbitrary
(35:14):
and capricious government action.
You can't say, that the sameregulation means two different
things at the same time.
So he struck down that regulation, thatreinstituted a prior regulation, and
that regulation says that you in facthave to honor those payments so long
as the coupon is not used on a drug forwhich there is a generic equivalent.
Stacey Richter (35:38):
Which is kind of what we were talking about before.
And this is specificallywith the ACA plans, so the
marketplace or fully insured.
Bill Sarraille (35:44):
Yes.
Stacey Richter (35:44):
Okay, so we've got Don't take people by surprise, just if
you're going to do something like this,then you got to be upfront about it.
If you're going to give plan sponsorsanother piece of advice, beyond kind of
like, actually look into whether you'vegot patients running around unable
to get drugs and what drugs they are,because I do get the feeling that there
are a number of plan sponsors who arewholly unaware that this is going on.
Bill Sarraille (36:08):
Yeah, I mean, my other two pieces of advice, I suppose, would
be that if you have a utilizationmanagement end that you're trying to
achieve, then expect your providerof the utilization management
services to manage the services.
And if you're not getting that service,then you need to change vendors.
(36:28):
You need to change your partner.
These programs are not a meansto effect utilization management.
There is a tool belt.
Use the tool belt.
I think the other observation thatI would make is that this particular
issue fits into the wider questionof unraveling the perverse incentives
(36:52):
that seem to dominate this space.
There are at least some emerging optionsout there that are focused on net pricing
as a way to structure healthcare services.
And part of the problem here from thepatient perspective is their co-insurance
is a percentage of a made up number, alist price that your plan is not paying,
(37:17):
your PBM is not paying, and if we couldget to a place where people are actually
being charged a percentage of a realnumber, that would go a long way towards
making all services, not just specialtydrugs, but all services more affordable.
Stacey Richter (37:36):
And a big point that you're making there is, you
know, still you have patientswho are paying co-insurance and
this is true across the board.
They're paying coinsurance based on thelist price, which is artificially inflated
because everybody wants the rebates.
So you wind up with situations wherea patient's paying a percentage
and this happens a lot like at thepharmacy counter with generics.
(37:57):
Where the co-pay is actuallymore than the cost of the drug
because the list price is so high.
So yeah, I mean, indeed, if there is a waythat the patients aren't being subjected
to these artificially high list pricesand yeah, butting up against the whole
plan sponsors are addicted to rebates,again, because they enable lower premiums.
Bill Sarraille (38:22):
At least that's the way they're presented.
You know, a rebate guarantee may or maynot actually be leading to lower prices.
And because you as the sponsordon't actually know what the net
prices are underneath it, youdon't actually know whether it's
leading to lower prices or not.
Stacey Richter (38:38):
Listen to the show with Scott Haas for a very eloquent
breakdown of exactly what you'retalking about there, and the one
with Paul Holmes, where he getsinto like, What is rebate, actually?
Whoever gets to define the rebate getsto determine exactly how much money
winds up in the plan sponsor's pocket.
And that is, uh, yeah, the PBM, so.
So, there's just so many, so much.
(39:00):
It's a fracas.
Bill Sarraille (39:01):
It's a lot of perverse incentives is what it is.
Stacey Richter (39:04):
Indeed.
Bill Sarraille, love yourLinkedIn, lots of food for thought.
Also your Substack, we willlink to both in the show notes.
Let me just say your wholeretirement game, not strong.
Bill Sarraille (39:19):
Yeah, no, I'm failing retirement.
That's that's quite clear.
Stacey Richter (39:23):
Bill Sarraille, thank you so much for being on
Relentless Health Value today.
Bill Sarraille (39:26):
Thanks so much for the invitation.
Great to chat with you.
Tom Nash (39:29):
Hi, this is Tom Nash, one of the RHV team members.
You might recognize my voicefrom the podcast intro.
If you love this show and you want toshow us your support, please follow us
on your favorite podcast app, sign upfor the newsletter, or maybe consider
making a small donation in the tip jar.
Thanks so much for listening.
Episode 459, "Cost Containment by Co-Pay
Maximizer or Co-Pay Accumulator.
Points to Ponder."
Today, I speak with Bill Sarraille.
American Healthcare Entrepreneurs andExecutives You Want to Know, Talking.
(00:26):
Relentlessly Seeking Value.
If you have zero clue what co-paymaximizers and or co-pay accumulators
are and the financial incentivesinvolved for PBMs and planned sponsors
here, after you're done listeningto this episode, go back and listen
to the show with Joey Dizenhouse.
Also, the episode called "Co-PayCards Gone Wild" with Dea Belazi.
(00:46):
Both these shows couldfill in some blanks.
Here's the micro mini of the co-paymaximizer slash accumulator deal.
These are vehicles that are designed byvendors who are also sometimes called
maximizers or sometimes they're also PBMs.
But these programs are designed toget as much money out of pharma as
possible in the form of co-pay support.
(01:09):
So, here's how the maximizersare supposed to maximize plan
sponsors getting pharma money.
Say for some drug, the pharmacompany has, I don't know, $12,000
max in co-pay support availableto patients in total per year.
Pharma does always cap the dollarsthat are available for patients.
So in this hypothetical,12k a year is available.
What a forthright or well run maximizerwill do is figure out, you know, if
(01:34):
there's 12k max available, then they'llset a co-pay, so there's variable co-pays
for patients, so they'll set a patientco-pay of like $1,000 a month, which adds
up to 12k over 12 months of the year.
Get it?
Every single month, the patient hasa $0 co-pay, but the plan maximizes
the dollars that the plan gets.
(01:56):
Or you know, maybe they'llcharge $1,025 a month.
So the patient has some small, thinair quote skin in the game, and
the plan sponsor just banked 12K.
Sounds great.
Right?
Well, sure, when it works as promised,and we'll get to this in a moment.
Accumulators, on the other hand, have nosuch, Hey, let's make sure the patient
actually gets their meds guardrails.
(02:16):
They hear that the pharma is offering12k, and the accumulator vendor, and their
plan sponsor clients also, are like, cool,let's get that money as fast as possible.
So they make the co-pay for that drug, Idon't know, like hypothetically $3,000.
Great, now the patient runs outof that co-pay money in May.
And don't forget, and or let meinform you, for both maximizers and
(02:39):
accumulators, dollars paid by thepharma generally don't count to the
plan deductible for the patient.
So now the patient walks into thepharmacy, if in an accumulator or
in a poorly run maximizer program,they walk into the pharmacy in May.
And are told that if they want their drug,they're going to need to pay the $3,000
co-pay that was set out-of-pocket everymonth until they reach their deductible.
(03:03):
With some of these co-pay maximizer slashaccumulator plans, the plan sponsor may
be a little bit out of the loop relativeto what is actually going on here.
The plan sponsor may think that membersare doing fine, you know, they're
getting their drug every month, sothey may be surprised to learn about
this running out of money in May issue.
And what is true moreoften than it's not true.
(03:23):
This $3,000 or whatever, hundreds orthousands of dollars payment due co-pay,
the patient learns about it at thepharmacy counter or will try to get chemo.
It comes as a complete surprise the factthat they owe three grand or whatever.
What patient just shrugs and pays up inthat moment because they happen to have
their entire deductible or thousands ofdollars lying around and at the ready.
(03:46):
What a shock to find thisout at the pharmacy counter
or at the infusion clinic.
Some of these maximizer programs are alsostarting to veer back into accumulator
zones, like they're doing things suchas saying that the member must pay their
out-of-pocket max or their deductibleor 30 percent of the cost of the drug,
(04:07):
right, like some number before the planwill allow the patient to use the co-pay
reimbursement program to begin with.
So, there's other things that areemerging right now, which, again, cause
the patient to have a very, very largeout-of-pocket in order for them to get
a drug which they have been prescribedand ostensibly, at least, need.
(04:29):
Allegedly, and sometimes for sure,dollars raked in from pharma make
it across the PBM slash maximizer,vendor, middleman trench all the
way over to the plan sponsor.
For sure, especially for theadministrative only maximizer vendors,
yeah, you're going to have the dollarsactually making it to the plan sponsor.
But sometimes the vendor runningthese programs is paid spread, right?
(04:51):
So the more expensive the drug andthe richer the co-pay card program,
the more the vendor will make becausethey take a percentage of savings.
So the more expensive, the moresavings, therefore, the more
the vendor is going to make.
In these cases where the vendoris paid a spread, can I take
perverse incentives for $600, Alex?
Right?
But in sum, again, there's a lot tothis conversation with Bill Sarraille,
(05:12):
so please do listen to the whole thing.
Bill offers five main piecesof advice, so I'm just going to
cover them right here up front.
Spoiler alert, I guess, but justto keep them all in one place.
Point of advice number one, lookinto what is going on with a
maximizer and or accumulator program.
First of all, is the plansponsor paying spread?
And also, how are these programs beingmarketed to members and how aggressively?
(05:36):
Because there are a lot of plansponsors having way more negative
impact than they suspect they are.
So that's point of advice numberone, really look into actually
what is happening on the groundswith some of these programs.
Number two, point ofadvice, eliminate surprise.
Any plan sponsor listening, and BrianReid also says this very crisply
in an episode a month or so ago.
(05:57):
If a plan sponsor wants to do stufflike this, like force a patient to
pay hundreds or thousands of dollarsout-of-pocket, if at any point during
the year they are going to wind upwith thousands of dollars in co-pay
or co-insurance to get their Crohn'sdisease med or cancer med or whatever,
be really upfront about this at least.
It's really important if we reallywant to make sure that patients
(06:17):
are taking maintenance meds.
And getting the medications that they'reprepared for the reality that at a
certain point during the year, theyare going to have a really big bill.
Third piece of advice,there is legal risk here.
So also Bill's advice is check intowhether accumulators and or maximizers
are unlawful under the ACA and or bydeceptive practices rules, when maximizers
(06:41):
or accumulators are teed up as a benefit.
And it again, reference point ofadvice number two, it's not explained
that dollars they get from pharmawill be taken by the plan and not
applied to the patient deductible.
I was just reading about the crazyaggressive marketing tactics that
some of these vendors are using to getmembers to sign up and yeah, definitely
look into deceptive practice rules.
(07:03):
Four, if it's utilization managementthat we're trying to achieve here,
then your utilization managershould be utilization managing.
These maximizers are not meantto impact utilization management.
Patients really cannot differentiateas per study after study, it's very
difficult for patients to differentiatehigh value from low value care or meds.
(07:27):
So pretty much the impact of having apatient with thousands or hundreds of
dollars of out-of-pocket spend to get amed isn't going to be to ensure that the
right people are taking the right med.
Point is, use the righttool for the right job.
So if we're trying to keep patientsaway from low value meds, the tool
for that is utilization management.
(07:47):
Also be aware, if the PBM says itcannot do utilization management or
you lose your rebates and or is pushinginto a maximizer accumulator program
to do this instead, that's kind of aclue that they cannot do it because
they are taking money from pharma tonot have any restrictions on a drug.
Read the article in the New York Times.
(08:08):
Gift link in the show notes, you'rewelcome, about how PBMs took secret
payments for the free flow of opioids,and Chris Crawford also talks about
this sort of same ish thing in anupcoming show relative to GLP 1s.
But, if you're trying to doutilization management, then
do utilization management.
Last point of advice, use ourunderstanding of this whole goings
on as a rationale or a way totamp down perverse incentives.
(08:31):
We want to wind up with patients gettingcharged a percentage of net prices, not
a percentage of some wildly inflatedlist price with this whole accumulator
maximizer contributing to, you know,just more wildly inflated list prices.
So the co-pay programs can be biggerand someone can make even more money
off of the percentage of savings.
(08:52):
And plan sponsors addicted to rebatesnow have another bucket of cash.
Like this is just another example of howperverse incentives pervade the system.
And we should certainly be aware of that.
Bill Sarraille was a healthcareattorney for many years.
He retired from his law firm on the firstof last year, and now he's doing the
things he wanted to do before but couldn'tbecause his billable rate was too high.
(09:15):
Bill is teaching at the Universityof Maryland Law School and doing
some regulatory consulting, etc.
He's working with avariety of patient groups.
My name is Stacey Richter.
This podcast is sponsoredby Aventria Health Group.
And here is my conversationwith Bill Sarraille.
Bill Sarraille, welcome toRelentless Health Value.
Bill Sarraille (09:30):
Well, thanks for having me.
Stacey Richter (09:31):
I am really looking forward to speaking with you about
accumulators slash maximizers.
What's going on right now that plansponsors might want to be aware of?
Bill Sarraille (09:44):
Well, from my perspective, patients are being
harmed in a variety of different ways.
Sometimes, in a program that spreadsout the entire cost of the coupon
supported portion of the drugcost over the 12 months, we have
situations where patients later inthe year are experiencing problems.
(10:09):
Other times, we have situations wherethere really isn't an attempt to
smooth the coupon dollars over thecourse of the year and the patient is
experiencing an access problem muchearlier in the year, maybe by mid
year or even in the first quarter.
Stacey Richter (10:27):
When you say experiencing a problem, you mean they go in to
get their drug, They show up with themanufacturer coupon because we're talking
about these specialty pharmacy products.
A lot of times the co-insurance thatthe plan sponsors put against these are
based on a percentage of the list price.
The list prices, as weknow, they're very high.
(10:47):
So when you're saying they wind up with aproblem, what you mean is, they show up at
the pharmacy and they're told their drugcosts thousands of dollars or something.
Bill Sarraille (10:55):
Well, that's one problem, but it's not the only problem.
The issue is that from the patient'sperspective, and I think from
the law's perspective, they havecompletely satisfied their deductible
and their out-of-pocket maximum.
And so whatever service they're goingto, whether it's for a specialty drug
(11:15):
or for a retail general med drug, orif it's just to go to a physician's
office or for a minor procedure inthe hospital outpatient department,
no matter what the service is, theyunderstood that their entire deductible
and their entire out-of-pocket maximumhad been fulfilled and suddenly it's not.
(11:39):
That's the problem fromthe patient's perspective.
Stacey Richter (11:42):
So, in other words, the patient knew that pharma was paying their
deductible, and now the patient thinks thedeductible is met, except that it's not?
Bill Sarraille (11:51):
Yes.
People tend to think that the only waythat there can be a problem for a patient,
is that at some point in the year, theygo to get the coupon supported drug, and
now the coupon doesn't work for them,perhaps because of the manufacturer's
terms, where the manufacturer hasplaced a ceiling on the coupon.
(12:15):
But that's not the onlyproblem that can occur.
The reality is because, at leastin my experience, plans in PBMs do a
very poor job, and maybe not even alawful job, of trying to explain to
patients what in fact is going tobe their treatment of manufacturer
(12:36):
assisted payments by patients.
The issue that I'm talking about, wherepatients think, not having been adequately
informed by their plan or PBM, that infact they are not going to get credit for
coupon assisted payments that they make.
They are coming into treatmentsituations thinking that they have
(12:59):
met their deductible, and thinkingthat they have met the out-of-pocket
maximum, and they have not.
And for, unfortunately, a number ofthose patients, they don't have the
money to actually access the care.
And so this becomes anaccess problem for them.
Stacey Richter (13:17):
It's interesting what you're saying, and I know there's
going to be a lot of plan sponsors.
Who are listening, who are thinkingthe things that some plan sponsors
when discussing these accumulatorsslash maximizer programs or just co-pay
cards in general, tend to, to thinkand, and let's just go down the laundry
list just to get these on the floor.
And I'm not passing judgment here, right?
Because these are really toughtimes we live in and, and
(13:39):
pharma costs are accelerating.
Like I was talking to someone theother day who said her pharmacy costs
have doubled in the past five years.
So this is certainly an issue,trying to keep premiums down.
You know, family premiums haveexceeded $26,000 or it's like
$25,500, almost $26,000 a year, right?
So you have premiumsbecoming unaffordable.
There's just, there'sobviously a lot of issues here.
(14:01):
One of the big reasons why these maximizerslash accumulator programs get put into
place to begin with is, is basicallyto get double the deductible, right?
Because if the pharma company is payingthe deductible and then the patient
is paying the deductible, now theplan can access two deductibles and
those two deductibles then go to lowerpremiums for the entire patient pool.
(14:23):
So that's good.
Kind of one thing.
Bill Sarraille (14:25):
The point that was made was that, you know, maximizers are a way
to enable sick patients to make healthcaremore affordable for healthy patients.
And what I would say back to that isthat's not the purpose of insurance.
And it certainly isn't consistentwith either the law or the policy
(14:45):
of the Affordable Care Act.
That is fundamentally at odds with boththe relevant legal structure and the
policy that Congress put into place.
People can think that that shouldhappen, that sicker patients should
be making payments that make premiumsfor healthier patients less expensive.
(15:07):
But that's not a current reflectionof the law as Congress has passed
it and I don't personally thinkthat that's the right policy.
I think that basically is an invitationto discriminate in favor of healthy
patients to the detriment of sick patientswhich in the pre-existing condition
(15:27):
change and in multiple other changesincluding the provision that forbids
discrimination and based on health status.
We see law actually movingin the opposite direction.
So I don't have more to say about that.
If people disagree with what Congress wasactually trying to do, then they disagree
with what Congress was trying to do.
And the law can be changed,but that's not the law.
Stacey Richter (15:50):
The other plan sponsors thing is the notion that if one patient
is taking a specialty pharmacy drug andgets their deductible paid for them,
that's kind of unfair to somebody whoneeds a knee replacement or something
like that, who actually has to paytheir deductible by themselves.
So, then you create a situation wherethere's kind of this disparity, where
(16:11):
some people get their deductiblepaid for them and others do not.
Bill Sarraille (16:14):
The concept is that it's unfair that some patients are able
to be supported and some are not able tobe supported with manufacturer coupons.
Again, you know, as a lawyer, atleast by training, if not currently
in practice, what I would say to thatis, well, that's a wonderful policy
(16:35):
slash philosophical observation.
But it seems irrelevant to mebecause what the statute says is the
following (16:43):
The terms cost sharing include deductibles, co-insurance,
co-payments, or similar charges.
These are the cost sharing that have tobe counted for purposes of a deductible
at an out-of-pocket maximum under the law.
And that's where the clause ends.
The terms cost sharing includedeductibles, coinsurance,
(17:06):
co-payments, or similar charges.
That's it.
It doesn't say, unless a drugmanufacturer is the source of the dollars.
And, you know, talk about fairness, Imean, if we are to interpret that language
to exclude manufacturer dollars that thepatient uses to pay any of those charges,
then the statute would have to be read thesame way for any other third party source.
(17:31):
A father couldn't pay anadult child's cost sharing.
A charity that doesn't get anymoney from a manufacturer couldn't
pay the cost sharing for a patient.
We're stuck with the language we havein front of us, and the language in
front of us doesn't make a distinctionabout the third party source.
(17:51):
It simply says that the plan or the PBMis obligated to recognize cost sharing
that includes deductibles, coinsurance,co-payments, or similar charges.
So I don't think the fairness questionis the right question, but if we want
to talk about fairness, what it wouldmean is the quite unfair result that
no one could help that patient in need,and that can't be the right answer.
Stacey Richter (18:15):
And then the third thing that often gets brought up is
that this whole "skin in the game",where if somebody's deductible gets
paid for them, then they wind upaccessing the healthcare system, and
maybe in a way which is excessive.
Because their deductible is paid, so theygo get excessive medical treatment because
they no longer have a deductible to pay.
Bill Sarraille (18:37):
I agree, it gets raised all the time, is this
notion of "skin in the game".
That one makes my head explode.
Because what I hear when I hearskin in the game is, Oh yes.
It's a medically necessary service,but we're hoping that by putting this
barrier in place, we can convincepeople not to access the medically
(19:00):
necessary care that they have beenprescribed by their physician.
And that is, if we want to use theword unfair, I think we could use
the word unfair, but I'm just goingto stick with unlawful on that one
because that is a fundamental breachin the relationship that is supposed
to exist between an insurance company,its agents, and an insured person.
Stacey Richter (19:24):
So those are the three things that plan sponsors bring up.
Bill Sarraille (19:26):
Those do not resonate with me, unfortunately, at any level.
Stacey Richter (19:31):
There's this element of surprise, which constantly exists here.
And that is actually a big deal,that it would be one thing if
the patients understood thatthis was how the plan operated.
But it seems like very often when thepatient shows up with their co-pay
card, they are told that the co-paycard no longer works because the benefit
(19:52):
has been maximized and that benefithas gone to the plan and they are now
responsible to pay their deductible.
Like there's shock at that point in time.
Brian Reid said this as well
There feels like there'ssomething wrong with that.
Bill Sarraille (20:04):
I appreciate the comment that, you know, whatever one might
think of issues one, two, and three,that we shouldn't have a situation
where a patient shows up for care andthey're hit with a bill that literally
could be $10,000 that they're expectedto pay in order to access care.
And this is why I believe that many ofthese programs are presented in a way
(20:29):
which creates issues in terms of deceptiveand unfair trade practice act liability.
Stacey Richter (20:35):
And I want to dig in on that for a sec, but I think the
last point that you're making is justsimply, if this is, you know, there's
a lot of hard questions that arebeing asked here and I was talking to
someone the other day who was basicallysaying the drug costs were so high
that the employer laid off workers.
You know what I mean?
So like, these are really difficult, I'mgoing to use the word trade offs, it's
(20:59):
this zero sum game here that is at leasthow it's being played out right now.
But the element of surprise isan overlying factor here, and you
just connected the dots betweendeceptive practices, which I'm
on the edge of my seat, to here.
So maybe get into that a littlebit, that irrespective of like
(21:21):
what someone's choosing to do here.
If people get taken by surprise thatthat's a, a thing in and of itself?
Bill Sarraille (21:28):
Well, it certainly can be.
Yes.
Even when there is something that attemptsto provide some level of disclosure about
these programs, the word that sometimes isused to describe the program is a benefit.
Well, I don't think that any averageconsumer would read that language
and draw from that the paradeof horribles that unfortunately
(21:50):
they can subsequently experience.
So yeah, I think that there are in factsome real legal issues that are presented
here, not simply by the fact that theseprograms don't do what I think they have
to do under the ACA, where the plan issubject to the ACA of course, and honor
these payments from both the deductibleand an out-of-pocket maximum perspective.
(22:12):
But separate and apart from that, justin terms of the obligation, obviously,
not to deceptively induce a patientinto carrying the insurance or staying
with the insurance or making paymentstowards the insurance that they think
that they're getting a policy thatallows them to use this coupon assistance
(22:37):
and they are not in fact getting aninsurance that allows that to be the case.
I think another important issuefor employers to consider is
whether they're potentially inviolation of the ADA by implementing
accumulator and maximizer programs.
The ADA does apply to benefit designsemployed by employers, to the extent
(23:03):
that the employer is taking particularbenefit positions which reflect
a disability based distinction.
So in a situation where a treatmentor a procedure is used extensively or
nearly exclusively, to treat a particulardisability, the negative creation or
(23:24):
alteration of an existing benefit designcan, in fact, be seen as a subterfuge to
discriminate against disabled employees.
And I have a real concern that thatis exactly what's going on in at
least a significant percentage ofaccumulator maximizer benefit redesigns.
(23:48):
They do focus on a high number ofinterventions, particularly drug
interventions, that are very muchassociated with disabled status.
So I think that's a really importantissue for employers to consider
in evaluating these programs.
Stacey Richter (24:04):
There are nuances here obviously.
I think in the states where accumulatorshave been banned, the specifics there,
if the drug is the only drug thatis available, then they're banned.
But if it's a case where there's sixcompetitors, or there's a standard
of care, then accumulators are okay.
(24:27):
I also just kind of want to dip a toe intothe fact that there are some drugs which
are on a value formulary, you know, thereare some plans that are really trying to
create value formularies and they havedetermined that some drugs are not really
of value and they're trying to not havepeople take those drugs and this is one
of the means by which they are doing that.
Bill Sarraille (24:50):
From my perspective, that sounds like a plan and a PBM that
isn't doing what it is supposed to do.
So if the actual concern is thatthey think that they can deliver the
same therapy at a lower cost, that'swhat utilization management is for.
(25:11):
Taking advantage of patients lack ofunderstanding about the position that
the insurer is taking, I think, indisregard of the plain language of the
federal statute is not the means bywhich they should achieve that end or
that they have to achieve that end.
Plans and PBMs are expected toengage in utilization management.
(25:35):
One of those elements of utilizationmanagement could be a step edit, where
if they believe that, in fact, onetherapy is just as good as another and
is lower cost to the plan, that they can,in fact, require that the patient fail
first on that less expensive drug beforemigrating to the more expensive drug.
(25:57):
But do your job, Plan.
Do your job, PBM.
Don't victimize the patient as aresponse to your failure to do the
thing that you're being paid to do.
Stacey Richter (26:08):
So if I wanted to get very cynical about this whole thing.
If there is a plan who has a maximizer butnot utilization management, it would make
me very curious whether that maximizerwas being paid a spread because, and
what being paid a spread is, is thatthat maximizer gets some percentage of
(26:30):
the savings or the cost of the drug.
Because if you think about it thatway, it would be very profitable
for that maximizer to not haveany utilization management, right?
Like, let the patient get prescribedthe really expensive drug.
Take the available pharma dollars,right, like I can get them, I mean,
some of it goes to the plan, but someof it also goes to the maximizer.
(26:51):
Now I have a whole lot of money.
I mean, patient's still gonna wind up nothaving a script in May or June, but the
maximizer got a lot of money before that.
Bill Sarraille (27:00):
I know you know, because you, you have devoted your podcast
to this subject over and over again.
We have incredibly perverseincentives that manifest
themselves throughout the system.
You know, part of what I see asparticularly objectionable about
accumulator and maximizer programsis the way that it interplays
(27:23):
with some of the other perverseincentives that you're talking about.
You know, if you have a drug with agiven list price, it's already providing
a 50 percent rebate to that plan.
The plan then imposes a 40 percentco-insurance on the patient.
The, we'll start with $1,000 postrebate, a $500 drug, 40 percent of
(27:49):
the list price, the patient pays $400.
Ridiculous.
The patient is paid 80 percent ofthe total actual cost of the product.
And then they're being lied toon top of that, being told that,
oh, you're only paying 40%.
What they don't realize is they'repaying 40 percent of a made
up number that doesn't apply.
Stacey Richter (28:09):
You can definitely see why over half of Americans with
commercial insurance right now areconsidered functionally uninsured.
That they're paying all thismoney for insurance that they
then can't afford to use.
What I'm hearing you, and again, I just,I really want to emphasize to listeners
is that you have plan sponsors who aretrying to figure out how to solve for
these rapidly escalating pharma costs.
(28:32):
But I think the point that you're makingis there's different ways to do that
and doing it in such a way where eitherthe patient's caught in the middle
or the patient's caught by surpriseis maybe not as palatable or legal.
Bill Sarraille (28:47):
I don't think it's either palatable or legal from my perspective.
Look, I, we, we are on theverge of a premium explosion.
That's just the reality of the situation.
That is not just a functionof pharmaceutical prices.
It would be lovely if we could justpoint our finger in one very specific
(29:09):
direction and magically, poof, theproblem could go away without having
to face the harsher realities.
But that is, I think,completely inconsistent with
the actual data out there.
Stacey Richter (29:22):
That's definitely pretty clear, like most employers,
most self insured employers who lookthrough their data will discover.
You know, like Marilyn Bartlettfrom Montana, 48 percent of
her spend was acute hospitals.
I've heard as high as 56 percentare not just acute hospitals,
but just like hospital care.
So hospital care is generally speaking,I don't think I've ever encountered
(29:43):
a plan sponsor who didn't say thatdollars going to hospitals was their
biggest category of spend, but notrising as fast as pharmaceutical trend.
I was talking to someone theother day whose pharma spend
doubled in the past five years.
So, like, just not necessarily howmuch of that money is making its
way back to pharma, but just thetrend for a self insured employer,
(30:04):
the pharma trend is quite high,which is obviously of a concern.
Now, it's still 25%, 23 percent ofoverall planned spend a lot of times,
whereas hospitals are 50%, let's just say.
So obviously hospitals are thehighest category here, but if you're
just talking about trend, that's whysome employers are super concerned.
Bill Sarraille (30:25):
I totally get that.
I would say from my perspective, even ifyou look at the drug spend, in many cases
you're often looking at spend that isin fact influenced by hospital charges.
Hospitals, not insignificantly becauseof 340B, but certainly in part because of
340B, are making tremendous inroads intothe specialty pharmacy marketplace and
(30:52):
are among other third parties involved,the PBMs as well as a significant
issue contributing to that spend.
So even if we focus and you'reright to get us to focus on the
drug specific spend, uh, as you'reindicating that's a multifaceted
component with multiple players whoare contributing to those costs.
Stacey Richter (31:14):
Totally understood.
So let's get to the adviceportion of this conversation.
Again, we've got rock hard place goingon here, but there's probably better or
worse ways to do many things and managingpharma trend is certainly one of them.
So if I'm going to sort of distillthis conversation down into some
(31:34):
pieces of advice that I'm hearingyou say, one of them is, can't have
this element of surprise, right?
Like that's not fair to havepeople who have to get sick and
be standing at a pharmacy counteror waiting to get their infusion.
It can't be in that moment where theyfigure out that they actually don't
have coverage for a treatment, right?
(31:54):
So there has to be something that isdone so that the benefits, you know,
if a plan is using accumulators orusing maximizers and they're doing it
in this way, then it would seem to bethe fair thing to do to just make sure
everybody in the plan is aware of it.
That's the first thingI'm hearing you say.
Bill Sarraille (32:11):
It's definitely one of the things I'm saying.
It's not the first thing I'm saying.
The first thing I'm saying isthat if you're covered by the
ACA, I think this is unlawful.
If you're not in fact covered bythe ACA, then you certainly would
be covered by state and federal lawsthat create liability for unfair and
deceptive trade practices, which caninclude communications in the context
(32:34):
of insurance in at least some instances.
So yes, I certainly think that a goodstep would be to at least rub our
poor patient's nose in the fact thatthey are ultimately still going to be
responsible for an incredibly importantcontribution in the form of both
(32:55):
deductibles and out-of-pocket maximums.
Stacey Richter (32:57):
So number one, be upfront about it so you're not taking people
by surprise and they do understandwhat benefits they actually have.
That's only fair.
The second thing if you don't, somaybe this is part B of the first
one, if you don't, there's, there'ssome legal risk there, right, because
it's, it could be deemed deceptive,especially if a maximizer or whatever
(33:18):
is teed up as a benefit, which Idefinitely have seen in some cases,
Bill Sarraille (33:22):
Yeah, I mean, I think we're headed to some
pretty serious litigation here.
I mean, I think we're in a holding patternwhere obviously we had one district
court ruling that focused not on thestatute, but instead on the regulation.
We have HHS declaring that it'snot going to enforce that policy
as a matter of federal law.
(33:43):
We have some state insurancecommissioners who have said, well,
that's great that you're not, but I am.
And at some point in the newadministration, probably not that
far into the new administration,we're going to have a new rule.
I think there's going to be abunch of litigation at that point.
I would be surprised if that litigationis just between patient groups and the
(34:03):
government as it was on the first goround, my thought will be that there
will be litigation against employers,there'll be litigation against plans,
there'll be litigation against PBMs.
That's, I think, where we're headed.
Stacey Richter (34:17):
And specifically around this, like, maximizer slash
accumulator type activity litigation?
Bill Sarraille (34:23):
Yes, I think so.
Stacey Richter (34:24):
What was the one case that you had mentioned?
You said that there was a case.
Bill Sarraille (34:28):
Yes, it was brought by three patient advocacy organizations and
three patients against the Departmentof Health and Human Services in the U.S.
District Court for theDistrict of Columbia.
It basically struck down HHS's rule,which said that its regulation could be
(34:51):
interpreted as both permitting ACA coveredplans to count these amounts towards the
out-of-pocket maximum and deductibles.
And that it also permitted thesame insurers not to count the
same amounts towards deductiblesand out-of-pocket maximums.
And what Judge Bates said was, Well,that's kind of the definition of arbitrary
(35:14):
and capricious government action.
You can't say, that the sameregulation means two different
things at the same time.
So he struck down that regulation, thatreinstituted a prior regulation, and
that regulation says that you in facthave to honor those payments so long
as the coupon is not used on a drug forwhich there is a generic equivalent.
Stacey Richter (35:38):
Which is kind of what we were talking about before.
And this is specificallywith the ACA plans, so the
marketplace or fully insured.
Bill Sarraille (35:44):
Yes.
Stacey Richter (35:44):
Okay, so we've got Don't take people by surprise, just if
you're going to do something like this,then you got to be upfront about it.
If you're going to give plan sponsorsanother piece of advice, beyond kind of
like, actually look into whether you'vegot patients running around unable
to get drugs and what drugs they are,because I do get the feeling that there
are a number of plan sponsors who arewholly unaware that this is going on.
Bill Sarraille (36:08):
Yeah, I mean, my other two pieces of advice, I suppose, would
be that if you have a utilizationmanagement end that you're trying to
achieve, then expect your providerof the utilization management
services to manage the services.
And if you're not getting that service,then you need to change vendors.
(36:28):
You need to change your partner.
These programs are not a meansto effect utilization management.
There is a tool belt.
Use the tool belt.
I think the other observation thatI would make is that this particular
issue fits into the wider questionof unraveling the perverse incentives
(36:52):
that seem to dominate this space.
There are at least some emerging optionsout there that are focused on net pricing
as a way to structure healthcare services.
And part of the problem here from thepatient perspective is their co-insurance
is a percentage of a made up number, alist price that your plan is not paying,
(37:17):
your PBM is not paying, and if we couldget to a place where people are actually
being charged a percentage of a realnumber, that would go a long way towards
making all services, not just specialtydrugs, but all services more affordable.
Stacey Richter (37:36):
And a big point that you're making there is, you
know, still you have patientswho are paying co-insurance and
this is true across the board.
They're paying coinsurance based on thelist price, which is artificially inflated
because everybody wants the rebates.
So you wind up with situations wherea patient's paying a percentage
and this happens a lot like at thepharmacy counter with generics.
(37:57):
Where the co-pay is actuallymore than the cost of the drug
because the list price is so high.
So yeah, I mean, indeed, if there is a waythat the patients aren't being subjected
to these artificially high list pricesand yeah, butting up against the whole
plan sponsors are addicted to rebates,again, because they enable lower premiums.
Bill Sarraille (38:22):
At least that's the way they're presented.
You know, a rebate guarantee may or maynot actually be leading to lower prices.
And because you as the sponsordon't actually know what the net
prices are underneath it, youdon't actually know whether it's
leading to lower prices or not.
Stacey Richter (38:38):
Listen to the show with Scott Haas for a very eloquent
breakdown of exactly what you'retalking about there, and the one
with Paul Holmes, where he getsinto like, What is rebate, actually?
Whoever gets to define the rebate getsto determine exactly how much money
winds up in the plan sponsor's pocket.
And that is, uh, yeah, the PBM, so.
So, there's just so many, so much.
(39:00):
It's a fracas.
Bill Sarraille (39:01):
It's a lot of perverse incentives is what it is.
Stacey Richter (39:04):
Indeed.
Bill Sarraille, love yourLinkedIn, lots of food for thought.
Also your Substack, we willlink to both in the show notes.
Let me just say your wholeretirement game, not strong.
Bill Sarraille (39:19):
Yeah, no, I'm failing retirement.
That's that's quite clear.
Stacey Richter (39:23):
Bill Sarraille, thank you so much for being on
Relentless Health Value today.
Bill Sarraille (39:26):
Thanks so much for the invitation.
Great to chat with you.
Tom Nash (39:29):
Hi, this is Tom Nash, one of the RHV team members.
You might recognize my voicefrom the podcast intro.
If you love this show and you want toshow us your support, please follow us
on your favorite podcast app, sign upfor the newsletter, or maybe consider
making a small donation in the tip jar.
Thanks so much for listening.
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