A closer look: what you need to know about insurance companies' and PBMs' "copay accumulator" scheme
Copay accumulators defined.
Like most Americans, Randi Clites – a former state legislator who now lobbies her former colleagues as state policy director for the Ohio Bleeding Disorder Council – had never heard the term “copay accumulators” until 2017. That year, the parent of a child with hemophilia called her to complain about a new wrinkle with her insurance adding thousands of dollars to what her family paid out of pocket for life-saving drugs.
Within months, a growing number of the estimated 3,500 Ohio families dealing with bleeding disorders reached out to plead that something be done about this new practice in which pharmacy benefit managers (PBMs) clawed back money originally intended as discounts for patients on expensive but essential medications. Clites soon learned that patients with other chronic illnesses such as diabetes or AIDS were running up against the same problem.
Copay accumulators are a system that insurance companies and PBMs began using about six years ago in response to the growing number of drug manufacturers offering discount coupons, or so-called copay cards, that offered deep discounts to patients facing large out-of-pocket costs before they hit their yearly deductible. Under the new strategy, PBMs and insurers stopped counting the discounts for the deductible – meaning that instead of pocketing the intended savings, patients now faced large bills later in the year when the discounts were exhausted.
As Clites learned of the new practice, she feared – correctly – it was headed for her family as well. Her own son was born in 2002 suffering from hemophilia, the bleeding disorder that for many can only be controlled with a costly drug regimen. When Clites – a one-term Democratic lawmaker who lost her seat in the 2020 election – was forced to change insurance plans, she discovered her new coverage was one of the many plans using copay accumulators. Since her son’s hemophilia medication would cost some $400,000 a year without insurance, the policy means Clites’ family begins paying thousands of dollars extra in out-of-pocket costs when those coupons expire midway through the billing year.
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“We are already fairly stressed out,” said Clites, noting that anxiety about paying those large bills at the end of the year comes on top of normal worries about keeping their jobs and the kind of insurance coverage that will ensure their son’s health. In 2022, the ex-lawmaker and advocate had high hopes that Ohio would join 16 other states in banning copay accumulators, which would aid thousands of patients and also could put more pressure on Washington to stop the practice nationwide.
But the measure died in the Ohio Legislature – a victim of aggressive lobbying by those PBMs and the large insurance companies that own the biggest ones. Nonetheless, a coalition of patient groups that has been fighting copay accumulators almost from the day they arrived six years ago has high hopes that 2023 will be a turning point in convincing lawmakers and regulators to clamp down. They believe that simply shining a public light on the practice makes it hard for the industry to justify it
“This is a money grab by the PBMs and the pharmaceutical companies, pure and simple,” said George Huntley, CEO of the Diabetes Leadership Council, who is part of the coalition that is seeking through a federal lawsuit to overturn a Donald Trump-era policy that not only allowed but seemed to encourage the use of copay accumulators. “It’s a cost shift to patients, but what makes it so evil is it's a cost shift to patients on the most expensive drugs” – prescribed to people with chronic conditions, who need these drugs in order to live their lives to the fullest, or to stay alive.
The issue with copay accumulators is just one twist on a national crisis – the gaping holes in health insurance plans used by millions of Americans, which force families to spend thousands of dollars from their own pockets for essential medicines or care. It pushes some patients into bankruptcy while too many others simply forego the care they need, getting sicker and even risking death. But copay accumulators are particularly vexing to advocates because they seem to lack any rationale beyond insurers taking money that could otherwise benefit these struggling patients.
David Balto, former policy director at the Federal Trade Commission who now heads the Coalition to Protect Patient Choice, has sharply criticized copay accumulators as a straight-up case of greed – pharmacy benefit managers hijacking a program designed to help patients afford often life-saving drugs to instead siphon more dollars toward their already inflated bottom lines
A new profit mechanism for insurers
Balto said in a phone interview that for many PBMs or health insurers, copay accumulators ”practically might have had a legitimate purpose at first” – referring to the rare situations in which a cheaper generic alternative to a critically needed medication is available – “but they started to see it as a profit mechanism.” Indeed, a report by the PBM Accountability Project found that these pharmaceutical middlemen increased their yearly profits from $25 billion to $28 billion, or 12%, from 2017 through 2019, the period when co-pay accumulators become a common industry practice.
So how do PBMs even justify copay accumulators? The industry’s argument is that the big pharmaceutical companies use discount coupons as a form of enticement to patients to depend on the most expensive treatments, and thus serves as a disincentive for lowering the overall cost of prescription drugs.
Patient advocates like Huntley don’t disagree that U.S. pharmaceutical prices are too high, but they note the PBM’s core argument is based on a fallacy: In reality, much more than 90 percent of the cases of chronic patients using the drugmakers’ discount coupons involve treatments that do not have a generic or a lower cost alternative.
“If the insurance companies and the pharmaceutical companies want to fight over pricing, knock yourselves out – just don't hurt the patient,” Huntley said. He stressed that insurers still control the authorization process and thus could deny any treatment deemed unnecessary. Instead, PBMs are using copay accumulators to squeeze extra profits from those treatments that doctors say their patients need to survive.
“In the absence of generic alternatives, accumulators and maximizers are simply disincentives from filling prescriptions since they increase absolute cost for patients,” Gunnar Esiason, a cystic fibrosis patient and advocate who is executive vice president of the Boomer Esiason Foundation, wrote in a recent blog post. “We, collectively, need to ask why? Why are our insurance schemes disincentivizing access when the alternative is less absolute health. It’s a bad tradeoff for society.” Esiason called on pharmaceutical firms like the maker of popular CF drug Vertex to work with patients on solutions.
But the math is insidious. Far too many drug-benefit plans in America come with a high deductible – the often thousands of dollars that patients have to pay out of pocket before their mediations are fully covered. The discount coupons offered by manufacturers of many of the leading drugs for serious, chronic conditions often cover much or all of those out-of-pocket costs, but not for the full year. The coupon dollars should count toward the deductible limit – but copay accumulators mean they do not. Months into a year of needed treatment, families are shelling out hundreds of dollars they should have been credited for – or making difficult choices about rationing medicine
Paying deductibles twice
“The insurance company gets their deductible paid twice, because the manufacturers are paying it – and then you’re paying it,” Huntley explained. In recent years, some PBMs have adopted a complex, related program called a copay maximizer for some expensive drugs that aims at recovering dollars more from the drug manufacturers than from patients, but advocates question the legality of all these practices.
The industry’s use of copay accumulators increased after the Trump administration’s Department of Health and Human Service issued guidance in 2020 that gave insurers broader latitude to carry out the practice. That guidance prompted the legal challenge from groups like Huntley’s Diabetes Leadership Council and the HIV + Hepatitis Policy Institute. They allege in their federal lawsuit that the guidance runs counter to the 2010 Affordable Care Act, which explicitly caps out-of-pocket drug payments regardless of who is making those payments, the patient or a manufacturer.
“This is clearly being paid on their behalf,” Huntley said of the manufacturer’s discount coupons, “and they should be getting credit.” While the suit wends its way through the legal system, advocates have taken comfort in the series of wins in statehouses, with the tally of states that have outlawed copay accumulators now up to at least 16, with hope for more action in 2023
Federal and state action is needed
But those state gains come with a huge catch. The legislation typically only applies to state-regulated insurance plans, such as those covering state employees and people who buy their coverage on their own instead of getting it through an employer, but not to large multi-state plans. It’s believed that the current state bans apply to about 13% of all insurance coverage, leaving considerable room for growth.
In Ohio, bleeding disorder advocate Clites said changes in the new legislature and continued pressure from the powerful insurance lobby means that the bill to ban copay accumulators faces an uphill climb in the new session. And Huntley said there currently is no meaningful federal legislation in the works in Congress..
But the diabetes-patient advocate also noted that progress on the state level eventually forced Congress to act last year on capping the cost of insulin and other prescription drugs, so he’s hoping the same kind of momentum can be generated around copay accumulators. Huntley said success might come once the public gets a broader awareness of what PBMs do – that “they don’t make anything, they don’t warehouse anything, and they don’t ship anything. All they do is take a cut.”