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Emerging Alternative Funding Programs

A somewhat recent development in the Pharmacy Benefit field, is the emergence of “Alternative Funding Programs.”  Interest comes from plan sponsors like Taft Hartley Funds, TPAs, and commercial plans along with members making contributions who are struggling with the potentially massive costs of specialty drugs that can comprise  45% of overall pharmacy plan costs or up to 60% if we include medical claims.  Specialty drug costs are rising by double digits annually with new specialty products being introduced at an astonishing rate.

Think of Alternative Funding Programs as entities that match specialty drug costs with organizations that provide potential funding for these drugs. Examples may include private foundations primarily established by pharmaceutical companies, grants, public charities, state, county and municipal programs, and state specialty access programs.  Alternative Funding Programs advertise 70% savings off a plan sponsors current specialty drug costs.  A typical Alternative Funding Program will include approximately 300 specialty brand drugs covering various chronic complex conditions. Examples of chronic complex conditions include rheumatoid arthritis, multiple sclerosis, and cancer.  Approximately 40% of these specialty drugs have an individual and/or family income cap.

How do these programs work?  A defined list of specialty drugs that are subject to prior authorization, medical necessity, and clinical program rules, are excluded from coverage under the plan participants pharmacy health plan.  Plan participants taking any of these defined specialty drugs are required to complete an application and enrollment process and in some cases verification of individual and family income criteria.  No income information is shared with the plan, only with the Alternative Funding Program.  Once the plan participant is identified as being eligible for alternate funding, the Alternative Funding Program facilitates the shipment and confirms receipt of the drug to the plan participant along with their solution of any issues. Participants are instructed on any applicable cost sharing that is detailed in the Plan Schedule of Benefits.  In most cases drugs eligible for alternate funding are provided at no cost to the participant.  

What can make these programs difficult to implement is that not all PBM’s, TPA’s, and Carriers are open to working with Alternative Funding Programs for various reasons.  Below area few examples:

1)      Loss of revenue - Specialty drugs can be a large revenue source for all three.  As a result, if the savings potential with any group health plan is large enough, the plan would have to go out to bid to select new health plan partners allowing for the implementation of these programs.

2)      Exclusion of specialty drugs - To implement an Alternative Funding Program, the plan must exclude a defined list of specialty drugs from coverage under their pharmacy benefit plan.  This exclusion is specifically outlined in the plan’s Summary Plan Document and these specialty drugs would be an automatic denial at point of service.  The defined list of specialty drugs must be filled through the Alternative Funding Program.    

3)      Help for participants specialty expenses - An HRA (Health Reimbursement Account)or MERP (Medical Expense Reimbursement Plan) needs to be set up to pay for any eligible reimbursement of a defined specialty drug from a list that are drugs excluded from the plan sponsor’s pharmacy benefit plan. The HRA or MERP is designed to “fill a gap” between when a member begins a specialty drug treatment regimen and when the Alternative Funding Program establishes the funding assistance.   The HRA or MERP is available only for plan participants who are actively enrolled in another qualifying, comprehensive health coverage plan. They are a supplement to coverage and not a replacement. Participants are not asked to contribute to the account, as it is solely owned and controlled by the plan sponsor.

4)      Addressing participants above income caps – About 40% of specialty claims that have alternate funding available have an individual and household income cap that may limit or exclude a participant’s ability to be eligible for alternate funding.  Plans must determine the best way to handle plan participants taking a specialty drug on the list but are over the income cap imposed as a threshold to access alternate funding.  A plan can continue to keep the participant on the HRA or MERP for that specific specialty drug or create an override to allow the participant to have that specific specialty drug filled through the employee pharmacy benefit program.

Group health plans that still rely on their “grandfather status” should not be impacted by implementing an Alternative Funding Program since the program lowers both plan and member cost.  Also, these programs do coordinate with multiple parties that include PBMs and funding programs and exchange plan participant enrollee health information.  These programs can accomplish this without individual authorization.  Plan participants covered under federal healthcare programs such as Medicare and Medicaid are excluded from the program.

In summary,Alternative Funding Programs can be complicated to understand, include many steps to implement, require early and frequent member education, and include the establishment of an HRA or MERP.  But we have found the dramatic savings worth the effort.  

If you would like to learn more about these programs, please call Ginger Campbell at 225-281-0291 or visit our website www.cobaltrx.com for more information.