This op-ed originally appeared in CommonWealth Magazine on May 30, 2023.
Earlier this month, the Legislature’s Joint Committee on Financial Services held a hearing on S. 609, a bill that would limit out-of-pocket costs for patients paying for prescription drugs. Sixteen other states have passed similar bills, and S.609 is a clear step in the right direction.
In recent years, the out-of-pocket obligations imposed by health insurance companies on many patients, such as deductibles and coinsurance, have been growing substantially, especially for more expensive drugs. Because drug companies did not want their drugs abandoned at the pharmacy counter, pharmaceutical manufacturers began offering financial assistance to patients to offset these out-of-pocket costs.
While the drugmakers clearly offered this assistance to keep their sales buoyant, these programs were also enormously popular with patients, who could see their out-of-pocket costs drop to zero. Moreover, these programs also help the overall health care system as, when patients are compliant with their medications, they tend to be healthier.
In stepped the pharmacy benefit managers (PBMs). PBMs are consultants to health plans who help manage the drug benefit for the insurer. PBMs decided they did not want patients receiving financial assistance to offset their out-of-pocket costs. So, they began “confiscating” that financial assistance through PBM programs called accumulator and maximizer programs.
Let’s say a patient has a $5,000 deductible in their health insurance plan and is required to pay the first $5,000 of any drug cost before the insurance will kick in. Suppose that patient is prescribed a $10,000 drug. Without any kind of assistance, the patient would need to pay the first $5,000 out of pocket before insurance would cover the drug.
When drugmakers began offering financial assistance, the patient could use those drug company funds to meet their $5,000 deductible until insurance kicked in. Patient out-of-pocket costs would then drop to zero.
However, under an accumulator program, the PBM refuses to count the drug company assistance toward the patient’s deductible. So, the patient may use drug company assistance to pay the first $5,000 of drug cost, but then the patient would be responsible for the next $5,000.
The PBM takes $5,000 from the drug company and $5,000 from the patient before the PBM pays a dime, making accumulator programs extremely profitable at the expense of patients.
PBM maximizer programs use a similar tactic. The PBM confiscates all the available financial assistance from the drug company and reduces the out-of-pocket costs substantially for that one drug. However, the patient’s out-of-pocket obligations are not reduced in any way; so, if the patient needs another drug, or a surgery, the patient must first pay $5,000 out of pocket.
Again, the PBM wins because they receive funds from both the drug company and the patient, and the patient loses because their out-of-pocket costs live on.
If this seems complicated, here’s a simpler analogy. Imagine a single mom is having trouble paying her $1,500 monthly rent so she applies to a local charity for a rent voucher that would offset her rent by $500 per month. Then, imagine that her landlord pockets the rent voucher but also continues to charge her $1,500 per month. This is what is happening with these PBM accumulator and maximizer programs.
S.609 would solve this problem for some patients because it would require that health plans count any funds provided by the patient “or on behalf of the enrollee by another person … towards an enrollee’s applicable cost sharing requirement.” In short, if the PBM takes a drug company’s assistance funds intended for a patient, that patient’s out-of-pocket obligations must be reduced by that amount.
While this is a step in the right direction, it will not solve this problem for all patients in the Commonwealth. The Legislature has the authority to regulate smaller, Massachusetts-based health plans; it does not have the authority to regulate large multistate ERISA health plans. National legislation may be required to solve this problem for many patients.
S. 609 is particularly fitting for Massachusetts because these PBM programs tend to harm patients most who are prescribed so-called “specialty” drugs. These are drugs for more complex diseases such as arthritis and cancer—and many of those drugs are being discovered in the laboratories of Cambridge and Boston. If out-of-pocket costs are too high for these drugs, patients may not take them, and our companies will not be able to sell them. So, S.609 would most importantly benefit patients, but it might have additional economic benefits for the Commonwealth.
William Smith, PhD, is senior fellow and director of the Life Sciences Initiative at Pioneer Institute. He is an author of a recent paper on accumulators and maximizers available here.