Alternative Funding Programs are Simply the Rich Robbing the Poor

By: Ranier Simons, ADAP Blog Guest Contributor

Patients who utilize specialty medications are living with serious and often chronic health conditions, such as cancer, cystic fibrosis, diabetes, or HIV. Barriers to obtaining those medications can literally be a matter of life and death. Many people obtain their specialty drugs via their private health insurance, often employer-sponsored plan. Unfortunately, some insurance plans engage in very anti-patient policies, such as copay accumulators and copay maximizers, placing profit above the patient’s well-being. The most recent anti-patient cost-shifting scheme is the alternative funding program (AFP). AFPs are characterized as “sinister” by some patient advocates because they force patients with private insurance to utilize public safety net programs taxing already limited resources earmarked for those who are truly in need. Additionally, AFPs create barriers to access and adversely affect healthcare outcomes.[1]

Photo Source: Health Policy Today

Alternative funding programs' primary mode of operation is to convince self-insured health plans to exclude most if not all, specialty prescription drugs from coverage in their formulary.[2] In 2020, the average cost of a specialty drug for a chronic health condition was $84,442.[1] Specialty prescriptions cost about ten times more than regular medications. Their exclusion from a plan’s drug formulary essentially renders beneficiaries ‘uninsured’ regarding their medication. When patients are prescribed a non-covered specialty medication, their plan denies the claim, and the AFP then seeks to enroll the patients in patient assistance programs.[2] If the patient qualifies for a patient assistance program from a manufacturer or charity, they receive the medication for free or at a significantly reduced cost. If they do not qualify for any programs, the claim returns to the plan and is covered under the standard pharmacy benefit with cost-sharing.

This cost-cutting scheme is multidimensionally problematic. It is dangerous regarding the continuity of patient care. Applying for these programs takes time. These third-party AFPs must gather financial and demographic information for the process, and approval could take two to four weeks or sometimes months.[2,3] Being without prescriptions for that long can cause serious medical problems and create or exacerbate symptoms. It is possible that resulting adverse outcomes could even be irrevocable. 

This is especially dire for those taking HIV antiretroviral medication, where adherence is vital in maintaining viral suppression. Tim Horn, Director of Medication Access at NASTAD, reports, “What we're seeing in a number of states are AFP administrators referring people requiring antiretrovirals or other high-cost drugs to manufacturer patient assistance programs, which may in turn end up recommending enrollment in the state AIDS Drug Assistance Program.” He adds, “the denial of the original pharmacy claim by the employer's plan, the capacity it takes to apply for and be turned down by a manufacturer PAP, followed by the time and energy it takes to apply and be confirmed eligible for ADAP support effectively means someone can go for weeks without being able to access essential medicines – and that's if they haven't given up on the whole process entirely.”

Photo Source: ONS Voices

Critics argue that AFPs are unethical and fiscally damaging. As Adam J. Fein, Ph.D., CEO of Drug Channels Institute, points out, “You’re basically trying to access money that is explicitly intended for needy, uninsured, financially strapped patients. This is not copay support for commercial benefits, where the benefit kind of stinks or they over-cost-shifted.”[4] Manufacturer and charity patient assistance programs have limited funds. AFPs’ abuse of the system could eventually drain programs to the point of causing programs to close entirely or at least drastically reduce the ability to extend help to the genuinely uninsured and indigent. It is unjust and inequitable for AFPs to use patient assistance funds to subsidize health insurance plans for profit.

Some AFPs utilize a practice that directly endangers the lives of plan members. If a beneficiary does not qualify for the patient assistance programs, AFPs may attempt to source a needed medication through international mail order. This exposes patients to unregulated medicines that could be counterfeit, impure, expired, and otherwise dangerous to their health. Additionally, guidance from the U.S. Food & Drug Administration (FDA) indicates that it is illegal for individuals to import drugs or devices into the United States for personal use under most circumstances.[5]A couple of extremely narrowly defined exceptions exist: the Personal Importation Policy and the Importation of Drugs Originally Intended for Foreign Markets Policy. However, utilizing international mail order for the members of an entire health plan does not fall under either of those exceptions.

In an effort to push back against AFPs, advocacy groups have been flagging AFPs as violations of various regulations under the Employee Retirement Income Security Act of 1974 (ERISA). (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to protect individuals in these plans.[6] This includes employer self-insured plans. ERISA exists to ensure that health plans operate in the best interests of the beneficiaries. ERISA is comprised of many rules. Developing inquiry efforts include exploring how AFPs could be causing health plans to improperly exercise their fiduciary duties and how they may create discriminatory plan design.[7]

According to Carl Schmid, Executive Director of the HIV+Hepatitis Policy Institute, “Most AFPs are taking advantage of a loophole in the ACA that allows employer plans to designate certain drugs as “non-essential health benefit”.  The federal government through regulation seems to be starting to close that loophole for marketplace and small group plans, but for the larger employer plans, that really are the guilty parties, we need to continue to push the administration to act.  Bills are also pending in several states and in the Congress. This is just a start, but to end AFPs, the government must step in stop these nefarious schemes.”

Photo Source: iStock

Alternative funding programs amount to simply the rich robbing the poor, but they are growing in number. Currently, there are over twenty AFP vendors. They are not in the best interests of employers because the cost savings are deceptive. While plan sponsors may celebrate the relief of not paying for expensive specialty medication, they incur high costs from the AFP plan administrators. AFPs charge payers’ large percentages of the savings they achieve, sometimes as high as 25% of a drug’s list price.[8] Plan beneficiaries are harmed by delays in care, the stress of administrative red tape, and increased cost burdens when eligibility for AFP funding mechanisms goes awry. The public is harmed because AFPs divert funds from those who truly are in need. Ongoing developments indicate that it will be crucial for advocacy groups and the government to be vigilant in preventing the proliferation of AFPs and the damage they cause.

[1] Alliance for Patient Access. (2023, June). The high costs of alternative funding programs. Retrieved from https://allianceforpatientaccess.org/wp-content/uploads/2023/06/AfPA_High-Costs-of-Alternative-Funding-Programs_June-2023.pdf

[2] Blum, K. (2023, November 20). ‘Alternative’ model for patient assistance draws stakeholder ire. Retrieved from https://www.specialtypharmacycontinuum.com/Policy/Article/12-23/Alternative-Model-For-Patient-Assistance-Draws-Stakeholder-Ire/72048

[3] Schroeder, D. (2022, November 22). The looming threat of alternative funding models. Retrieved from https://ipghealth.com/news/the-looming-threat-of-alternative-funding-models

[4] AIS Health. (2022, September 1). Industry experts question alternative funding companies that carve out some specialty drugs, ‘abuse’ charities. Retrieved from https://www.mmitnetwork.com/aishealth/spotlight-on-market-access/industry-experts-question-alternative-funding-companies-that-carve-out-some-specialty-drugs-abuse-charities/

[5]  FDA. (2023, December 7). Personal Importation. Retrieved from https://www.fda.gov/industry/import-basics/personal-importation#:~:text=In%20most%20circumstances%2C%20it%20is,unapproved%20new%20drug%20in%20the

[6] U.S. Department of Labor. (2024). ERISA. Retrieved from https://www.dol.gov/general/topic/health-plans/erisa#:~:text=The%20Employee%20Retirement%20Income%20Security,for%20individuals%20in%20these%20plans.

[7] Aimed Alliance. (2022, December 14). Essential health benefits, importation, and more – Do you know the risks?[Video]. YouTube. https://www.youtube.com/watch?v=U9-rJZ9YjLU&t=723s

[8] Fein, A. (2022, August 2). The shady business of specialty carve-outs, a.k.a., Alternative Funding Programs. Retrieved from https://www.drugchannels.net/2022/08/the-shady-business-of-specialty-carve.html

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.