Many of us have experienced escalating drug prices, but some patients on expensive specialty medications have seen their health care costs go up by thousands thanks to tricky insurance tactics called “copay accumulators” or “copay maximizers.”
These are programs in insurance plans initially designed to keep patients from choosing expensive medications when a generic alternative is available. Now, they’re being used more often and can result in patients paying many thousands of dollars more than they might have expected.
The Oregon Legislature was the latest body to consider changes to these policies, which can cost patients tens of thousands of extra dollars per year, but patients will have to wait for a fix. Oregon legislators have failed to pass this legislation three times in the past three years.
Last week, legislators chose not to attach this amendment to a drug pricing bill, hampered in part by the Republican-led walkout in the Oregon Senate.
It all comes back to rising drug prices
Dr. Meghan McGarry, a pediatric pulmonary doctor and professor at the University of California, San Francisco, has watched a lot of changes in the world of cystic fibrosis over the last decade, thanks to a new class of drugs that target the condition’s underlying cause.
“It has really transformed the whole disease,” she said.
Average lifespans for people with cystic fibrosis have nearly doubled.
“Instead of patients dying from their lung disease or needing a lung transplant, their lungs really improve and they go back to living a normal life, graduating from high school, getting a job, getting pregnant,” McGarry said. “It’s been amazing.”
But these breakthrough medications don’t come cheap. A new cystic fibrosis medication, brand name Trikafta, costs more than $300,000 per year for each patient.
Such prices are becoming more common as new treatments come onto the market for cancer, autoimmune disorders and other diseases.
“Pharmaceutical companies have found out that they can charge ridiculous amounts of money for drugs. So there are some drugs that are over a million dollars a year,” McGarry said. “That’s insane. No one can afford that.”
Insurance already limits use of brand-name prescription drugs
Naturally, insurance companies only want to pay for these expensive treatments when medically necessary. So they require patients to go through steps to prove they’ll benefit before the health insurance companies cover the medications.
Doctors must submit documents to prove that cheaper therapies have failed, they sometimes have to order genetic testing, and they must apply for pre-authorization from insurance — all before patients get their first pill.
Once an insurance company does finally approve a new drug, the copay — the amount patients have to pay beyond what an insurer covers — can come as a shock to patients.
One of the tools insurers use to discourage patients from obtaining expensive medication is placing those prescriptions in what’s called a higher drug “tier.” This means the insurance company expects the patient to pick up a bigger percentage of the cost, so the patient’s copay is higher for that medication.
Often, insurers require patients to pay 50% of the cost of specialty drugs. For one of the most commonly prescribed specialty medications used to treat autoimmune disorders, Humira, that would cost a typical patient $3,000 a month. That’s more than double the average mortgage payment in Oregon.
How this Oregon family affords costly copays
Luckily, the makers of these drugs offer financial assistance to patients to help them afford their copays. Often it comes in the form of a debit card loaded with money that can only be used to pay down the patient’s insurance copay. The card typically covers nearly all of the patient portion of the drug cost.
Madonna McGuire-Smith has used these debit cards to help make the budget work for her family, which has five people with hemophilia.
“The copay plans were a really, really nice addition just a few years ago to kind of help us because it is so expensive, the disease,” she said. Just one of her son Gavin’s two hemophilia medications costs $30,000 per month.
Health insurance companies were trying to discourage use of expensive medication by sharing the costs with patients. They saw these copay cards as eliminating the incentive for patients to opt for less expensive treatments. That allowed pharmaceutical companies to continue raising prices on the shoulders of the insurance industry.
“It’s not crazy that the insurance companies are like, ‘Wait a second, we can’t be affording to pay all these hundreds of thousands, millions of dollars, for these drugs,’” McGarry said. “The drug company and the insurance company both don’t like when they’re having to give money to the other one. ... They don’t like when the other one’s making more billions.”
So health insurance companies designed a counter-move: the copay accumulator and the copay maximizer. These programs are hidden deep in health insurance accounting.
To understand how these work, you have to go back to how insurance is usually designed.
Paying more than the maximum
Most health insurance plans will have a deductible, which is a limit on how much an individual or family will pay out of pocket before their full benefits kick in. Plans also have an out-of-pocket maximum, which is the most a person or family can spend in a year.
“Once you spend [the deductible], the insurance company is picking up the rest. That’s how it’s supposed to work,” McGarry said.
Health insurance companies realized that if copay assistance cards weren’t counted toward the deductible, the insurance companies could drain the maximum available amount from the pharmaceutical company’s patient assistance program — which is often three or four times the patient’s out-of-pocket maximum for the year.
After that money is exhausted, the insurance companies can then come back to the patient and require them to meet their deductible again. “So it puts the cost back onto the patients,” said McGarry.
McGuire-Smith’s insurance surprised her by requiring her to enroll in a copay maximizer when she tried to refill her son’s medication, which he needs to take on time to prevent life-threatening hemophilia complications.
“We thought it was in the mail and on the way,” she said. “And then we called and we were told, ‘No, unless you call and ... sign up through this company called SaveOnSP, we’re not gonna send you your product.’”
When her son had a serious gastrointestinal bleed that required hospitalization a few weeks later, her insurance company wouldn’t authorize the medication his doctor said he needed to be released from the hospital until she agreed to enroll in another copay maximizer program the very next day.
“They were literally holding us hostage,” McGuire-Smith said. “They were basically like, ‘Sorry, not gonna give you your med until you do what we tell you.’”
McGuire-Smith signed up for the maximizer program to get her son’s medication, but it came at a cost. McGuire-Smith’s family’s out-of-pocket maximum was $5,000, but her insurance took in more than 18 times that amount — from her and from the pharmaceutical company’s assistance — because of the copay maximizer programs.
“His shots are about $15,000 a shot twice a month. He’s gonna hit his out-of-pocket max on his very first order,” McGuire-Smith said.
The required copay maximizer exhausted the entire available copay assistance without counting toward the family’s $5,000 out-of-pocket maximum. After the copay funds were emptied to $0, the McGuire-Smith family still had to pay their out-of-pocket maximum before insurance kicked in.
“They literally took $90,000 and we still had to pay $5,000,” McGuire-Smith said.
Where did these copay policies come from?
Copay accumulator and maximizer policies were not originally meant to keep patients from life-saving drugs like the ones McGuire-Smith’s son Gavin relies on. They were meant to prevent pharmaceutical companies from luring patients into expensive brand-name drugs when affordable generics were available.
While the policies have existed for over a decade, they became more widespread in the past two years, after the U.S. Department of Health and Human Services changed rules to allow accumulators to be implemented for any drug, even when there is no cheaper generic drug available.
“At least in the world of bleeding disorders, there isn’t a cheaper medicine,” Madonna McGuire-Smith said. “So as much as I would like to say, ‘Oh, you can just put my son on the cheaper one,’ that’d be great, but they’re really not cheap.”
Exact numbers are difficult to find because available assistance programs change annually, but the high end of estimates indicates up to 88% of people use copay assistance for drugs with no lower-cost generics available.
Not every patient can afford the unexpected expense when they are hit by a copay accumulator, even for life-saving drugs. McGuire-Smith, who by day is the director of nonprofit Pacific NW Bleeding Disorders, sees people with hemophilia that have to make the choice to go without meds.
“I know a college student who has hemophilia and is trying to make ends meet and chooses not to treat prophylactically because his out-of-pocket costs each month are more than he can afford as a college student,” she said.
A 2019 industry study found that more than 70% of patients fail to fill their prescriptions once out-of-pocket costs climb to more than $250 per refill. McGarry said high costs can be a big risk to patient outcomes.
“These are lifesaving drugs. So if you can’t afford it one month and ... if you stop it, it stops working right away,” McGarry said. “And so you may have to then get hospitalized or have life-threatening complications.”
In other words, a tactic insurance companies use to limit their costs could put patients’ lives at risk and might ultimately cost more than an expensive prescription for at least some conditions.
According to a recent industry report, about 40% of people with commercial insurance in the country have copay accumulators or maximizers. In 2022, the AIDS Institute think tank found the figure to be even higher in Oregon, with more than two-thirds of the state’s marketplace plans having such policies.
Several states have banned copay accumulators, but Oregon hasn’t
Oregon is the latest state to propose legislation banning copay accumulator and maximizer programs. Sixteen states — including Washington — and Puerto Rico have already banned them. Oregon’s Senate bill banning them was supported by over 100 different patient advocacy organizations, including McGuire-Smith’s group.
Jonathan Frochtzwajg, an advocate with Cascade AIDS Project, known as CAP, who testified in support of the Oregon legislation, said patients “are really just caught in the crossfire between insurance and Big Pharma.”
Frochtzwajg doesn’t think that copay accumulators fight high prescription drug prices, as insurance companies claim.
“Make no mistake. We, speaking for CAP at least, are pro-prescription drug price reform,” Frochtzwajg said. “Drug prices are out of control and there’s inaction at every level of government on the issue. But I should also point out that insurance companies profit from copay accumulators; they make more money with copay accumulators than without.”
McGarry said patients are caught in a back-and-forth battle between the profit engines of the health insurance industry and the pharmaceutical industry.
Several insurance companies testified against the proposed Oregon legislation. But representatives for two of them, Cambia Health Solutions and Kaiser Permanente, said their companies would back a compromise to allow copay accumulators only for drugs that have a generic option.
At the federal level, bipartisan groups in both the House and Senate have introduced legislation called Help Ensure Lower Patient Copays Act, or the HELP Copays Act.
As for the McGuire-Smith family, they’ll continue to budget for unexpected $5,000 copays and pay them off when they can.
Correction: This story previously misstated how far copay accumulator legislation had advanced in Oregon in 2021.