There’s a simple reason why co-pay accumulators captured the industry’s attention when they rolled out in 2017: Healthcare is too damn expensive and co-pay accelerators, at least in theory, offered a financial workaround.

Not that the numbers need to be referenced again, but the U.S. spends more on healthcare than any other country and yet costs continue to surge. A decade ago, the average deductible was $862; today, it’s $1,655. High-deductible plans are also on the rise: One in eight covered workers must spend $3,000 or more before their insurance kicks in. As a direct consequence of these high costs, a quarter of Americans have reported skipping medical treatment.

Enter co-pay accumulators. Designed by pharmacy benefit managers (PBMs) on behalf of insurance companies, the programs stipulate that drug coupon cards or co-pay assistance — which are issued by manufacturers and designed to cover part of the cost of a drug, often to the tune of hundreds or even thousands of dollars — do not count toward a patient’s deductible or out-of-pocket maximum. Traditionally, by the time a patient’s coupon cards ran out, she would have already hit her deductible. With a co-pay accumulator, when the coupon cards run out, the (often very high) deductible remains largely untouched.

PBMs and payers argue drug coupons drive healthcare costs up by disincentivizing patients from seeking cheaper therapies and allowing manufacturers to continue to raise prices. For patients who do not need specialty medications, accumulators provide a nudge to switch from a brand-name drug to a cheaper generic. But for those with conditions that require expensive specialty drugs that lack generic equivalents, they can be devastating. 

Following a stealth rollout in 2017, co-pay accumulators gained wider attention last year. Patient advocate groups increasingly sounded the alarm; organizations focused on conditions that rely on specialty drugs, such as rheumatoid arthritis, multiple sclerosis, diabetes and HIV, led the charge. Last September, the Hemophilia Foundation released a damning video illustrating not just how co-pay accumulators work, but how they can prevent patients from accessing much-needed prescriptions. 

In response to the growing backlash, state legislatures have sprung into action. To date, West Virginia, Virginia, Arizona and Illinois have all passed bills either banning the use of co-pay accumulators altogether or enacting restrictions.

Banning accumulators in self-insured plans would require an act of Congress.

Jeremy Schafer, Precision For Value

Ostensibly, these bills are a harbinger of co-pay accumulators’ decline. In reality, state-level legislation is relatively toothless, as it applies only to plans that are fully-insured or purchased through state exchanges. Self-funded plans, which account for the majority of commercial insurance, are exempt.

“Banning accumulators in self-insured plans would require an act of Congress,” says Jeremy Schafer, SVP of payer access solutions at Precision For Value.

Together with Medicare and Medicaid, commercial insurance accounts for the bulk of health plans. While state laws may be a symbolic rebuke to co-pay accumulators, they are unlikely to meaningfully stop their expansion in 2020. 

Based on loose estimates from surveys with employers, last year about one in six commercial beneficiaries were in plans that had accumulators, according to SSR analyst Richard Evans. He adds that, “This year, it looks like something closer to half.”

Last year at this time, TrialCard VP, client services Rick Fry estimated that 6% to 10% of patients taking specialty drugs were impacted by co-pay accelerators in 2018. However, he says that the industry hasn’t seen as much of an increase in the number of impacted patients as it had projected.

“The percentage of impacted patients has remained fairly consistent with isolated areas of growth depending on the brand and therapeutic area,” he explains. “When looking across the co-pay assistance programs we support, on average about 7% of patients are being impacted with the range being anywhere from 2% to 17% of patients within a given program.”

Nonetheless, some of the nation’s largest employers have already taken the accumulator jump. Walmart and Home Depot both include them in their benefit design. “Many other employers are considering them for the future,” Schafer notes.

The appeal of the programs is easy to see: co-pay accumulators save employers a lot of money. Unlike rebates, which are applied retroactively, “Accumulator programs offer savings up front, right away,” Schafer says.

home depot employee
Some employers have been cautious about accumulator programs, but Home Depot and Walmart have already started to include them in their benefit design.

As healthcare costs have continued to rise, premiums for self-insured commercial plans have failed to keep pace — which means companies are shelling out more in other ways. “Self-insured employers are constantly trying to reduce their costs” without raising premiums, explains Lisa Kennedy, chief economist at Innopiphany.

While the savings are attractive, co-pay accumulators can disproportionately shift the financial burden to sicker patients with specialty diseases who rely on expensive, brand-name drugs for which there are no generics. “We have these two sides fighting over something that is affecting real people,” says Marah Short, an associate director at Rice University’s Baker Institute for Public Policy. “The way this market is set up is imperfect for consumers.”

Manufacturers are also feeling the sting. In Q1 and Q2 of 2018, drug net prices fell around 6% — a downdraft Evans attributes to political pressure on list price growth, formulary exclusions and co-pay accumulators’ effect on high-cost specialty drugs. In 2019, net prices continued to fall (around 4%, 6% and 5% for the year’s first three quarters) even as the use of accumulators spread. The decline would have been even steeper, but manufacturers have begun to fight back against co-pay accumulators. 

So far, their go-to move has been to shift patients from coupon cards to indemnity programs in which patients who run up against an accumulator program are issued a debit card so they can continue to purchase the drug. Unlike coupons, debit cards are difficult for payers to track, allowing patients to apply them toward their deductibles. However, indemnity programs are an imperfect response. For one, they are far more susceptible to fraud than coupons. “You have to be a lot more careful,” Evans explains. “You need case managers. It’s more expensive.”

We have these two sides fighting over something that is affecting real people. The way this market is set up is imperfect for consumers.

Marah Short, Rice University’s Baker Institute for Public Policy

For high-cost specialty drugs such as Humira, it makes financial sense for manufacturers to eat these added expenses to keep patients filling their prescriptions. But for less lucrative medications, such as cholesterol drugs, the economics don’t add up.

As election season revs up and elected officials and candidates alike zero in on rising healthcare costs, it’s likely more states will pass legislation banning or limiting the use of co-pay accumulators. However, Evans notes that “to have an impact you have to make them illegal for a sufficient number of patients.” Without prohibiting their use in commercial plans — which, again, would require action at the federal level — that’s close to impossible. 

Even if the overall financial impact is minimal, Kennedy is hopeful that state legislation will shine a much-needed spotlight on the issue. As more patients learn about what co-pay accumulators are and how they affect people with chronic conditions, the backlash could pressure employers to avoid plans that saddle workers with unaffordable drug costs. 

In the short-term, PBMs and payers will continue to offer plans with co-pay accumulators in 2020. And as is their wont, manufacturers will continue to find new strategies for circumventing them.

Longer term, co-pay accumulators represent the latest battle in an endless war between payers and manufacturers. Schafer, for his part, can see the steps playing out in front of him: Manufacturers will find a workaround, PBMs will adopt a measure that blocks the workaround, and so on. As the cycle continues and money pours in from both sides, patients will endure the now-familiar exercise of watching their health costs climb. 

“The dance will always continue,” he says.