First Report Managed CareAlternative Funding Programs: A Tempting Choice Laden With Risks

Navigating the Complex Terrain of Alternative Funding Programs: Implications for Patient Care and Cost Management

In the evolving landscape of healthcare, the rising costs of specialty drugs present a significant challenge for employers and health plan executives. Alternative Funding Programs (AFPs) emerge as a tempting yet complex solution to mitigate these expenses. This summary elucidates the intricacies and potential pitfalls of AFPs, offering physicians a comprehensive understanding to better navigate these programs’ implications for patient care and cost management.

Key Points:

• Specialty drug spending reached $315 billion in 2022, marking a 40% increase from 2017, with these drugs accounting for half of total drug spending despite representing a smaller fraction of prescriptions.
• AFPs offer a mechanism to manage the high costs of specialty drugs by excluding these medications from standard coverage or denying prior authorization, shifting to alternative funding sources.
• A 2022 study highlighted that a notable fraction of large employers is either using AFPs or considering their adoption, indicating a growing trend in seeking cost-containment strategies.
• AFPs do not provide insurance but offer financial assistance through patient assistance programs (PAPs), creating a complex dynamic where insured patients may compete with low-income individuals for limited funds.
• Patients may face treatment delays and increased out-of-pocket costs due to the intricacies and time-consuming nature of PAP application processes.
• Employers and health plans lack contractual guarantees with AFPs, introducing uncertainties in program effectiveness and patient access to necessary medications.
• The relationship with pharmacy benefit managers (PBMs) can be affected by AFP adoption, potentially altering contract terms, rebate amounts, and incurring additional fees.
• Although some employers are drawn to the potential savings of AFPs, health plans exhibit cautious engagement, possibly due to awareness of legal and regulatory risks.

A 2016 analysis reported that the estimated cost to bring a new drug successfully to market is around $2.6 billion, with post-approval costs increasing the total to approximately $2.87 billion.

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