Introduction to Episode 459
[00:00:00] Stacey Richter: Episode 459, "Cost Containment by Co-Pay Maximizer or Co-Pay Accumulator. Points to Ponder." Today, I speak with Bill Sarraille.
Understanding Co-Pay Maximizers and Accumulators
[00:00:28] Stacey Richter: If you have zero clue what co-pay maximizers and or co-pay accumulators are and the financial incentives involved for PBMs and plan sponsors here, after you're done listening to this episode, go back and listen to the show with Joey Dizenhouse.
Also, the episode called "Co-Pay Cards Gone Wild" with Dea Belazi. Both these shows could fill in some blanks. Here's the micro mini of the co-pay maximizer/accumulator deal. These are vehicles that are designed by vendors who are also sometimes called maximizers or sometimes they're also PBMs.
But these programs are designed to get as much money out of pharma as possible in the form of co-pay support.
To listen to this episode or read the show notes with the mentioned links, visit the episode page.
How Maximizers and Accumulators Work
[00:01:09] Stacey Richter: So, here's how the maximizers are supposed to maximize plan sponsors getting pharma money. Say for some drug, the pharma company has, I don't know, $12,000 max in co-pay support available to patients in total per year.
Pharma does always cap the dollars that are available for patients. So in this hypothetical, 12k a year is available. What a forthright or well run maximizer will do is figure out, you know, if there's 12k max available, then they'll set a co-pay, so there's variable co-pays for patients, so they'll set a patient co-pay of like $1,000 a month, which adds up to 12k over 12 months of the year.
Get it? Every single month, the patient has a $0 co-pay, but the plan maximizes the dollars that the plan gets. Or you know, maybe they'll charge $1,025 a month. So the patient has some small, “skin in the game,” and the plan sponsor just banked 12K. Sounds great. Right? Well, sure, when it works as promised, and we'll get to this in a moment.
Issues With Co-Pay Programs
[00:02:10] Stacey Richter: Accumulators, on the other hand, have no such, Hey, let's make sure the patient actually gets their meds guardrails. They hear that the pharma is offering 12k, and the accumulator vendor, and their plan sponsor clients also, are like, cool, let's get that money as fast as possible. So they make the co-pay for that drug, I don't know, like hypothetically $3,000.
Great, now the patient runs out of that co-pay money in May. And don't forget, and or let me inform you, for both maximizers and accumulators, dollars paid by the pharma generally don't count to the plan deductible for the patient. So now the patient walks into the pharmacy, if in an accumulator or in a poorly run maximizer program, they walk into the pharmacy in May.
And are told that if they want their drug, they're going to need to pay the $3,000 co-pay that was set out-of-pocket every month until they reach their deductible. With some of these co-pay maximizer/accumulator plans, the plan sponsor may be a little bit out of the loop relative to what is actually going on here.
The plan sponsor may think that members are doing fine, you know, they're getting their drug every month, so they may be surprised to learn about this running out of money in May issue. And what is true more often than it's not true. This $3,000 or whatever, hundreds or thousands of dollars payment due co-pay, the patient learns about it at the pharmacy counter or while trying to get chemo.
It comes as a complete surprise the fact that they owe three grand or whatever. What patient just shrugs and pays up in that moment because they happen to have their entire deductible or thousands of dollars lying around and at the ready. What a shock to find this out at the pharmacy counter or at the infusion clinic.
Some of these maximizer programs are also starting to veer back into accumulator zones, like they're doing things such as saying that the member must pay their out-of-pocket max or their deductible or 30 percent of the cost of the drug, right, like some number before the plan will allow the patient to use the co-pay reimbursement program to begin with.
So, there's other things that are emerging right now, which, again, cause the patient to have a very, very large out-of-pocket in order for them to get a drug which they have been prescribed and ostensibly, at least, need.
Allegedly, and sometimes for sure, dollars raked in from pharma make it across the PBM slash maximizer, vendor, middleman trench all the way over to the plan sponsor. For sure, especially for the administrative only maximizer vendors, yeah, you're going to have the dollars actually making it to the plan sponsor.
But sometimes the vendor running these programs is paid spread, right? So the more expensive the drug and the richer the co-pay card program, the more the vendor will make because they take a percentage of savings. So the more expensive, the more savings, therefore, the more the vendor is going to make. In these cases where the vendor is paid a spread, can I take perverse incentives for $600, Alex? Right?
But in sum, again, there's a lot to this conversation with Bill Sarraille, so please do listen to the whole thing.
Bill Sarraille's Advice for Plan Sponsors
[00:05:13] Stacey Richter: Bill offers five main pieces of advice, so I'm just going to cover them right here up front. Spoiler alert, I guess, but just to keep them all in one place.
Point of advice number one, look into what is going on with a maximizer and or accumulator program.
First of all, is the plan sponsor paying spread? And also, how are these programs being marketed to members and how aggressively? Because there are a lot of plan sponsors having way more negative impact than they suspect they are. So that's point of advice number one, really look into actually what is happening on the grounds with some of these programs.
Number two, point of advice, eliminate surprise. Any plan sponsor listening, and Brian Reid also says this very crisply in an episode a month or so ago. If a plan sponsor wants to do stuff like this, like force a patient to pay hundreds or thousands of dollars out-of-pocket, if at any point during the year they are going to wind up with thousands of dollars in co-pay or co-insurance to get their Crohn's disease med or cancer med or whatever, be really upfront about this at least.
It's really important if we really want to make sure that patients are taking maintenance meds. And getting the medications that they're prepared for the reality that at a certain point during the year, they are going to have a really big bill.
Legal and Ethical Considerations
[00:06:28] Stacey Richter: Third piece of advice, there is legal risk here. So also Bill's advice is check into whether accumulators and or maximizers are unlawful under the ACA and or by deceptive practices rules, when maximizers or accumulators are teed up as a benefit.
And it again, reference point of advice number two, it's not explained that dollars they get from pharma will be taken by the plan and not applied to the patient deductible. I was just reading about the crazy aggressive marketing tactics that some of these vendors are using to get members to sign up and yeah, definitely look into deceptive practice rules.
Four, if it's utilization management that we're trying to achieve here, then your utilization manager should be utilization managing. These maximizers are not meant to impact utilization management. Patients really cannot differentiate as per study after study, it's very difficult for patients to differentiate high value from low value care or meds.
So pretty much the impact of having a patient with thousands or hundreds of dollars of out-of-pocket spend to get a med isn't going to be to ensure that the right people are taking the right med. Point is, use the right tool for the right job. So if we're trying to keep patients away from low value meds, the tool for that is utilization management.
Also be aware, if the PBM says it cannot do utilization management or you’ll lose your rebates and or is pushing into a maximizer accumulator program to do this instead, that's kind of a clue that they cannot do it because they are taking money from pharma to not have any restrictions on a drug.
Read the article in the New York Times. Gift link in the show notes, you're welcome, about how PBMs took secret payments for the free flow of opioids, and Chris Crawford also talks about this sort of same ish thing in an upcoming show relative to GLP 1s. But, if you're trying to do utilization management, then do utilization management.
Last point of advice, use our understanding of this whole goings on as a rationale or a way to tamp down perverse incentives.
We want to wind up with patients getting charged a percentage of net prices, not a percentage of some wildly inflated list price with this whole accumulator maximizer contributing to, you know, just more wildly inflated list prices. So the co-pay programs can be bigger and someone can make even more money off of the percentage of savings.
And plan sponsors addicted to rebates now have another bucket of cash. Like this is just another example of how perverse incentives pervade the system. And we should certainly be aware of that.
Bill Sarraille was a healthcare attorney for many years. He retired from his law firm on the first of last year, and now he's doing the things he wanted to do before but couldn't because his billable rate was too high.
Bill is teaching at the University of Maryland Law School and doing some regulatory consulting, etc. He's working with a variety of patient groups.
My name is Stacey Richter. This podcast is sponsored by Aventria Health Group. And here is my conversation with Bill Sarraille.
Interview With Bill Sarraille
[00:09:28] Stacey Richter: Bill Sarraille, welcome to Relentless Health Value.
[00:09:30] Bill Sarraille: Well, thanks for having me.
[00:09:31] Stacey Richter: I am really looking forward to speaking with you about accumulators/maximizers. What's going on right now that plan sponsors might want to be aware of?
[00:09:44] Bill Sarraille: Well, from my perspective, patients are being harmed in a variety of different ways.
Sometimes, in a program that spreads out the entire cost of the coupon supported portion of the drug cost over the 12 months, we have situations where patients later in the year are experiencing problems. Other times, we have situations where there really isn't an attempt to smooth the coupon dollars over the course of the year and the patient is experiencing an access problem much earlier in the year, maybe by mid year or even in the first quarter.
[00:10:27] Stacey Richter: When you say experiencing a problem, you mean they go in to get their drug, They show up with the manufacturer coupon because we're talking about these specialty pharmacy products. A lot of times the co-insurance that the plan sponsors put against these are based on a percentage of the list price. The list prices, as we know, they're very high.
So when you're saying they wind up with a problem, what you mean is, they show up at the pharmacy and they're told their drug costs thousands of dollars or something.
[00:10:55] Bill Sarraille: Well, that's one problem, but it's not the only problem. The issue is that from the patient's perspective, and I think from the law's perspective, they have completely satisfied their deductible and their out-of-pocket maximum.
And so whatever service they're going to, whether it's for a specialty drug or for a retail general med drug, or if it's just to go to a physician's office or for a minor procedure in the hospital outpatient department, no matter what the service is, they understood that their entire deductible and their entire out-of-pocket maximum had been fulfilled and suddenly it's not. That's the problem from the patient's perspective.
[00:11:42] Stacey Richter: So, in other words, the patient knew that pharma was paying their deductible, and now the patient thinks the deductible is met, except that it's not?
[00:11:51] Bill Sarraille: Yes. People tend to think that the only way that there can be a problem for a patient, is that at some point in the year, they go to get the coupon supported drug, and now the coupon doesn't work for them, perhaps because of the manufacturer's terms, where the manufacturer has placed a ceiling on the coupon. But that's not the only problem that can occur. The reality is because, at least in my experience, plans in PBMs do a very poor job, and maybe not even a lawful job, of trying to explain to patients what in fact is going to be their treatment of manufacturer assisted payments by patients.
The issue that I'm talking about, where patients think, not having been adequately informed by their plan or PBM, that in fact they are not going to get credit for coupon assisted payments that they make. They are coming into treatment situations thinking that they have met their deductible, and thinking that they have met the out-of-pocket maximum, and they have not. And for, unfortunately, a number of those patients, they don't have the money to actually access the care. And so this becomes an access problem for them.
Challenges and Solutions in Healthcare Costs
[00:13:17] Stacey Richter: It's interesting what you're saying, and I know there's going to be a lot of plan sponsors who are listening, who are thinking the things that some plan sponsors when discussing these accumulators/maximizer programs or just co-pay cards in general, tend to, to think and, and let's just go down the laundry list just to get these on the floor.
And I'm not passing judgment here, right? Because these are really tough times we live in and, and pharma costs are accelerating. Like I was talking to someone the other day who said her pharmacy costs have doubled in the past five years. So this is certainly an issue, trying to keep premiums down. You know, family premiums have exceeded $26,000 or it's like $25,500, almost $26,000 a year, right?
So you have premiums becoming unaffordable. There's just, there's obviously a lot of issues here. One of the big reasons why these maximizer/ accumulator programs get put into place to begin with is, is basically to get double the deductible, right? Because if the pharma company is paying the deductible and then the patient is paying the deductible, now the plan can access two deductibles and those two deductibles then go to lower premiums for the entire patient pool. So that's kind of one thing.
[00:14:25] Bill Sarraille: The point that was made was that, you know, maximizers are a way to enable sick patients to make healthcare more affordable for healthy patients. And what I would say back to that is that's not the purpose of insurance. And it certainly isn't consistent with either the law or the policy of the Affordable Care Act.
That is fundamentally at odds with both the relevant legal structure and the policy that Congress put into place. People can think that that should happen, that sicker patients should be making payments that make premiums for healthier patients less expensive. But that's not a current reflection of the law as Congress has passed it and I don't personally think that that's the right policy.
I think that basically is an invitation to discriminate in favor of healthy patients to the detriment of sick patients which in the pre-existing condition change and in multiple other changes including the provision that forbids discrimination and based on health status. We see law actually moving in the opposite direction. So I don't have more to say about that. If people disagree with what Congress was actually trying to do, then they disagree with what Congress was trying to do. And the law can be changed, but that's not the law.
[00:15:50] Stacey Richter: The other plan sponsors thing is the notion that if one patient is taking a specialty pharmacy drug and gets their deductible paid for them, that's kind of unfair to somebody who needs a knee replacement or something like that, who actually has to pay their deductible by themselves. So, then you create a situation where there's kind of this disparity, where some people get their deductible paid for them and others do not.
[00:16:14] Bill Sarraille: The concept is that it's unfair that some patients are able to be supported and some are not able to be supported with manufacturer coupons. Again, you know, as a lawyer, at least by training, if not currently in practice, what I would say to that is, well, that's a wonderful policy slash philosophical observation. But it seems irrelevant to me because what the statute says is the following: The terms cost sharing include deductibles, co-insurance, co-payments, or similar charges. These are the cost sharing that have to be counted for purposes of a deductible at an out-of-pocket maximum under the law.
And that's where the clause ends. The terms cost sharing include deductibles, coinsurance, co-payments, or similar charges. That's it. It doesn't say, unless a drug manufacturer is the source of the dollars. And, you know, talk about fairness, I mean, if we are to interpret that language to exclude manufacturer dollars that the patient uses to pay any of those charges, then the statute would have to be read the same way for any other third party source.
A father couldn't pay an adult child's cost sharing. A charity that doesn't get any money from a manufacturer couldn't pay the cost sharing for a patient. We're stuck with the language we have in front of us, and the language in front of us doesn't make a distinction about the third party source. It simply says that the plan or the PBM is obligated to recognize cost sharing that includes deductibles, coinsurance, co-payments, or similar charges.
So I don't think the fairness question is the right question, but if we want to talk about fairness, what it would mean is the quite unfair result that no one could help that patient in need, and that can't be the right answer.
[00:18:15] Stacey Richter: And then the third thing that often gets brought up is that this whole "skin in the game", where if somebody's deductible gets paid for them, then they wind up accessing the healthcare system, and maybe in a way which is excessive. Because their deductible is paid, so they go get excessive medical treatment because they no longer have a deductible to pay.
[00:18:37] Bill Sarraille: I agree, it gets raised all the time, is this notion of "skin in the game". That one makes my head explode. Because what I hear when I hear skin in the game is: “Oh yes. It's a medically necessary service, but we're hoping that by putting this barrier in place, we can convince people not to access the medically necessary care that they have been prescribed by their physician.”
And that is, if we want to use the word unfair, I think we could use the word unfair, but I'm just going to stick with unlawful on that one because that is a fundamental breach in the relationship that is supposed to exist between an insurance company, its agents, and an insured person.
[00:19:24] Stacey Richter: So those are the three things that plan sponsors bring up.
[00:19:26] Bill Sarraille: Those do not resonate with me, unfortunately, at any level.
[00:19:31] Stacey Richter: There's this element of surprise, which constantly exists here. And that is actually a big deal, that it would be one thing if the patients understood that this was how the plan operated. But it seems like very often when the patient shows up with their co-pay card, they are told that the co-pay card no longer works because the benefit has been maximized and that benefit has gone to the plan and they are now responsible to pay their deductible. Like there's shock at that point in time. Brian Reid said this as well. There feels like there's something wrong with that.
[00:20:04] Bill Sarraille: I appreciate the comment that, you know, whatever one might think of issues one, two, and three, that we shouldn't have a situation where a patient shows up for care and they're hit with a bill that literally could be $10,000 that they're expected to pay in order to access care. And this is why I believe that many of these programs are presented in a way which creates issues in terms of deceptive and unfair trade practice act liability.
[00:20:35] Stacey Richter: And I want to dig in on that for a sec, but I think the last point that you're making is just simply, if this is, you know, there's a lot of hard questions that are being asked here and I was talking to someone the other day who was basically saying the drug costs were so high that the employer laid off workers.
You know what I mean? So like, these are really difficult, I'm going to use the word trade offs, it's this zero sum game here that is at least how it's being played out right now. But the element of surprise is an overlying factor here, and you just connected the dots between deceptive practices, which I'm on the edge of my seat, to hear. So maybe get into that a little bit, that irrespective of like what someone's choosing to do here. If people get taken by surprise that that's a thing in and of itself?
[00:21:28] Bill Sarraille: Well, it certainly can be. Yes. Even when there is something that attempts to provide some level of disclosure about these programs, the word that sometimes is used to describe the program is a benefit.
Well, I don't think that any average consumer would read that language and draw from that the parade of horribles that unfortunately they can subsequently experience. So yeah, I think that there are in fact some real legal issues that are presented here, not simply by the fact that these programs don't do what I think they have to do under the ACA, where the plan is subject to the ACA of course, and honor these payments from both the deductible and an out-of-pocket maximum perspective.
But separate and apart from that, just in terms of the obligation, obviously, not to deceptively induce a patient into carrying the insurance or staying with the insurance or making payments towards the insurance that they think that they're getting a policy that allows them to use this coupon assistance and they are not in fact getting an insurance that allows that to be the case.
I think another important issue for employers to consider is whether they're potentially in violation of the ADA by implementing accumulator and maximizer programs. The ADA does apply to benefit designs employed by employers, to the extent that the employer is taking particular benefit positions which reflect a disability based distinction.
So in a situation where a treatment or a procedure is used extensively or nearly exclusively, to treat a particular disability, the negative creation or alteration of an existing benefit design can, in fact, be seen as a subterfuge to discriminate against disabled employees. And I have a real concern that that is exactly what's going on in at least a significant percentage of accumulator maximizer benefit redesigns.
They do focus on a high number of interventions, particularly drug interventions, that are very much associated with disabled status. So I think that's a really important issue for employers to consider in evaluating these programs.
[00:24:04] Stacey Richter: There are nuances here obviously. I think in the states where accumulators have been banned, the specifics there, if the drug is the only drug that is available, then they're banned.
But if it's a case where there's six competitors, or there's a standard of care, then accumulators are okay. I also just kind of want to dip a toe into the fact that there are some drugs which are on a value formulary, you know, there are some plans that are really trying to create value formularies and they have determined that some drugs are not really of value and they're trying to not have people take those drugs and this is one of the means by which they are doing that.
[00:24:50] Bill Sarraille: From my perspective, that sounds like a plan and a PBM that isn't doing what it is supposed to do. So if the actual concern is that they think that they can deliver the same therapy at a lower cost, that's what utilization management is for. Taking advantage of patients lack of understanding about the position that the insurer is taking, I think, in disregard of the plain language of the federal statute is not the means by which they should achieve that end or that they have to achieve that end.
Plans and PBMs are expected to engage in utilization management. One of those elements of utilization management could be a step edit, where if they believe that, in fact, one therapy is just as good as another and is lower cost to the plan, that they can, in fact, require that the patient fail first on that less expensive drug before migrating to the more expensive drug. But do your job, Plan. Do your job, PBM. Don't victimize the patient as a response to your failure to do the thing that you're being paid to do.
[00:26:08] Stacey Richter: So if I wanted to get very cynical about this whole thing. If there is a plan who has a maximizer but not utilization management, it would make me very curious whether that maximizer was being paid a spread because, and what being paid a spread is, is that that maximizer gets some percentage of the savings or the cost of the drug.
Because if you think about it that way, it would be very profitable for that maximizer to not have any utilization management, right? Like, let the patient get prescribed the really expensive drug. Take the available pharma dollars, right, like I can get them, I mean, some of it goes to the plan, but some of it also goes to the maximizer. Now I have a whole lot of money. I mean, patient's still gonna wind up not having a script in May or June, but the maximizer got a lot of money before that.
[00:27:00] Bill Sarraille: I know you know, because you, you have devoted your podcast to this subject over and over again. We have incredibly perverse incentives that manifest themselves throughout the system.
You know, part of what I see as particularly objectionable about accumulator and maximizer programs is the way that it interplays with some of the other perverse incentives that you're talking about. You know, if you have a drug with a given list price, it's already providing a 50 percent rebate to that plan.
The plan then imposes a 40 percent co-insurance on the patient. The, we'll start with $1,000 post rebate, a $500 drug, 40 percent of the list price, the patient pays $400. Ridiculous. The patient is paid 80 percent of the total actual cost of the product. And then they're being lied to on top of that, being told that, oh, you're only paying 40%. What they don't realize is they're paying 40 percent of a made up number that doesn't apply.
[00:28:09] Stacey Richter: You can definitely see why over half of Americans with commercial insurance right now are considered functionally uninsured. That they're paying all this money for insurance that they then can't afford to use. What I'm hearing you, and again, I just, I really want to emphasize to listeners is that you have plan sponsors who are trying to figure out how to solve for these rapidly escalating pharma costs.
But I think the point that you're making is there's different ways to do that and doing it in such a way where either the patient's caught in the middle or the patient's caught by surprise is maybe not as palatable or legal.
[00:28:47] Bill Sarraille: I don't think it's either palatable or legal from my perspective. Look, I, we, we are on the verge of a premium exposion.
That's just the reality of the situation. That is not just a function of pharmaceutical prices. It would be lovely if we could just point our finger in one very specific direction and magically, poof, the problem could go away without having to face the harsher realities. But that is, I think, completely inconsistent with the actual data out there.
[00:29:22] Stacey Richter: That's definitely pretty clear, like most employers, most self insured employers who look through their data will discover. You know, like Marilyn Bartlett from Montana, 48 percent of her spend was acute hospitals. I've heard as high as 56 percent are not just acute hospitals, but just like hospital care.
So hospital care is generally speaking, I don't think I've ever encountered a plan sponsor who didn't say that dollars going to hospitals was their biggest category of spend, but not rising as fast as pharmaceutical trend. I was talking to someone the other day whose pharma spend doubled in the past five years.
So, like, just not necessarily how much of that money is making its way back to pharma, but just the trend for a self insured employer, the pharma trend is quite high, which is obviously of a concern. Now, it's still 25%, 23% of overall planned spend a lot of times, whereas hospitals are 50%, let's just say. So obviously hospitals are the highest category here, but if you're just talking about trend, that's why some employers are super concerned.
[00:30:25] Bill Sarraille: I totally get that. I would say from my perspective, even if you look at the drug spend, in many cases you're often looking at spend that is in fact influenced by hospital charges.
Hospitals, not insignificantly because of 340B, but certainly in part because of 340B, are making tremendous inroads into the specialty pharmacy marketplace and are among other third parties involved, the PBMs as well as a significant issue contributing to that spend. So even if we focus and you're right to get us to focus on the drug specific spend, as you're indicating that's a multifaceted component with multiple players who are contributing to those costs.
[00:31:14] Stacey Richter: Totally understood.
Final Thoughts and Conclusion
[00:31:15] Stacey Richter: So let's get to the advice portion of this conversation. Again, we've got rock hard place going on here, but there's probably better or worse ways to do many things and managing pharma trend is certainly one of them. So if I'm going to sort of distill this conversation down into some pieces of advice that I'm hearing you say, one of them is, can't have this element of surprise, right?
Like that's not fair to have people who have to get sick and be standing at a pharmacy counter or waiting to get their infusion. It can't be in that moment where they figure out that they actually don't have coverage for a treatment, right? So there has to be something that is done so that the benefits, you know, if a plan is using accumulators or using maximizers and they're doing it in this way, then it would seem to be the fair thing to do to just make sure everybody in the plan is aware of it.
That's the first thing I'm hearing you say.
[00:32:11] Bill Sarraille: It's definitely one of the things I'm saying. It's not the first thing I'm saying. The first thing I'm saying is that if you're covered by the ACA, I think this is unlawful. If you're not in fact covered by the ACA, then you certainly would be covered by state and federal laws that create liability for unfair and deceptive trade practices, which can include communications in the context of insurance in at least some instances.
So yes, I certainly think that a good step would be to at least rub our poor patient's nose in the fact that they are ultimately still going to be responsible for an incredibly important contribution in the form of both deductibles and out-of-pocket maximums.
[00:32:57] Stacey Richter: So number one, be upfront about it so you're not taking people by surprise and they do understand what benefits they actually have. That's only fair. The second thing if you don't, so maybe this is part B of the first one, if you don't, there's, there's some legal risk there, right, because it's, it could be deemed deceptive, especially if a maximizer or whatever is teed up as a benefit, which I definitely have seen in some cases.
[00:33:22] Bill Sarraille: Yeah, I mean, I think we're headed to some pretty serious litigation here. I mean, I think we're in a holding pattern where obviously we had one district court ruling that focused not on the statute, but instead on the regulation. We have HHS declaring that it's not going to enforce that policy as a matter of federal law. We have some state insurance commissioners who have said, well, that's great that you're not, but I am.
And at some point in the new administration, probably not that far into the new administration, we're going to have a new rule. I think there's going to be a bunch of litigation at that point. I would be surprised if that litigation is just between patient groups and the government as it was on the first go round, my thought will be that there will be litigation against employers, there'll be litigation against plans, there'll be litigation against PBMs. That's, I think, where we're headed.
[00:34:17] Stacey Richter: And specifically around this, like, maximizer/accumulator type activity litigation?
[00:34:23] Bill Sarraille: Yes, I think so.
[00:34:24] Stacey Richter: What was the one case that you had mentioned? You said that there was a case.
[00:34:28] Bill Sarraille: Yes, it was brought by three patient advocacy organizations and three patients against the Department of Health and Human Services in the U.S. District Court for the District of Columbia. It basically struck down HHS's rule, which said that its regulation could be interpreted as both permitting ACA covered plans to count these amounts towards the out-of-pocket maximum and deductibles.
And that it also permitted the same insurers not to count the same amounts towards deductibles and out-of-pocket maximums. And what Judge Bates said was, Well, that's kind of the definition of arbitrary and capricious government action. You can't say, that the same regulation means two different things at the same time.
So he struck down that regulation, that reinstituted a prior regulation, and that regulation says that you in fact have to honor those payments so long as the coupon is not used on a drug for which there is a generic equivalent.
[00:35:38] Stacey Richter: Which is kind of what we were talking about before. And this is specifically with the ACA plans, so the marketplace or fully insured.
[00:35:44] Bill Sarraille: Yes.
[00:35:44] Stacey Richter: Okay, so we've got, Don't take people by surprise, just if you're going to do something like this, then you got to be upfront about it.
If you're going to give plan sponsors another piece of advice, beyond kind of like, actually look into whether you've got patients running around unable to get drugs and what drugs they are, because I do get the feeling that there are a number of plan sponsors who are wholly unaware that this is going on.
[00:36:08] Bill Sarraille: Yeah, I mean, my other two pieces of advice, I suppose, would be that if you have a utilization management end that you're trying to achieve, then expect your provider of the utilization management services to manage the services.
And if you're not getting that service, then you need to change vendors. You need to change your partner. These programs are not a means to effect utilization management. There is a tool belt. Use the tool belt.
I think the other observation that I would make is that this particular issue fits into the wider question of unraveling the perverse incentives that seem to dominate this space.
There are at least some emerging options out there that are focused on net pricing as a way to structure healthcare services. And part of the problem here from the patient perspective is their co-insurance is a percentage of a made up number, a list price that your plan is not paying, your PBM is not paying, and if we could get to a place where people are actually being charged a percentage of a real number, that would go a long way towards making all services, not just specialty drugs, but all services more affordable.
[00:37:36] Stacey Richter: And a big point that you're making there is, you know, still you have patients who are paying co-insurance and this is true across the board. They're paying co-insurance based on the list price, which is artificially inflated because everybody wants the rebates. So you wind up with situations where a patient's paying a percentage and this happens a lot like at the pharmacy counter with generics.
Where the co-pay is actually more than the cost of the drug because the list price is so high. So yeah, I mean, indeed, if there is a way that the patients aren't being subjected to these artificially high list prices and yeah, butting up against the whole plan sponsors are addicted to rebates, again, because they enable lower premiums.
[00:38:22] Bill Sarraille: At least that's the way they're presented. You know, a rebate guarantee may or may not actually be leading to lower prices. And because you as the sponsor don't actually know what the net prices are underneath it, you don't actually know whether it's leading to lower prices or not.
[00:38:38] Stacey Richter: Listen to the show with Scott Haas for a very eloquent breakdown of exactly what you're talking about there, and the one with Paul Holmes, where he gets into like, What is rebate, actually? Whoever gets to define the rebate gets to determine exactly how much money winds up in the plan sponsor's pocket. And that is, yeah, the PBM, so. So, there's just so many, so much. It's a fracas.
[00:39:01] Bill Sarraille: It's a lot of perverse incentives is what it is.
[00:39:04] Stacey Richter: Indeed. Bill Sarraille, love your LinkedIn, lots of food for thought. Also your Substack, we will link to both in the show notes.
Let me just say your whole retirement game, not strong.
[00:39:19] Bill Sarraille: Yeah, no, I'm failing retirement. That's that's quite clear.
[00:39:23] Stacey Richter: Bill Sarraille, thank you so much for being on Relentless Health Value today.
[00:39:26] Bill Sarraille: Thanks so much for the invitation. Great to chat with you.
[00:39:29] Tom Nash: Hi, this is Tom Nash, one of the RHV team members. You might recognize my voice from the podcast intro. If you love this show and you want to show us your support, please follow us on your favorite podcast app, sign up for the newsletter, or maybe consider making a small donation in the tip jar. Thanks so much for listening.