Some health plans push patients toward specialty drug charities on purpose

The Labor Department believes it can stop that, the head of EBSA testified at a U.S. House hearing last week.

The U.S. Labor Department could soon crack down on self-funded employer health plans that cut pharmacy costs by sending patients to specialty drug purchase subsidy charities.

The “alternative funding program” strategy for specialty drugs came up last week during a House Education and the Workforce health subcommittee hearing on the Labor Department’s Employee Benefits Security Administration, which was streamed on the web. The only witness was Lisa Gomez, the Labor Department assistant secretary in charge of EBSA.

Rep. Lucy McBath, D-Ga., asked for Gomez’s help with reining in the specialty drug alternative funding program strategy.

A specialty drug is a relatively new, on-patent, brand-name drug that costs more than about $1,000 per month.

Related: 3 things to know about specialty pharmacy in 2024

In the past, health insurers complained that some drug makers were getting around insurance company utilization management provisions, such as high copayments for very expensive drugs, by having charities cover the patients’ share of the costs. By reducing patients’ own costs, the copay assistance program charities encouraged too many patients to use extremely high cost plans, according to the insurers and their pharmacy benefit managers.

Now, McBath said, some vendors are encouraging employers to classify specialty drugs as “nonessential” and push them off the plan “formularies,” or covered drug lists.

McBath joined with Rep. Rick Allen, R-Va., to write a letter about the alternative funding program issue in April.

The copay assistance program loophole looks as if it will save employers money but actually causes insured patients to use resources that should be helping the uninsured, McBath said.

Another problem is that patient assistance charities may not cover the specialty drugs for all patients, she added.

“Oftentimes, these patients must shoulder the full cost of life-saving medications or experience delays that can result in harmful and long-lasting implications,” she said.

Gomez said one problem is how the alternative funding programs are marketed.

“Employers find that these programs are not what are being sold to them,” Gomez said.

McBath asked Gomez whether the Labor Department has the statutory authority to address the issue.

“Yes, thank you, we do,” McBath said.

Constrained resources: Gomez said when asked about other benefits enforcement issues that EBSA has only 850 employees, only about one investigator for every 1,300 federally regulated plans and no ability to impose fines on bad plans.

“There are a lot of opportunities for bad actors to be slipping through the cracks,” Gomez said. “We are a minuscule agency compared to our responsibilities.”

Also at the hearing: Gomez emphasized her belief that the Labor Department’s new fiduciary standard for retirement plan asset rollover advice is appropriate, and she predicted the requirements would have little effect on retirement savers’ access to advice.

She also defended the department’s recent moves to overturn Trump-era regulations allowing expanded use of association health plans and cutting the maximum duration for short-term health insurance policies to three months, from three years.