Payers tend to manage high-cost, high-complexity disease states quite differently than other indications. In recent years, payers’ growing reliance on managed care carveouts, in the form of specialty benefit managers (SBMs) and alternative funding programs (AFPs), has directly impacted pharma companies that offer patient assistance. This year, the downstream effects of the Inflation Reduction Act (IRA) and changes to Medicare Part D benefit will also play a role in patient access.

For pharma companies that offer a patient assistance program (PAP), keeping an eye on managed care trends is essential, as utilization shifts can directly impact the availability of funds. PAPs are typically focused on providing assistance for both uninsured and under-insured patients, or patients whose health plans do not cover a specific drug.

Let’s take a look at the impact of these trends and how pharma companies with PAPs can prepare for the year ahead.

Hidden Influence of Specialty Benefit Managers 

Many payers are relying on specialty benefit managers (SBMs), or third-party administrators with expertise in a given therapeutic area, to make coverage recommendations intended to improve outcomes and lower costs. The rise of SBMs impacts some therapeutic areas far more than others, including mental health, neurological disorders, diabetes, and oncology. Many SBMs offer services ranging from clinical pathway development to provider education to complex care management services.

In many instances, the SBM will specify which drugs the payer should cover, which should be excluded, and which should be preferred. In others, the SMB might recommend the use of more restrictive policies for non-preferred therapies. For example, if an SBM wants to tightly manage utilization for a particular drug, they can implement more complex prior authorization (PA) criteria, such as specifying that providers must include clinical notes or additional testing results before a patient will be covered for the drug.

While SBM management does bring more structure to a therapeutic area, it can also make it far more difficult for physicians to treat their patients in the way they see fit. SBM management is a hidden carve-out mechanism that has an outsized impact on the patients in these indications, as it impacts their physician’s ability to prescribe certain therapies. 

More Restrictive Prior Authorizations

As PAs in these high-cost areas grow ever more complicated, with new and various criteria, the administrative burden on providers increases. Lately, we’ve seen an increase in additional eligibility criteria for prior authorizations, with some payers mirroring the strict inclusion/exclusion criteria from a manufacturer’s clinical trials to limit member utilization.

Many payers and SMBs are also shortening the PA approval period, which means patients need to be reauthorized if they want to continue on the therapy. As reauthorization criteria becomes more complex, it can be more difficult for patients to continue their course of treatment. Providers might be required to show proof of the patient’s continued medical necessity, or provide documentation of incremental outcome improvements, via lab values, a quality-of-life scale, or another measurement method.

While pending federal legislation aims to encourage the use of electronic PA systems, many authorizations are still completed manually. According to MMIT research, more than one-third of physicians still submit PA requests via fax, phone or mail, and approximately 20% of payers are still using a manual PA process.

By adding more steps for physicians to complete, complex PAs can cause serious treatment delays, which in turn increase the risk of patients abandoning their treatment plan. From a pharma company’s perspective, the risk of complicated PAs is that physicians may ultimately decide the therapy in question is not worth the hassle; instead, they’ll choose a different drug with fewer barriers to access.

Despite the more restrictive use of PAs, there are pockets of resistance to this trend. In response to state and federal legislation and widespread pushback on the overuse of PAs, several major payers—including UnitedHealthcare and Cigna—have begun reducing PA requirements, especially for drugs and services with high approval rates or low costs.

Growth of Alternative Funding Programs

Alternative funding programs (AFP) are a different type of specialty carve-out that’s focused on saving payers money through the use of manufacturers’ PAPs. In exchange for managing a specialty area on a payer’s behalf, AFP vendors charge a facilitation fee. First, the AFP vendor will ask a payer to remove certain high-cost drugs from their formularies, or to designate these drugs as ‘nonessential,’ which allows the plan to bypass annual limits on patients’ out-of-pocket costs. The AFP vendor then helps these newly underinsured members apply for PAP funds to cover the cost of the drug.

For payers, AFPs can be hugely beneficial, as they significantly offset payer costs, while patients still receive the therapies they need. However, AFPs have serious ramifications for pharma companies, as they rapidly deplete PAP funding intended for patients in need. They also increase the number of patients who are functionally uninsured in a given space, which can backfire in catastrophic ways.

According to MMIT Index research, physicians and oncologists are united in their negative opinions about AFPs, as they delay their ability to treat the patient and reduce medication adherence. As alternative funding vendors are not guaranteed a consistent source of PAP funding, access to treatment can be delayed indefinitely when funds aren’t secured.

Interestingly, many payers also condemn AFPs, as their use distorts cost-sharing strategies and drug rebate programs, and can negatively impact patient care coordination.

Pharma Pushback on AFPs

For pharma companies hoping to create sustainable, efficient PAPs, the growth of AFPs is highly problematic. In order to ensure that assistance funds are used for patients who really need support, some pharma companies are no longer allowing patients with any commercial insurance to apply for their assistance programs.

Many manufacturers are also changing their eligibility criteria and adjusting their federal poverty level (FPL) screening criteria in an effort to weed out patients impacted by a payer’s use of an AFP. For most PAPs, the standard criteria for participation is 400% FPL, meaning that individuals whose household income is at or below 400% of the FPL can qualify for assistance.

However, in some competitive therapeutic areas, manufacturers are beginning to lower the FPL income cap, even for branded products. In the biosimilar space, many manufacturers do not have the funds to offer a PAP for their products; those that do tend to have a much lower FPL threshold.

Of course, any changes to a manufacturer’s PAP program have downstream effects. Providers may feel that the pharma company is not offering as much support for patients as they once did. Pharma companies will need to proactively educate patients on alternative processes for assistance, and should even consider identifying at-risk patients in advance to help them through the process.

IRA’s Impact on Out-of-Pocket Costs 

The IRA’s Medicare Drug Price Negotiation Program is undeniably good for Medicare beneficiaries. By negotiating a lower list price for the most expensive and frequently utilized drugs, the program will directly impact how much Medicare beneficiaries pay in co-insurance, which is typically 10 to 20%. Reducing the overall list price for these selected therapies will allow Medicare to save money while passing these savings along to enrollees.

However, the program might negatively impact drug affordability for commercially insured patients, as the reduced list prices will apply only to Medicare. If manufacturers of the selected drugs choose to keep their original list price in place for commercial plans, the commercially insured will continue to pay more out-of-pocket for the same drugs. However, to offset their Medicare losses, some manufacturers may decide to increase the list price of their products on the commercial market, thereby raising patients’ co-insurance costs.

Patients with a higher out-of-pocket cost may have trouble accessing their therapies, especially if payers are imposing more complicated restrictions and PAs. Our research indicates that  payers are likely to increase restrictions in 2025 in order to control costs. According to a recent MMIT Index Rapid Event Primer, 60% of payers plan to increase their use of prior authorizations, and 45% plan to increase the use of both step edits and product exclusions in 2025. 

Four Steps for Pharma PAPs 

In light of these trends, pharma companies that offer PAPs must be proactive in monitoring and managing their use. Here are four steps companies should take in 2025:

Give providers access to coverage/restriction details: Pharma companies should provide real-time coverage data on their brand websites to help ensure a smooth prescription and reimbursement process. Generalized or out-of-date coverage information is not sufficient, as providers need detailed, accurate data on what is required for each patient. With a dynamic coverage look-up tool, physicians can search by plan name to see the specific coverage criteria for PAs, such as the number and type of steps or any required testing.

Provide a letter of exception or medical necessity: Pharma companies can relieve some of the administrative burden of complex PAs by providing physicians with a letter of medical necessity or a letter of medical exception to submit. The letter should offer payers additional insights and clinical evidence to support the patient’s use of the therapy. Be sure to change templates as necessary, depending upon the feedback physicians are receiving from payers. By supporting physicians throughout the PA process, pharma companies can drive increased approval rates for their brand.

Exercise caution in your PAP eligibility criteria: For pharma companies launching a new product, market access experts advise not to be overly generous with the inclusion/exclusion criteria established for a new PAP. If payers view your PAP as well-funded, with relatively easy access for patients, they may not be as concerned about extending coverage for your product.

Segment PAP populations: By closely tracking changing coverage for participating patients, pharma companies will be better able to move patients out of their PAPs when assistance is no longer needed. Programs like benefit verification services, patient outreach programs, and M3P enrollment support can help pharma companies be more proactive with their PAP patients, which ultimately can result in a more sustainable assistance program to provide resources to patients who truly have no alternatives.

By monitoring market access and managed care trends, manufacturers of specialty therapies can keep track of payers’ shifting approaches to utilization management—and the potential impact on their patients.

For strategic planning and forecasting activities related to managed care and access dynamics, learn more about MMIT’s Custom Market Research. For payer and IDN feedback on the efficacy of brand messaging within a TA, learn more about MMIT’s Message Monitor.