Editor’s Note: Below Katie Herrick, Principal Consultant of Blue Fin Group, and Dan Landis, Senior Consultant of Blue Fin Group share insights on how pharmaceutical companies are adapting to the changing healthcare environment by focusing on improving patient access and affordability.

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As the healthcare landscape evolves, pharmaceutical manufacturers are increasingly adopting strategies to optimize patient access and affordability. One such strategy gaining traction is the $35 patient out-of-pocket cap, aimed at preventing patients from abandoning their prescriptions at the pharmacy counter or switching to generic alternatives.

The Evolving Prescription Drug Market

In the 1990s, the drug benefit landscape was relatively straightforward — patients typically paid a nominal fee for generic medications or a slightly higher amount for branded products. Fast forward to today, and the situation is much more complex. Most drug plans now feature three or more cost tiers, driven by several key factors:

• Increased Drug List Prices: The cost of branded medications continues to rise.
• Specialty Products: The introduction of high-cost specialty medications has added new layers of complexity.
• Crowded Drug Classes: Many therapeutic areas are now saturated with generic alternatives, intensifying price competition.

These factors are increasingly pushing general medicine branded drugs into the cash-pay market, raising significant considerations around patient affordability.

Why Are Branded Drugs Moving to Cash-Pay Markets?

Four primary factors are contributing to the shift of branded drugs into cash-pay segments:

1. Cash Pay and Generic Dominance: With the rise of digital pharmacy options like Mark Cuban Cost Plus Pharmacy and Amazon Pharmacy, patients are becoming more price-conscious and opting for lower-cost alternatives outside traditional retail pharmacies.
2. Insurance Ineffectiveness: Insurance plans are often failing to provide adequate coverage, leaving patients to shoulder high out-of-pocket costs. Many are turning to cash payments to avoid high copays, even though these do not contribute to their insurance deductibles.
3. Government Legislation: Recent policies, such as the Inflation Reduction Act (IRA), have capped out-of-pocket costs for Medicare enrollees. These measures, while beneficial to patients, also place pressure on manufacturers to comply with price caps across the board.
4. Commodification of Drug Classes and Treatment Options: In certain therapeutic areas, such as mental health, Ophthalmology, women’s health, Medical Dermatology and most recently obesity, crowded drug classes and lack of insurance coverage for some branded drugs drive the commodification trend.

Navigating the Challenges: Copay Assistance Models

Manufacturers are exploring various copay assistance models to address patient affordability challenges while maintaining market sustainability. Here’s an overview of some of the models currently in use:

• Not Covered Copay Assistance (Denial Conversion/eVoucher): These well-established models offer financial support to commercially insured patients. While they can lead to higher gross sales, they are also susceptible to abuse and are not generally applicable for government-insured patients.
• Cash Offer Programs: These involve cash coupons or true cash discounts, with the former being more common for brands. While widely available and transparent, they come with similar risks to not-covered copay cards and potentially present price ambiguity challenges with payers.
• COGs-Based Consignment Models: These programs, which involve contracting with pharmacies to dispense free drugs to cover high out-of-pocket costs, offer more control and potential margin improvements, but require increased oversight and data management.
• Authorized Generic/Unbranded Partnerships: This approach introduces new NDCs by using authorized generics or unbranded versions as ceiling-priced alternatives. It allows for price segregation but requires collaboration and complex measurement.

The Future of Affordability and Access in Pharmacy

As the general medicine branded market continues to shift toward cash pay, manufacturers must reconsider the challenge of affordability when insurance breaks down. Key considerations include understanding the benefits and drawbacks of various copay assistance models and aligning internal strategies with patient needs and market dynamics.

Conclusion

The $35 out-of-pocket strategy represents a critical tool for pharmaceutical manufacturers in enhancing patient access and managing affordability. However, navigating this complex landscape requires a strategic approach, balancing patient needs with financial sustainability. By evaluating the appropriate models and adapting to market changes, manufacturers can better support patients and ensure continued access to essential medications.

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