In May 2022, Johnson & Johnson (“JNJ”) filed a lawsuit[1] against Save On SP, LLC (“SaveOnSP”), essentially alleging that SaveOnSP illegally pilfered co-payment coupon and manufacturer assistance programs offered by JNJ to help patients afford increasingly higher out-of-pocket obligations. Specifically, the complaint alleged, among other things, that SaveOnSP circumvented patients’ out-of-pocket maximum set forth under the Affordable Care Act (“ACA”) for essential health benefits, and inflated patients’ co-pay costs to increase funds extracted from JNJ’s co-pay assistance program. JNJ further alleged that it paid $100 million more in co-pay assistance due to SaveOnSP’s scheme. In this article, we discuss SaveOn’s scheme alleged by JNJ and what it means for patients and manufacturers, as well as plan sponsors.
What is SaveOnSP?
SaveOnSP administers a co-pay maximizer program called “SaveOnSP Program” on specialty medications by partnering with Express Scripts, Inc. (“ESI”) and ESI’s specialty pharmacy, Accredo Health Group, Inc. (“Accredo”). SaveOnSP has elements of a co-pay maximizer program. The lack of clarity around SaveOnSP’s operations appears by design, with its website providing little information regarding its operations or services.
What is a Co-Pay Maximizer?
Co-pay maximizer programs sprung out of an earlier payer tactic, called co-pay accumulators, which sought to disallow manufacturer co-pay coupons from counting towards patients’ out-of-pocket thresholds (for example, in connection with deductible thresholds or maximum out-of-pocket spending). Co-pay maximizers take this concept one step further, and under a co-pay maximizer model, payers intentionally manipulate the set co-pays for various medications to ensure that the full value of the pharmaceutical manufacturer’s co-pay savings program is extracted. Co-pay maximizers tout themselves as reducing plan sponsors’ total drug spending by shifting costs to manufacturers through targeted increases to patients’ stated co-pays when a manufacturer co-pay coupon is available. For example, rather than employing a standard $25 co-pay for a branded drug, a maximizer might set the co-pay at $1,000 per month when the manufacturer has made a co-pay coupon available with a maximum annual benefit of $12,000.
Some co-pay maximizers extend their focus beyond just co-pay coupon programs, and actively search out free drug programs offered by manufacturers for patients without any insurance. In these instances, the co-pay maximizers work with the plan to exclude such drugs from coverage altogether in order to make such patients appear as being uninsured and usher them into manufacturer-free drug programs. However, one important caveat is that such co-pay maximizer administrators (including PBMs) keep significant amounts of these so-called “shared savings,” sometimes retaining 25% or more of the value of the manufacturer’s savings programs. In addition, PBMs may also seek rebates for these same claims (essentially double-dipping) while simultaneously claiming that they bear no obligation to share such rebates with plan sponsors. Hence, PBMs, especially the large ones, are incentivized to partner with third-party administrators to operate specialty drug maximizer programs, such as SaveOnSP Program, and have the patients enroll separately with the third-party administrators.
What is SaveOnSP’s Alleged Scheme?
The ultimate goal of SaveOnSP’s alleged scheme is to drain the co-pay assistance program provided by JNJ (e.g., CarePath), which would increase SaveOnSP’s fee (up to 25% of funds extracted from a co-pay assistance program). The scheme involves, among other things, the following:
- Recategorizing a drug from “essential health benefits” to “non-essential health benefits,” which then enables SaveOnSP to over-inflate patients’ co-pay amounts beyond the ACA’s annual out-of-pocket maximum (note that PBMs also set co-pay tiers and have the ability to manipulate which drugs belong to each tier);
- SaveOnSP over-inflated patients’ co-pay amounts to the maximum (in JNJ’s complaint, JNJ referenced a statement provided by a SaveOnSP representative, “if the amount of assistance per fill is $6,600: ‘we would literally set the patient co-pay to $6,600, and you would save that amount on every fill.’”);
- Accredo encourages patients to enroll in SaveOnSP Program even though a patient’s co-pay may have already been reduced to $10, $5, or even $0 by CarePath; and
- SaveOnSP chooses drugs that have the most lucrative co-pay assistance program.
What is the Financial Impact on Patients?
Dollar amounts extracted by SaveOnSP from a pharmaceutical manufacturer’s co-pay assistance program do not contribute to a patient’s deductible or out-of-pocket maximum. In other words, the patients will still face higher costs for other healthcare services. What’s worse, the patients pay monthly premium for their health benefits with the expectation that they will be receiving funded coverage for their medications. However, through these arrangements, PBMs pay little to nothing out of the funded benefit for these drugs, causing the patients to pay substantial sums for a benefit they theoretically could have equally received without insurance. These “savings” (i.e., monies extracted by co-pay maximizers from manufacturers’ co-pay assistance programs) are not passed onto the patients who continue to pay rising premiums despite their PBMs paying less—and in some instances, nothing—for the patients to receive the medications.
What is the Impact on Pharmacy Providers?
Through programs like SaveOnSP, PBMs act to carve out drugs (mostly expensive specialty drugs) from a drug formulary and push those prescriptions into free drug programs sponsored by manufacturers. Through these free drug programs, the medications can only be filled at a limited number of pharmacies which have contracted with the manufacturer to provide free drugs to patients without insurance. As a result, when a patient is pushed into the free drug program, independent pharmacies lose the ability to dispense the medication to the patient, and physicians administering drugs must obtain the medications through “white bagging” from a free drug pharmacy. Both situations result in a loss of revenue to the provider as well as disjointed care.
What is the Impact of Co-pay Maximizers on Pharmaceutical Manufacturers?
Pharmaceutical manufacturers certainly bear the brunt of such co-pay maximizer programs. The monies siphoned by SaveOnSP (enabled by its partnerships with ESI and Accredo) is draining manufacturers’ benefits intended for patients. In the complaint, JNJ acknowledged that any attempt to reduce co-pay assistance on a patient-by-patient basis is unattainable due to the secretive nature of SaveOnSP’s operations. Likewise, PBMs including ESI benefit from the same secretive arrangement through creating a vertically integrated network, ranging from Plan Sponsors to providers. Such secretive arrangements only benefit PBMs and their vertically integrated partners at the expense of patients. Pictured below is a snapshot of vertical integration in the pharmacy benefits industry.
Worse yet, however, co-pay maximizers and affiliated PBMs often engage in “double-dipping” by extracting drug rebates in addition to excess discounts through co-pay assistance programs. In some instances, PBMs may be claiming rebates even when they have pushed the medication outside of coverage and required the patient to obtain the drug from the manufacturer’s free drug pharmacy. Indeed, JNJ disclosed in the complaint that it paid over $8 billion dollars for rebates in 2021 to commercial plans and PBMs.
It is also worth noting that the United States District Court for the District of Columbia issued an opinion granting Summary Judgment to Pharmaceutical Research and Manufacturers of America (“PhRMA”), and setting aside the December 2020 Medicaid Best Price rule, on the grounds that the rule violated the Administrative Procedure Act. This decision recognizes the somewhat underhanded “scheme” being employed by PBMs and co-pay accumulator and maximizer programs to siphon benefits intended for patients and fits within a string of other recent actions aimed at these programs such as the JNJ’s lawsuit against SaveOnSP.
What Is the Impact on Plan Sponsors?
Co-pay maximizer programs are the most prevalent in commercial health plans, especially with respect to self-funded employers and union groups. While such programs may tout themselves as saving money, they come with added complexities and obfuscation, making it difficult to tell whether a plan is getting a deal at all. For example, the fee percentage charged by companies like SaveOnSP in the form of “shared savings” may exceed the net cost of the drug that could have otherwise been attained when factoring in rebates. While PBMs still likely obtain rebates on these claims, they are not likely being passed on to plan sponsors, which further creates compliance concerns under the newly enacted Consolidated Appropriations Act of 2021 (which requires plan sponsors to report all rebates and fees earned on behalf of prescriptions dispensed to their beneficiaries).
How Frier Levitt Can Help
Frier Levitt represents manufacturers and plan sponsors with price reporting obligation compliance (such as requirements set forth under the Consolidated Appropriations Act), negotiating and drafting rebate agreements with PBMs, and evaluating co-pay assistance program requirements and compliance. If you have questions about reporting obligations or are looking to develop compliant programs, contact us.
[1] Johnson & Johnson Health Care Systems, Inc. v. Save On SP, LLC., 2:22-cv-02632-JMV-CLW, pending in the United States District Court for the District of New Jersey.
