How alternative funding programs prevent access to medications

Understand how commercial health insurance alternative funding programs (AFPs) prevent patient access to specialty medications, and what you can do if you’re affected.

If you have health insurance through your employer, your insurance plan may be using a cost-saving approach known as an alternative funding program (AFP) that could hurt your access to specialty medications and increase your out-of-pocket medication costs.

Specialty medications are expensive prescription drugs that treat rare, complex, and chronic health conditions. Even if your healthcare provider prescribes a specialty medication that is the best course of treatment for your condition, your health insurance plan may deny coverage and then require you to choose between enrolling in an alternative funding program or paying in full for the medication.

Ultimately, this delays or denies access to medications, and increases out-of-pocket costs for patients with rare and chronic health conditions.

The PAN Foundation outlines what you need to know about AFPs, and what you can do if you’re affected by an AFP.

What is an alternative funding program?

Alternative funding programs, or AFPs, are programs designed by third-party, for-profit vendors marketed to self-funded employer health plans as a way to avoid costs for specialty medications. AFPs can be complicated and challenging for patients to recognize at first.

AFPs only impact people with commercial, or private, health insurance.

How AFPs work

AFPs typically work in one of two ways:

1. Plan exclusion of coverage, offer to work with a vendor
2. Plan automatic denial of prior authorization for coverage, requirement to work with a vendor

Know your AFP terms

• PAP: refers to a manufacturer patient assistance program.
• Vendor: refers to the outside company or third-party vendor that the insurance company contracts with to offer or require help obtaining the denied drug.

Exclusion of coverage, with an offer to work with an outside company

For this type of AFP, the health insurance plan excludes coverage for selected specialty medications, leaving you without coverage for these drugs under the plan benefits.

You are “offered” the “opportunity” to work with the contracted vendor to obtain your drug through another source, usually a manufacturer patient assistance program (PAP). The vendor may ask you for personal information, including tax returns, pay stubs, and/or limited power of attorney.

• If a PAP is not available or you do not qualify for the PAP, your employer may choose to (but isn’t required to) override the exclusion as a medical necessity.
• If the PAP application is not approved, and your employer does not override the exclusion as a medical necessity, you must pay for the medication yourself. These costs will not be counted toward your deductible or out-of-pocket cost sharing requirements.
• If a PAP is not available, some vendors may try and obtain the medication through a foreign pharmacy, leaving you with the imported drug as your only option for accessing the medication through your plan.

If you don’t work or comply with the vendor’s requirements, you must pay for the medication yourself without any of the expenses being counted toward your deductible or out-of-pocket cost sharing requirements. Optionally, you can get other insurance.

Automatic denial of prior authorization, with requirement to work with an outside company

With this type of AFP, the health insurance plan covers the specialty medication but implements an automatic denial of prior authorization that requires you to first work with the vendor to seek the drug through another source, usually a PAP, as a pre-condition for coverage.

• If a PAP is not available or you do not qualify for the PAP, the vendor may try to seek the medication through a foreign pharmacy and/or apply for patient assistance to off-set the plan’s financial cost of covering the medication.
• If the vendor’s efforts to get the medication through a PAP or foreign pharmacy are unsuccessful, the specialty drug will be processed through the plan’s established benefits procedure (the plan may cover the drug in this case).

If you don’t work or comply with the vendor’s requirements, you are typically deemed to be in violation of the plan’s terms for prior authorization. You are now responsible for paying for the medication yourself without any of the expenses being counted toward your deductible or out-of-pocket cost sharing requirements. Optionally, you can get other insurance.

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Did you know…?

If you are eligible for a manufacturer or charitable patient assistance program, you don’t need to apply through an alternative funding program. You can apply on your own and use that assistance to pay for prescriptions—and it will count toward your annual out-of-pocket limit.

Many charitable patient assistance programs, such as PAN’s financial assistance, use your annual income as part of their eligibility criteria. You can also sign-up to use PAN’s free tool FundFinder to get notifications when a fund that covers your medication becomes available at nine different charitable patient assistance programs.

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Ways AFPs negatively impact patients

There are several negative impacts to patients because of AFPs, including:

• Delaying or denying access to needed medications, potentially worsening the patient’s condition or disease 
• Possibly exposing patients to non-FDA regulated imported drugs and their potential harms 
• Possibly interfering with provider treatment decisions, including non-medical switching of medications 
• Reducing resources available from safety-net programs intended for uninsured or underinsured patients 
• Targeting patients with serious, complex, or chronic conditions who require specialty medications
• Increasing costs for patients and eliminating their cost-sharing protections 

How does an AFP increase my out-of-pocket expenses?

You must pay for the medication yourself if:

• You fail to work with the vendor your health insurance plan refers you to, or if you don’t comply with the vendor’s requirements
• Your application for a patient assistance program is unsuccessful, and your employer also does not override the exclusion as a medical necessity

In either case, the expense you pay will not be counted toward your deductible or out-of-pocket cost sharing requirements. Optionally, you can pay for other insurance coverage.

How to recognize an AFP in your health plan

The information included in your plan documents, as well as letters you receive from your plan, may provide clues that your plan is working with an alternative funding program. For example, if any of the following applies to you, your health plan may be working with an AFP.

Does your health plan:

• Require you to work with another company to access your medication(s)?
• State that your medication is a “non-essential health benefit” or is “carved out” from coverage?
• Indicate that if you choose not to work with the AFP, you will need to pay 100% of the cost of your drug and these costs will not count toward your deductible or cost-sharing limit?
• Ask for personal information about your health condition, household income, and household size?
• State that the AFP company can help import your medication from another country?

If you answered yes to any of these questions, your health plan may be working with an AFP.

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Use our interactive tool to find out if your health plan may be working with an alternative funding program:

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What you can do about AFPs

Appeal the initial coverage decision from your health insurance plan

When you receive an initial denial of coverage letter from your plan—even before you work with an AFP—you may be able to appeal this decision through the following steps:

• Internal appeals process: You can request a review of your plan’s decision to deny coverage through an internal appeals process. This process should be described in the letter received from your plan and could take up to two months.
• External appeals process: If, after going through the internal appeals process, your plan still denies coverage, you can appeal to an independent third party through an external appeals process. This process could also take up to two months.
• In medically urgent situations: You can also use an external appeals process in medically urgent situations. In these cases, a review can be conducted more quickly.

Talk to your employer

Your employer should be aware of the challenges you face accessing the medications you need and the concerns you may have about how AFPs impact people living with rare or chronic diseases.

Share your experience with AFPs

Patient stories help convey the negative impact AFPs can have on patients and their health. Share your story with the PAN Foundation.

Advocate to prohibit AFPs

Take action by letting your elected officials know about AFPs and the impact they have on patients’ ability to access needed treatment. Explore how you can advocate with PAN.

Resources

A guide for healthcare professionals

PAN has created an educational guide to help healthcare professionals and providers understand alternative funding programs, as well as copay accumulators and copay maximizers.

Resources for patients

• Aimed Alliance provides information and resources related to AFPs
• Coverage Rights explains what steps to take if your insurer delays or denies your coverage

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Thank you to our sponsors

This content was made possible in part by educational grants from PhRMA and Exelixis, Inc.

Note: The PAN Foundation maintains full independence in the creation of educational content, ensuring that the materials produced are objective, evidence-based, and free from donor influence.

About The PAN Foundation

As a leading charitable foundation and healthcare advocacy organization, the PAN Foundation is dedicated to accelerating access to treatment for those who need it most and empowering patients on their healthcare journeys. We provide critical financial assistance for treatment costs, advocate for policy solutions that expand access to care, and deliver education on complex topics—all driven by our belief that everyone deserves access to affordable, equitable healthcare.   

Since 2004, our financial assistance programs have helped more than 1.3 million people to start or stay on life-changing treatment. In addition, we’ve achieved major policy victories that increase access to care, mobilized patient advocates to call for change, and educated people nationwide on critical healthcare-related topics. We’re committed to working towards a future where equitable health outcomes are a reality for all.