Alternative funding is a novel concept that aims to provide “free” medications from charitable organizations and foundations to employees and their dependents of self-funded employers. However, some vendors may suggest excluding some or all specialty drugs from the formulary to save money. Once the drugs are dropped from the list, the member appears uninsured or underinsured. The alternative funding vendor can then assist the patient in applying for needs-based programs to cover the prescription that was intentionally removed from the plan’s coverage. While it sounds ideal, the reality is that vendors are diverting charitable funds intended for people with little or no insurance coverage to those who already have coverage and may charge up to 25% of the cost of each drug.
Despite the drawbacks, employers are interested in alternative funding as it promises lower costs. Thousands of self-insured plans have adopted the program, and 27% are considering using it within the next 2-5 years. However, using alternative funding is not a sustainable solution and carries unexpected financial, clinical, and legal risks.
Alternative funding carries longer-term and unforeseen complications, and its financial promises may be overstated and unsustainable. Members might not qualify for assistance or find that the funds have run out while their treatment is ongoing. The possibility of delays in treatment is high, and the prospect of transferring patients back to their original coverage carries the risk of a gap in therapy. Additionally, alternative funding arrangements can create ethical dilemmas, posing a risk to patient access to needed care.
Self-insured plans may face ERISA- and IRS-related compliance issues, and some vendors may try to source the drug from a foreign market if they can’t secure funding through a patient assistance program. Furthermore, foreign sourcing is an intricate area of the law that plans should navigate cautiously. Individuals should be aware that vendors usually require them to sign a patient authorization form, certifying that they are not enrolled in a healthcare program that pays for any portion of their prescription drug costs.
Opting for an alternative funding program requires caution and prudence. Considering longer-term financial implications, compliance risk, and ethical considerations is crucial to avoid short-term solutions that pose financial and regulatory risk. At Wellyfe, we advocate for sustainable and longer-term strategies that offer holistic, coordinated care with better value.