A Case For Transparency: J&J Suit Targets Opaque PBM Affiliate’s Efforts To Exploit Copay Programs
Executive Summary
Lawsuit highlights the lack of transparency into pharmacy benefit manager activities and how their programs can influence drug pricing. A Senate hearing on PBMs held shows increasing momentum behind a Federal Trade Commission study on potential anti-competitive activity in the market sector.
Johnson & Johnson is seeking an injunction barring an under-the-radar drug copay program administered by SaveOnSP LLC from continuing to “pilfer tens of millions of dollars” from J&J’s patient assistance program for its own financial benefit and those of its payer clients, according to a complaint filed in US federal court for the District of New Jersey 4 May.
SaveOnSP operates the program in partnership with pharmacy benefit manager Express Scripts Holding Company and its Accredo specialty pharmacy, according to the complaint. But the ownership of the company is unclear. SaveOnSP is privately held and very little information on it is publicly available.
Much of J&J’s information on the program appears to have come from SaveOnSP marketing presentations to potential payer clients. The situation underscores the lack of transparency into pharmacy benefit manager activities and how their programs can influence drug pricing.
To enhance transparency and inform future possible reforms, members of the Senate Commerce Subcommittee on Consumer Protection, Product Safety, and Data Security endorsed the idea of a Federal Trade Commission study on PBMs during a hearing 5 May.
FTC considered advancing a study on PBMs earlier this year, but the initiative has not yet been approved by a majority in the commission. In the meantime, the agency has issued a request for information on PBMs that it says will enable review of a “wide array” of business practices impacting patients, payers and pharmacies. (Also see "FTC Seeks Input On How PBM Rebating Practices Affect Drug ‘Affordability,’ Access" - Pink Sheet, 25 Feb, 2022.)
PCMA Would “Not Oppose” FTC Study On PBMs
During the hearing, Pharmaceutical Care Management Association President and CEO JC Scott said in response to a question from subcommittee chairman Richard Blumenthal, D-CT, that the group “would not oppose” such a study, assuming it looks at other actors in the supply chain as well.
However, Scott pointed out that more PBM transparency is already underway. PCMA supported recent legislation requiring that information on rebating in Medicare Part D be available to Congress via the Medicare Payment Advisory Commission, he said. (Also see "US Medicare Part D Inflation Is Real, MedPAC Rebate Data Show" - Pink Sheet, 19 Apr, 2022.) Scott also noted that payers will be required to submit information on rebates and other price concessions in the commercial market to federal agencies beginning later this year. (Also see "Medical Benefit, Hospital Drugs Exempt From Detailed Cost, Coverage Reporting In Final Rule" - Pink Sheet, 23 Nov, 2021.)
J&J’s lawsuit is concerned with the way SaveOnSP leverages the manufacturer’s CarePath assistance program, which covers 44 of the company’s drugs. For most of the drugs covered, CarePath offers patients in commercial plans up to $20,000 in assistance towards their out-of-pocket costs per calendar year. “This assistance is meant not only to help patients afford their out-of-pocket costs for medications, but also to help patients meet their deductible and [Affordable Care Act] out-of-pocket maximums, thereby allowing patients to more easily afford their healthcare overall,” the complaint explains.
However, SaveOnSP offers patients the prospect of $0 copays, then draws an inflated copay amount from the CarePath program. In addition, SaveOnSP does not apply assistance funds to patient deductibles or out-of-pocket maximums, which can extend the time that patients have cost sharing obligations and need assistance, according to the complaint.
During 2021, “SaveOnSP has caused [J&J] to pay at least $100m more in copay assistance than it otherwise would have for a purpose [the company] did not intend, depleting the support available for patients who cannot afford their rising copays,” the lawsuit claims.
As a result of the program, J&J costs for patient support have “exploded,” the complaint maintains. During 2021, “SaveOnSP has caused [J&J] to pay at least $100m more in copay assistance than it otherwise would have for a purpose [the company] did not intend, depleting the support available for patients who cannot afford their rising copays,” it claims.
For example, the average amount of J&J’s copay assistance for its anti-inflammatory blockbuster Stelara was $1,171 in 2021 for patients not enrolled in SaveOnSP. But the average was $4,301 for patients who were enrolled, according to internal company data. The pattern continued during January through March of this year, with assistance for Stelara averaging $2,057 for patients not enrolled and $6,401.96 for those who were (see table below).
Suit Alleges Contract ‘Interference,’ Consumer Protections Violations
The lawsuit alleges that SaveOnSP is engaged in “tortious interference of contract” by encouraging patients to sign up for its own program in addition to J&J’s CarePath, even though the CarePath program is not supposed to be paired with assistance from another source. SaveOnSP “knowingly and wrongfully induces patients to agree to CarePath’s terms and conditions, thereby intentionally causing those patients to breach their contract with [J&J] every time they use CarePath funds while enrolled in the SaveOnSP Program,” the complaint says.
“Through its wrongful inducement, SaveOnSP knowingly and proximately causes [J&J] damage by making it pay more money from CarePath than it otherwise would have for a purpose [J&J] did not intend,” the complaint states. By its actions, “SaveOnSP wrongly increases the costs of patient assistance programs and, unless enjoined, will make it untenable for such programs to continue to be provided.”
In violation of New York consumer protection laws, the program also encourages patients to sign up by “engineering a false denial of coverage at the point of sale,” which frightens patients into thinking they would bear the full cost of the drug unless they received assistance, the complaint says. In this way, “SaveOnSP has been and is engaging in willful deceptive acts and practices in New York against [J&J] and the public in the conduct of its business.”
J&J believes the court should step in because the opacity around SaveOnSP makes it hard for the company to target the program. “There is no easy or foolproof way for [J&J] to simply reduce the amount of assistance it provides to all patients enrolled in SaveOnSP’s program,” the suit explains.
The “secretive nature of SaveOnSP’s operations … renders any attempt to reduce copay assistance on a patient-by-patient basis unworkable as it risks harming the very patients CarePath was designed to support.”
“This is because SaveOnSP has taken steps to obscure when funds are being extracted from CarePath through its program, including recently by varying the patient’s out-of-pocket obligation per prescription fill, such that the amounts extracted from the copay card by the pharmacy are not consistent and easily detectible.” The “secretive nature of SaveOnSP’s operations … renders any attempt to reduce copay assistance on a patient-by-patient basis unworkable as it risks harming the very patients CarePath was designed to support.”
Leveraging A ‘Loophole’ In ACA Rules Around Coverage
To facilitate the program, SaveOnSP takes advantage of a “loophole” in the Affordable Care Act rules governing commercial plans by designating targeted drugs as “non-essential” health benefits, the complaint says. Once the program re-categorizes a drug in that way, it is no longer subject to the ACA’s annual out-of-pocket cap.
“In direct contravention to … legislative intent, by reclassifying certain medications as non-essential health benefits, the SaveOnSP scheme allows the payer to continue to charge the patient inflated copay costs even where the patient has already satisfied their out-of-pocket maximum,” the suit maintains.
The Centers for Medicare and Medicaid Services has a policy in place regarding copay assistance in ACA-governed plans that may give some cover to the SaveOnSP program. The agency allows private insurers to prevent the value of manufacturer cost sharing assistance from being counted toward deductibles or out-of-pocket maximums through so-called "copay accumulator" programs despite opposition from pharma and patient groups. (Also see "Copay Accumulator Programs Allowed In 2023 Private Insurance Market In Proposed Rule" - Pink Sheet, 6 Jan, 2022.)