As someone living with cardiac sarcoidosis, 60-year-old Kevin Danahy can’t afford to have bad health insurance. To control the inflammation in his heart, he needs an infusion of Remicade every other month, which he gets at Beth Israel in Boston. The infusion costs thousands of dollars out of pocket, so Danahy typically opts for costly PPO plans for reliable coverage.
This past spring, when his wife got a job at nursing home operator Stellar Health Group, Danahy joined her health plan. Like always, he reached out to his doctor to start the process of getting insurance approval for his infusions. The approval, viewed by Fierce Healthcare, came from Anthem Blue Cross Blue Shield and acknowledged the medication was medically necessary.
“There was nothing to make me question whether or not this would be covered,” Danahy said. “It looked good to me, and it looked good to my doctors.”
Danahy went in for two infusions, in April and June. He then unexpectedly got a benefits explanation from Leading Edge Administrators, the third-party administrator of the plan, showing he was responsible for $17,000 in charges. He also got an $11,300 bill from Beth Israel for one of the infusions. His explanation of benefits documents inexplicably keep getting revised, with his responsibility now exceeding $20,000.
Around the same time, another third party got involved: Payer Matrix. The vendor told him it works with his plan and wants to make sure he doesn’t face out-of-pocket costs for his specialty medication. Payer Matrix urged Danahy to agree to apply to a patient assistance program run by Remicade’s manufacturer, Johnson & Johnson. The program offers eligible uninsured or underinsured patients free drugs for up to a year.
Danahy was confused. He already got his Remicade approval. But just in case, he filled out the forms Payer Matrix needed to submit the application. Several weeks passed without an update. When he inquired, it turned out his application had been missing his coverage approval letter. After Danahy submitted it, J&J rejected him from the patient assistance program.
Without commenting on Danahy’s case specifically, a J&J spokesperson told Fierce Healthcare that, “Patient assistance is for patients alone, and it is wrong that assistance intended for vulnerable patients is being diverted to middlemen for their own financial gain. Assistance Diversion Programs are prohibited by J&J to make sure that help is available for patients with no safety net in place.”
Though he has appealed his charges, Danahy remains stuck in limbo. He’s been told that he does not, in fact, have coverage. Worried about another big bill, Danahy skipped his August infusion. His arrhythmia has gotten worse. With each skipped dose, he risks the treatment becoming less effective.
“My doctors say I put myself at a real risk of this sarcoidosis reactivating in my heart,” Danahy said. His condition had landed him in the hospital before, his medical records show.
Payer Matrix declined to comment about Danahy’s case, citing patient privacy law under the Health Insurance Portability and Accountability Act. Leading Edge and Anthem did not respond to multiple requests for comment.
“I want my drugs to be covered. We pay so much for health insurance that it’s only fair,” Danahy said.
Wading through an opaque roster of insurance vendors and conflicting messaging is something only experienced patient advocates can do. Adding to the confusion and fragmentation is a newer stakeholder in the self-insured market: alternative funding programs (AFPs). Danahy’s plan works with one of them, Payer Matrix.
The for-profit vendors claim to help self-insured employers save money on specialty meds by obtaining them for free or at a steep discount through alternative sources. These include pharma patient assistance programs, charities or international sourcing. AFPs may advise employers to exclude some or all specialty meds from coverage. In cases where specialty drugs are covered, AFPs may offer services to obtain copay assistance. While their tactics vary, their goal is the same: Help employers reduce their pharmacy costs.
Why target self-funded employers? These employers take on the costs of benefit claims. An insurer might serve as their administrator, managing the payments, but the employer pays the claims. Self-insured plans are subject to less regulation than fully insured plans, where employers buy health insurance and pay premiums. They can also offer more flexibility and potential savings. Smaller and medium-sized businesses are increasingly going self-funded in the hopes of lowering their expenses, the Employee Benefit Research Institute (EBRI) has found.
While AFPs sound promising, some healthcare experts describe them as sneaky, harmful to patients and in a gray zone ethically and legally. For a deeper look at how AFPs operate, Fierce Healthcare spoke with patients and patient advocates, clinicians, attorneys, pharma companies, drug pricing experts, brokers, pharmacy benefit managers and public officials in more than four dozen interviews. Two AFPs also agreed to comment. This story is also based on a review of research, public records, legal documents, marketing materials and exclusive surveys conducted on Fierce Healthcare’s behalf.
Employers’ drug costs attract middlemen boasting savings
Patient advocates began noticing AFPs on the scene within the past seven or so years. The timing made sense. From 2016 to 2021, specialty drug spending—driven mostly by price hikes—climbed 43% to $301 billion. Though they make up only about 2% of all prescriptions, specialty drugs accounted for half of total drug spend by 2021.
Among the chief concerns experts have about AFPs is how they contribute to medication delays. A 2024 survey of more than 210 patients found the average wait to get meds through an AFP was 68 days, which worsened a quarter of respondents’ conditions. Patient advocates that spoke to Fierce Healthcare have seen delays ranging from over a month for cancer patients to two years for hemophilia patients. Going without meds for even a few days can cause a catastrophic health crisis.
“Part of the way that the vendors frankly manipulate some of the employers into accepting these programs is the assurance that the employee is not, in fact, going to be hurt,” said William Sarraille, professor of practice at the University of Maryland’s Francis King Carey School of Law.
An AFP’s main allure is the possibility of big savings, though data suggest they struggle to deliver. Less than half of employers using AFPs saw a reduction in specialty drug claims, one survey found. Other pharma-sponsored research points out that the savings touted by AFPs can be undermined by lost rebates. AFPs, which can contract with employers or the network of advisors managing them, also charge a sizable fee—generally anywhere from 20% to 45% of savings achieved.
In interviews, sources most commonly cited the AFPs Payer Matrix, Paydhealth and SHARx as problematic, but the companies might be mentioned more often because of their market size.
Jennifer Hoefner, CEO of Payer Matrix, told Fierce Healthcare in emailed comments that Payer Matrix is a “cost-containment company focused on specialty drugs, the fastest-rising driver of pharmacy spend.”
Hoefner said higher drug costs are driven in part by “hidden rebates, aggressive marketing, and lobbying.” Americans also consistently pay more for prescription drugs than patients in other developed countries, a disparity policymakers are increasingly focused on, she noted.
“We work directly with self-funded employers and plan sponsors, and their members, after those plans have made the difficult decision to exclude specialty drugs from coverage because the costs have become unsustainable,” Hoefner said.
By contrast, Paydhealth’s chief commercial officer David Galardi told Fierce Healthcare the vast majority of its clients do not carve out specialty drugs. Most members have coverage, but may face prohibitively high deductibles and out-of-pocket costs. Paydhealth helps them navigate the complex world of pharma patient assistance and copay programs, Galardi said, so drugs can reach who they're intended for. Unlike other companies, Paydhealth bases its fees on the patient’s obligation, not what the plan would’ve paid.
“Our goal at Paydhealth is to make sure that when a person is prescribed a specialty drug, or anything for that matter, that they can afford what they and their doctor agreed to use and can continue the therapy for as long as they are supposed to and not go bankrupt,” Galardi said. Paydhealth does not engage in international sourcing, he added.
Ironically, AFP-related treatment delays can drive up overall healthcare costs. That’s bad business in more ways than one: Patients negatively impacted by AFP delays consider a job change or leave their job at up to five times the rate of those not impacted by wait times.
“Are we offsetting the costs, or are the costs going elsewhere?” cautioned Stephanie White, a clinical pharmacist at Vanderbilt Specialty Pharmacy. “It’s decreasing costs for the employer, but if it still resulted in a patient requiring another office visit or a hospitalization … that’s still an associated cost.”
Still, some maintain that the savings generated by an AFP could be meaningful. It’s hard to know whether AFPs work with smaller employers more often than larger ones. Large firms, with 500 or more employees, are much more likely (74%) than small (16%) and medium-sized firms (32%) to self-insure at least one of their health plans, EBRI data show. But a smaller employee pool makes it harder to absorb high claims.
“It’s the smaller employer that has three or four specialty drugs that could be a very large impact on whether or not they stay in business,” Donna Clifford Klein, senior vice president of pharmacy strategy at Personify Health, said.
As a portion of total drug spend, the cost of specialty drugs can be reduced drastically through patient assistance programs, depending on utilization and patient eligibility, per Klein. “It’s an enticing conversation, and it does work for some employers, for sure,” Klein said. “When it doesn't work, that’s when it gets a little messy.”
Personify is a benefits provider and administrator working with self-funded plans. Many of its 7,500 clients use or are interested in AFPs, and Personify can introduce them to a pharmacy benefit manager that works with one or offers it in-house.
Consultants say the big three PBMs do not play ball with external AFPs, though they might offer those services in-house. Specialty drugs drive a third of PBMs’ total profits, so, if they are carved out of a plan, that money is no longer flowing through them. But smaller PBMs are willing to engage—and those that do may have a shared savings arrangement with an AFP.
Smaller PBMs that work with AFPs do so “to differentiate themselves from the Big Three,” said Christine Johnston, general manager of the Pharmacy Solutions Marketplace at MacroHealth, a marketplace for payers. For these PBMs, an AFP partnership could be the source of more than half of their revenue, she said.
Johnston has seen that most employers who work with a PBM offering an AFP take that offer. MacroHealth is solution-agnostic and facilitates introductions as needed, though Johnston wishes the industry didn’t have to rely on AFPs. “I just think it’s icky that we have to go and play these games to get patients the access to care that they need,” Johnston said.
While some PBMs might be all-in on AFPs, others still need convincing. In a survey of 26 payers and PBMs conducted by pharma insights company Managed Markets Insight & Technology (MMIT) for Fierce Healthcare in April, more than half of respondents were aware of AFPs, but only four work with them. The survey reached a variety of company sizes, and respondents were paid an honorarium by MMIT for their participation. Eight-five percent of respondents were concerned about the legality or ethics of AFPs, though only a third have taken steps to limit or prevent their participation in their plans. These include limiting AFPs to specific diseases, requiring prior authorization of meds covered by AFPs and charging higher admin fees for handling AFP-covered drugs.
Pharma and charities running patient assistance programs have cracked down on AFPs, citing concerns about finite resources being taken from needy patients. These programs, they say, are not intended to support those with commercial insurance, whose employers simply don’t want to pay. As of 2024, AbbVie, Eli Lilly, Genentech, J&J and Takeda explicitly prohibit patients with an AFP from applying. Others, like Gilead Sciences, now only consider uninsured applicants, whereas before they also considered underinsured individuals. Gilead’s policy changed in November 2023.
“Gilead’s patient assistance programs are intended to be a source of free medication for those without insurance,” a spokesperson told Fierce Healthcare. “Our program policies ensure Gilead provides free medication to those who need it most and minimizes the risk of the [patient assistance] programs being misused or exploited.”
AbbVie has gone even further, suing Payer Matrix. In its suit, AbbVie alleges that between 2018 and 2022, Payer Matrix submitted thousands of applications to its patient assistance program. After explicitly updating its terms in early 2023 to prohibit applicants with AFPs, AbbVie alleges Payer Matrix “took certain steps to conceal its involvement” in subsequent applications. AbbVie also accuses Payer Matrix of attempting to convince prescribers to change patients to non-AbbVie alternatives with assistance programs they could apply to instead.
“AbbVie has significant concerns about the negative impact of alternate funding programs on patients and on the healthcare system at large,” a spokesperson told Fierce Healthcare. “These companies profit by manipulating coverage of specialty medicines and taking advantage of programs intended to help vulnerable patients access the medicines they need.”
Payer Matrix’s Hoefner told Fierce Healthcare the company’s strategies for securing affordable access to specialty drugs vary by plan but can include “helping members apply for assistance programs or working with providers to identify lower-cost biosimilar alternatives that may be a good fit.”
“Our associates help members reduce treatment delays by guiding them through the complicated process of accessing affordable care — often serving as a liaison between physicians, pharmacists, members and pharmaceutical companies,” she said.
To apply to patient assistance, AFPs need sensitive patient information, which can include health status and proof of income. Patient advocates worry about this level of access, particularly when AFPs request limited power of attorney. Some have also seen AFPs make misrepresentations to patients or pharma. Hope Charities, which connects patients with bleeding disorders to resources and financial assistance, often finds patients are unaware that an AFP has already submitted an application for them.
“It’s a measure of theft in our opinion, where they're actually stealing the drug from the drug manufacturer and then turning around and giving the employer the impression that they served this person,” Hope Charities CEO Jonathan James said. “When in reality, they just misrepresented the patient and unethically acquired free medication, and then charged a commission back to themselves for the savings.”
Pharmas are also concerned about how AFPs harm their relationships with payers on the commercial side of the business. From R&D through commercialization, Sanofi's medical team educates payers about a given disease and the value of a potential therapy. Once a drug is approved, Sanofi works with payers to determine appropriate utilization management criteria.
“The relationship is purposeful to ensure that we have the most affordable access possible,” Bill Rush, who leads Sanofi’s portfolio management strategy for U.S. market access, said. When third parties enter the picture, per Rush, that breaks the integrity of the system: “The ability for payers to manage preferred drug classes and criteria is diminished by these alternative funding programs.”
If an AFP fails to secure a medication, or if a patient chooses not to work with an AFP, what happens next depends on the plan. Sometimes, employers override the exclusion and ultimately agree to cover the drug. But in other cases, like Danahy’s, the patient is on the hook for the full cost.
More than half of commercially insured adults were told in the past year their meds are not covered by their health plan, a recent survey by the PAN Foundation found. Most of them were referred to an external company to obtain access. Patients reported that a variety of commonly known AFP tactics were attempted. Ultimately, when asked to select all the ways their drugs had been secured, 49% of respondents reported getting their meds covered by their plan; 42% used pharma assistance; 32% used international sourcing; and 32% used a charity.
“These are patients, they’re employees, who are paying premiums into their healthcare plan. When you pay a premium, you expect those medications to be covered by the plan,” Amy Niles, PAN’s chief mission officer, said.
Similar to existing research, PAN’s survey found that more than a third of patients working with an external company experienced delays of one month or more. A quarter had to visit the ER or urgent care, and 23% were prescribed more medications due to the impact on their health.
About two years ago, PAN, which runs 90 disease assistance programs, discovered that hundreds of applications were being submitted by a single AFP. Niles declined to name which one. PAN directed the vendor to stop and disenrolled every one of those patients, offering them the option to independently reapply if they are eligible.
“We are here to help people who meet our eligibility criteria, and our resources are scarce,” Niles said, “so we want to make sure they're going to the people who really need our assistance.”
A week after Fierce Healthcare reached out to Danahy’s insurers and AFP, Stellar Health Group fired his wife without warning. Her supervisor cited performance inadequacies, which she had never before been told about. Danahy suspects the move was to avoid paying for his drugs in the future.
Stellar Health Group would not comment specifically about the Danahys, but a spokesperson said all employment decisions are “based on business-related factors and in accordance with all applicable laws and internal policies. Any suggestion that a termination decision was based on an employee’s spouse’s medical condition is categorically false.”
Patient advocates Fierce Healthcare spoke to warned that employer retaliation against employees who speak out on the issue is common.
"A totally different game today"
Science has spurred some revolutionary therapeutics—and prices. A one-time gene therapy for hemophilia B costs an eye-popping $3.5 million, though experts point out that is less than a lifetime’s worth of infusions. Still, that sort of price tag is enough to put some self-funded plans, which cover more than 6 in 10 workers in the U.S., out of business.
“It’s a totally different game today,” James of Hope Charities said. “Biologics today are not what they were 25 years ago. They’re just not. And so employers really are struggling.”
Biologic drugs, extracted from living organisms, are so expensive in part because they are harder to make and face less competition than small-molecule drugs, made chemically.
While the start of the COVID-19 pandemic temporarily abated medical inflation, prescription drug utilization remained robust. Spending on medicine jumped 12% in 2021 as COVID vaccines and therapies emerged. Other employer expenses also rose. This period accelerated the AFP business, according to some insiders.
“COVID just created this scenario where everybody was looking to save money,” an executive in employer benefits with direct knowledge of AFP operations said. “Companies were looking at every line item really hard.”
While sources that Fierce Healthcare spoke to were generally sympathetic to the cost pressures employers face, some put it bluntly: They have a choice. If employers can’t manage the financial risk that comes with being self-funded, they can buy insurance.
“If a company's costs are that high, then go and become fully-funded again,” Kollet Koulianos, senior payer consultant at the National Bleeding Disorders Foundation, said. “People are paying their premium for a reason, and they should have the insurance they expect.”
Despite growing specialty drugs spending, data suggest companies may be souring on AFPs. From 2021 to 2023, the number of employers and plans considering an AFP fell, PSG surveys found. Two-thirds of respondents rated the AFP model as not at all or slightly sustainable.
Separately, a survey of 15 employers conducted by pharma insights company MMIT in April for Fierce Healthcare found only one employer currently works with an AFP, though nearly all were approached. Some had ethical concerns, while for others, it wasn’t the right fit. The employer working with an AFP reported disruptions to coverage, not having a system to ensure continuity of care and that if the AFP can’t secure meds, it becomes the employee’s responsibility.
A medical director at a Blues plan, which offers administrative services for self-funded plans, told Fierce Healthcare that it’s not uncommon to hear requests for specialty drug carve-outs. But the insurer advises employers that if the overall clinical efficacy of a drug is better than the standard of care, they should cover it.
“We should not be carving out something just because it’s expensive,” the medical director, speaking on the condition of anonymity, said. “That is contrary to our contract and if we do that, I think that is potentially unethical.”
Vanderbilt University Medical Center’s specialty pharmacy is studying AFPs alongside a dozen other health systems. So far, Vanderbilt found that of 79 of its patients using AFPs in 2024, more than a third had to use samples to prevent gaps in therapy. A fifth experienced gaps in treatment, and 10% had disease progression or flares related to the delays. The average time it took to get a new patient on meds was 46 days or 50 days for continuing therapies.
Vanderbilt pharmacists spend five hours per patient with an AFP coordinating medication access. “Patients are so distraught,” Autumn Zuckerman, director of health outcomes and research at Vanderbilt Specialty Pharmacy, said. “It really erodes the pharmacy-patient and provider-patient relationship.”
Similar to PAN, Vanderbilt found nearly a third of patients got their meds through a pharma patient assistance program. A third got them from international sources. Another 13% got their plan to cover the drug after an appeal; 6% had to switch plans for coverage.
Matthew Rohrbach, M.D., a practicing physician and house deputy speaker in the West Virginia House of Delegates, has noticed AFPs have become common. Rohrbach sponsored a bill that led to one of the first U.S. bans on copay accumulators, controversial insurance programs widely considered to be the precursor to AFPs. Lately, perhaps in response to the pharma crackdown, AFPs expect Rohrbach in his capacity as a doctor to be the one to submit patient applications to pharma. It’s time-consuming work that doesn’t get compensated, he said. Two nurses in his medical practice work on insurance issues all day.
“I don’t think it’s the doctor’s responsibility to have to go and get people signed up for free medicine,” Rohrbach said. He acknowledged that pharmacy costs are “outrageous,” and his practice helps patients apply for assistance when possible. “But it should not be my responsibility, and it shouldn’t be a condition of their insurance that I do this,” Rohrbach said.
Some have even seen patients who don’t work with an AFP caught in the crossfire. Ann Lewandowski, founder of employer consultancy Healthcare Rebel Alliance (formerly Patient Value Insights), recalls a patient who did not have coverage for an oral chemotherapy drug. He applied to Genentech’s patient assistance program but was rejected, because it looked like he was working with an AFP. He had to get the drug from a repository program, which collects and donates unused drugs as charity, until Genentech finally saw he did not have an AFP and approved his application.
“The problem is that identification of patients … becomes really difficult," Lewandowski noted. Pharma may assume that if coverage doesn’t exist, it must mean an AFP is involved. “I have certainly found many plans at this point that are not carving out and using an AFP intentionally, but are simply opting not to cover medications.”
In life-threatening situations, some providers might dispense drugs first and later bill the patient. While experiencing AFP-related delays, one hemophilia patient needed emergency infusions and amassed a $1 million bill, Koulianos with the National Bleeding Disorders Foundation said. Going into this much debt is not sustainable for providers or patients.
“These are life-and-death type of deals,” Koulianos said. “They don’t want to leave their patients without medication, but … it could actually upend their programs.”
The power and fear of risk
Stop loss is yet another factor in employer decisions about prescription drug coverage. The vast majority of smaller self-funded plans purchase stop loss to limit their risk. In typical arrangements, the employer agrees to cover claims up to a certain amount, above which stop loss kicks in. Covering expensive drugs can quickly push that threshold.
“Thus, stop loss insurers may look for ways to carve out coverage for very high pharmacy benefit claims from their policies,” Valerie Hughes, special counsel in employee benefits and executive compensation at Covington & Burling, said.
While large employers may not need stop loss due to their risk tolerance, “for your smaller and mid-market employers, stop loss is really absolutely key to the self-funding strategy,” Lewandowski said. It doesn’t come cheap: Stop loss is the second-highest fixed cost for a self-funded plan, per Lewandowski, the employer consultancy executive.
If a stop loss carrier agrees to cover some of the liability, there’s less need for an AFP. But these insurance carriers ironically hate risk, experts say. For employers with really high-cost claimants, stop loss carriers can raise premiums or set higher deductibles—which become the employer’s responsibility—for specific claimants in a policy called a laser. Thus, AFPs are seen as a way out.
“It’s a risk mitigation strategy to reduce the cost of the stop loss or reduce the risk of the laser,” Lewandowski said. “I’ve been told that, ‘If we don’t use these alternative funding programs, we’ll encounter lasers and have a much harder time with stop loss.’”
Stop loss carriers can even outright refuse to work with employers. This happened to a self-funded architecture firm, described by their human resources executive at a conference last year. The company discovered one of its employees was taking a medication costing more than $1 million a year, the executive explained in a session that was recorded.
“Our stop loss carrier was basically telling us, 'We don’t even want to talk to you for renewal,'” the HR leader said. “Now we were panicking.”
The company offered to buy the patient an outside plan that would cover her drug. “It would extricate her from our plan, so that our entire plan for our 1,300 employees wasn’t jeopardized,” the executive said. Ultimately, the patient discontinued the medication with her doctor’s approval. “It worked out, but I hate the thought of telling somebody that we have to move you off of our plan,” the executive said. “It was problematic.”
“Employers should carefully review their stop loss policies and ensure that they understand the policy coverage terms and limits,” Hughes noted. “We have, for example, seen stop loss policies that provide a maximum level of coverage. These policies would leave the employer responsible for costs above the maximum.”
Ripe for regulation
The Department of Labor (DOL) oversees almost all self-funded employer plans, which are subject to less regulatory requirements than fully insured plans. For instance, self-funded employers don’t have to offer health insurance. But if they do, they must adhere to certain Affordable Care Act (ACA) rules.
This includes a mandate to cover the 10 essential health benefits, including prescription drugs. Because the ACA doesn’t define prescription drugs, plans that exclude specialty meds from coverage argue they don’t fit the definition of “essential.”
The issue is hotly debated. Policy experts point to a recent Department of Health and Human Services (HHS) rule stating the ACA “does not provide for a blanket exclusion” from coverage for specialty drugs. This rule, however, did not apply to the self-insured market. The DOL issued an FAQ saying it intends to apply this to self-funded plans in future rulemaking, but that has not yet materialized.
Self-funded plans are also prohibited from discriminating against employees based on health status or disability. Yet specialty drug carve-outs may do just that “when individuals living with specific chronic conditions are unable to obtain any key medications in an affordable and accessible manner,” Harvard Law School’s Center for Health Law and Policy Innovation wrote to the Centers for Medicare & Medicaid Services in 2023.
Plans may also not discriminate in favor of highly compensated individuals related to benefits. If a plan covers specialty drugs, but only for employees who make too much to qualify for patient assistance, that could be considered discrimination, according to legal experts. Low-income employees would pay the same premiums as everyone else but wouldn’t get the same benefits.
In April 2024, two House members wrote to the DOL requesting it to investigate AFPs and their impact. “We are concerned that AFPs may mislead employers, exacerbate barriers to patient access to specialty medications, and redirect patient assistance dollars towards insured beneficiaries,” they wrote. Koulianos co-leads a task force of patient advocates raising awareness about AFPs, and the group has also met with the DOL on the issue. The DOL did not respond to requests for comment.
When it comes to AFP operations, experts are perhaps most alarmed by the international importation of drugs. While not every AFP will do international sourcing itself, it might facilitate it for clients through a partner. Meds from overseas have not been vetted by the Food and Drug Administration (FDA), and the law prohibits their importation in most cases. In a 2023 cease-and-desist to a vendor offering import services, FDA called international sourcing "particularly concerning” because of the trust employees place in their insurance that may keep them from questioning the legitimacy of the drug. In its letter, FDA threatened legal action, but that has not stopped companies from advertising these services.
White, the clinical pharmacist at Vanderbilt, handles oral oncology drugs. She recalls a cancer patient whose drugs were imported from overseas by a vendor called PriceMDs after some extreme steps. (The patient has since died, which White does not attribute to AFP issues.) After being rejected from pharma assistance, the patient had to have a telehealth visit with a provider based abroad. That required a U.S. passport, which they did not have. They got monthly overrides to fill at a U.S. pharmacy while they waited for their passport to arrive.
After the virtual visit through PriceMDs, without ever being examined in-person by the telehealth provider, the patient got their prescription. It was filled by a pharmacy in Switzerland and shipped to them on time, according to White.
It was alarming that PriceMDs didn’t reach out to Vanderbilt to confirm the prescription. “You’re not physically touching our patient,” White said. “How do you know that’s the appropriate dose for them?”
The patient received a three-month supply of the drugs, something White said is unusual unless a patient has been stable on a medication for a long time. Because their disease progressed and they had to move to a different line of therapy, their leftover doses were wasted. “That’s still drug that could’ve gone to somebody else instead of being disposed of,” White said. PriceMDs did not respond to multiple requests for comment.
In another case White handled, a metastatic breast cancer patient’s refill was directed through a convoluted chain of vendors to a Canadian pharmacy, delaying treatment by at least a week. The package of meds arrived labeled in French. Though it looked like the right product, White wanted to confirm the drug’s legitimacy with Pfizer. She submitted a complaint with photos, and eventually Pfizer confirmed it was legitimate product made in Canada. “You can’t guarantee that you’re not getting counterfeit drug,” White said.
“We’ve seen this so much that our nurses are trying to get us to add Canadian pharmacies to our EHR, so they can more easily send prescriptions to Canada. And that’s not allowed,” Zuckerman, who works with White, said. To send a script to a Canadian pharmacy, a prescriber must print, manually sign and fax the prescription, potentially causing further treatment delays.
It is hard to know how many AFPs even exist, much less how many of them offer or partner on international sourcing. In its lawsuit, AbbVie alleges Payer Matrix works with RxFree4Me, a company it says is known for importing medications from Canada. Other companies, like ScriptSourcing and PriceMDs, do similar work and advertise it as legal.
“I think that’s incorrect and without legal basis,” Sarraille, the professor at the University of Maryland’s law school, said. “They vociferously argue that they are permitted to do what they are, because ultimately it’s not they that are doing it, it’s the patient that’s doing it … I think that’s a factual and legal fallacy.”
In March 2024, nonprofit policy firm Aimed Alliance requested clarification from the FDA on international importation by AFPs. It did this because under its analysis of the law, this practice violates the Food, Drug, and Cosmetic Act, Ashira Vantrees, Aimed Alliance’s director of legal strategy and advocacy, told Fierce Healthcare.
In its response, the FDA was unable to reach a decision because the issue demands “extensive review and analysis.”
“While this response does not affirm that mandated international importation is illegal, it also does not state that this practice is permissible under federal law,” Vantrees noted. “As such, employers should be aware of both the health risks and questionable legality associated with mandatory international drug importation.”
“It just is astounding to me that the FDA has not taken action. I just find it horrid,” Sarraille said. “I find it a fundamental betrayal of FDA’s mission and legal responsibility in the face of some of these allegations.”
One alternative PBM executive, speaking on the condition of anonymity, noted that the unfolding impact of the Trump administration’s recent tariffs leaves the viability of international sourcing uncertain. It’s an option this PBM, which offers alternative funding services in-house, is monitoring, but may not make sense given their pass-through model.
“FDA does not regulate AFPs,” an HHS spokesperson told Fierce Healthcare. “In most circumstances it is illegal for individuals to import drugs into the U.S. for personal use because the medicine has often not been approved by FDA. FDA recommends only obtaining medicines from legal sources in the U.S.”
Experts believe the Federal Trade Commission (FTC), which oversees unfair or deceptive trade practices and recently sued PBMs, could also step in. They say the agency could tackle a number of allegations, including that AFPs devalue the premiums that patients pay, mislead or make misrepresentations, and charge a fee for something that’s free—applying for patient assistance.
Koulianos’ task force has also met with the FTC, plus the HHS, on the issue. Agencies have the authority to more quickly address AFP concerns than legislation could. “It’s weird, frankly, that no one has taken—at least in an observable way—enforcement action against those vendors,” Sarraille said. The FTC declined to comment.
Though it’s mostly not their jurisdiction, some states are interested in being informed. In 2024, Louisiana created a task force to investigate AFPs and their impact, publishing findings in a report earlier this year.
“In order for patient access to be unimpacted by AFPs, coverage delays must be reduced to align with traditional coverage, and there is no clear path to achieving that reduction,” the report concluded. “Proliferation of AFPs is likely to lead to reduced availability of PAPs and non-profit foundation funding, either in reduced funding availability or in narrower eligibility criteria, or both.”
Frank Opelka, deputy commissioner of the Louisiana Office of Health, Life and Annuity at the Department of Insurance, told Fierce Healthcare he was previously unaware of AFPs. Opelka wants to see AFP use restricted for self-funded governmental plans, which are within the state’s authority to regulate and would protect hundreds of thousands of members. Otherwise, federal action is required to address AFPs at a broader level, he said.
“Anything else the states do is going to be working within the margins and trying to find backdoor approaches to regulating AFPs,” Opelka said, “just because so much of their activity is outside of what we’re allowed to regulate.”
Passing the buck
The future of AFPs remains unclear. “You will see tactics change, you will see enforcement change,” the employer benefits executive with direct knowledge of AFP operations said. “People wanting to save money in the benefits world, that’s going to be there no matter what.”
In the tug-of-war over prescription drug costs, the pharmaceutical industry points the finger at PBMs, accusing PBMs of being the "middlemen" who control drug access, pocket drug discounts and rebates, and drive up patient costs.
“Insurance is not working the way that it should. Employers and patients are increasingly paying more. Insurers and PBMs are the sole entity that determine what patients pay at the pharmacy counter and what drugs they have access to,” Sarah Ryan, director of public affairs at trade group PhRMA, said. “We think the system needs to work better.”
Ryan pointed to a stat that in the U.S., half of all spending on brand medicines flows to stakeholders who are not pharma, including PBMs. Recent congressional efforts to reform PBMs are promising, per Ryan.
With the way the system currently works, employers often don’t see the full picture of their rebates and net costs, Sanofi’s Rush acknowledged. Formulary negotiations are opaque, and transparent breakdowns of spend by drug are rare. But AFPs are not the right solution, in his view.
“If this was truly about affordability for patients, somebody would design a different mechanism that didn’t create that [patient] risk,” Rush said. “These are third parties trying to extract value from the healthcare system. They’re not focused on patients.”
For their part, employers need to be more skeptical when doing research and hiring advisors, Lewandowski of the Healthcare Rebel Alliance urged. When approached by AFPs, “they need to look beyond just the sales pitch and look under the hood of what’s actually going on,” she said.
But pharma must also acknowledge that it has neglected employers while focusing on PBMs. “I don’t buy the ‘poor pharma’ argument,” Lewandowski said, adding that the AFP debate is a red herring at this point.
“You’re not actually addressing the core issue that is affordability that these employers are trying to overcome,” she said. “It’s AFP or no coverage right now for a lot of these employers, and I think that’s the conversation that we need to talk about.”