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 companies and offered to employer-sponsored, self-funded health insurance plans to save the insurance company money.
AFPs only impact people with commercial, or private, health insurance.
How AFPs work
Your health insurance plan may define specialty medications as non-essential health benefits, and therefore won’t cover the specialty medication prescribed by your healthcare provider. You may get a denial of coverage letter for your medication from your plan.
Then, your plan will notify you that you must enroll in an alternative funding program—operated by a separate company they partner with— to get the specialty medication your healthcare provider prescribed.
- If you enroll with the AFP: The AFP will go to outside sources to pay for the medication, such as manufacturer or charitable patient assistance programs. In some cases, they may use international drug importation programs and you will receive your medication directly from an international pharmacy.
- If you don’t enroll with the AFP: You will have to pay the entire medication cost since your health plan won’t cover it. These costs will not count towards your deductible or annual cost-sharing limit.
The AFP may ask you for personal information such as annual income and household size, which they will use to apply to a patient assistance program on your behalf.
How does an AFP increase my out-of-pocket expenses?
If the AFP is successful in receiving financial assistance from a patient assistance program for your medication, you will be able to use that support.
However, your plan will not count the value of this assistance towards your annual out-of-pocket cost-sharing limit. This means that you could end up paying more out-of-pocket for the year.
The AFP may look to one or more of the following kinds of patient assistance programs:
- Manufacturer patient assistance programs: Operated by drug manufacturers, these programs provide eligible people, typically those who are uninsured or underinsured, with their prescription medication free of cost which is shipped directly to them.
- Manufacturer copay assistance programs: Operated by drug manufacturers, these programs pay for some or all of your cost-sharing for the medication.
- Charitable patient assistance programs: Operated by independent charitable foundations and national patient organizations, these programs provide financial assistance to people who meet eligibility guidelines and are typically underinsured.
If you’re not eligible for a patient assistance program, and the AFP cannot get assistance for you, the prescription is then sent back to your health plan to cover the medication. The plan may or may not agree to cover the medication.
If the drug is covered by the plan but it denies access to the medication, then you may have a right to appeal this decision. If the plan doesn’t cover the medication, then you may not be able to appeal.
Your healthcare provider may then receive a request from the AFP to switch your medication—which may not meet your medical needs.
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.
Ways AFPs negatively impact patients
Alternative funding programs delay patients’ access to needed, often life-saving medications, and may increase annual out-of-pocket expenses.
- If denied by a patient assistance program, your healthcare provider may receive a request from the AFP to switch your medication. Switching to another medication may not meet your medical needs.
- When enrolled in an AFP, your health plan will not count the financial assistance you receive to pay for your medication toward your annual cost-sharing limit. And you may need to pay a lot for your medication.
- Use of patient assistance programs by AFPs reduces the amount of financial assistance available for people who meet their eligibility criteria and are in financial need.
- Obtaining medications through importation may not be safe for patients.
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.
Use our interactive tool to find out if your health plan may be working with an alternative funding program:
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 to learn more
- Aimed Alliance provides information and resources related to AFPs
- Coverage Rights explains what steps to take if your insurer delays or denies your coverage
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 1.2 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.