Alleging ‘Fraudulent and Deceptive Scheme,’ AbbVie Files Lawsuit Against Alternate Funding Company Payer Matrix

Alternate funding companies that carve out specialty drugs and then get funding for patients via manufacturers’ patient assistance programs (PAPs) have existed for several years, and pharma manufacturers have long complained about them. And although a few have begun restricting who can access their PAPs, that was the extent of the response — until now. On May 5, AbbVie Inc. filed a lawsuit (1:23-cv-02836) against Payer Matrix, LLC in the U.S. District Court for the Northern District of Illinois Eastern Division over its “fraudulent and deceptive scheme to enrich itself by exploiting AbbVie’s PAP through the enrollment of insured patients into a charitable program not intended for them.”

AbbVie states that it is “bring[ing] this action to stop Payer Matrix’s harmful conduct and protect its program so it can continue to serve its intended purpose — providing free drugs to uninsured and underinsured patients who otherwise could not afford their AbbVie medicine.”

Others in the industry have made similar comments about alternate funding companies. During a July 29, 2022, webinar titled Specialty Drugs Update: Trends, Controversies, and Outlook, longtime industry expert Adam J. Fein, Ph.D., CEO of Drug Channels Institute, stated that specialty carve-out companies are “basically trying to access money that is explicitly intended for needy, uninsured, financially strapped patients. This is not copay support for commercial benefits, where the benefit kind of stinks or they over-cost-shifted.”

On the other side, a Forbes article by Rich Adams, the president and CEO of PBM Integrated Prescription Management (IPM), argues that “alternative funding is one way that patients can get the medications they need without putting their lives and finances at risk and for employers to ease the cost-of-care burden. Alternative funding programs help offset specialty drugs prices through creative and sometimes philanthropic means so that employers can provide access to the drugs people need.”

In the lawsuit, AbbVie claims that “through acts of fraud and deceit, Payer Matrix knowingly maneuvers ineligible patients into AbbVie’s PAP — specifically, insured patients who should be receiving their medicine through their employers’ health insurance plans. Payer Matrix then charges the patients’ employers a substantial fee for reducing the employers’ health insurance costs through its scam on AbbVie’s PAP and other pharmaceutical manufacturers’ patient assistance programs.”

In addition, says the suit, “Payer Matrix is now interfering in doctor-patient relationships by making misrepresentations to doctors to try to convince them to switch patients from AbbVie’s medicines to alternative options, not for reasons of medical necessity but rather so Payer Matrix can continue to improperly profit from these patients.”

In January, AbbVie updated its myAbbVie patient assistance program application to include the following comments: “Patients with insurance plans or employers participating in an alternate funding program (also sometimes referred to as patient advocacy programs, specialty networks, SHARx, Paydhealth, or Payer Matrix, among other names) requiring them to apply to a manufacturer’s patient assistance program or otherwise pursue specialty drug prescription coverage through an alternate funding vendor as a condition of, requirement for, or prerequisite to coverage of relevant AbbVie products, or that otherwise denies, restricts, eliminates, delays, alters, or withholds any insurance benefits or coverage contingent upon application to, or denial of eligibility for, specialty drug prescription coverage through the alternate funding program are not eligible for the myAbbVie Assist program. You agree to inform myAbbVie Assist if you are a member of such an insurance plan or if you are applying to myAbbVie Assist on behalf of a patient who is a member of such an insurance plan.”

AbbVie followed that with a letter to Payer Matrix’s CEO on Feb. 10 that told him that people working with his company were ineligible for the manufacturer’s PAP. Even after that, AbbVie said it had identified more than 55 patients affiliated with Payer Matrix that submitted an application for assistance.

According to the lawsuit, “In several of those instances, Payer Matrix was patently trying to conceal its involvement in the process, including by instructing a doctor to send in the PAP application form to AbbVie so it would not be seen as coming from Payer Matrix (which instructions from Payer Matrix the doctor included in her submission to AbbVie), by using white out (ineffectively) to try to obscure Payer Matrix’s involvement in a patient’s submission to AbbVie’s PAP, by removing Payer Matrix fax machine headers from documents to conceal Payer Matrix’s involvement, and other acts of concealment demonstrating both that (i) Payer Matrix knew its submissions of these ineligible patients to AbbVie’s PAP was improper and (ii) it intended to deceive AbbVie into believing these were eligible patients.”

Shortly before AbbVie updated its PAP language, AIS Health, a division of MMIT, spoke with Michael Jordan, Payer Matrix’s chief business officer, to learn more about the company’s business model, which he defended.

In response to a query from AIS Health on the lawsuit, Payer Matrix gave the following statement: “On Friday afternoon, May 5, 2023, we were made aware that a complaint has been filed in federal court in Chicago by AbbVie, Inc. against Payer Matrix. The complaint makes certain allegations regarding Payer Matrix’s business practices and the alleged impact these practices have on AbbVie’s operations. We vehemently dispute the allegations made in the complaint and believe they are meritless. The complaint does nothing more than demonstrate a complete lack of understanding of Payer Matrix and its operations. We are, however, taking this complaint very seriously. The company has retained legal counsel to assist us in vigorously defending against the claims that have been asserted in the complaint.

“The filing of this complaint has no impact on how Payer Matrix conducts its business, and we will continue to operate ‘business as usual,’” the company continues. "We intend to continue to work with our plan and PBM partners and their subscribers as we always have, providing them with the best pathway toward obtaining clinically appropriate medications at the lowest cost possible.”

In the lawsuit, AbbVie pushed back on multiple claims, including the commonly heard contention that manufacturers can use the PAP as a tax deduction: “Payer Matrix even falsely tells some prospective clients and patients that its program and its submission of PAP applications to AbbVie benefits AbbVie through tax savings and an increase in the number of patients who are prescribed AbbVie’s drugs. None of these representations is accurate.”

“Ultimately, Payer Matrix’s scheme threatens the continued viability of AbbVie’s PAP for the patients it is designed and intended to serve,” says the filing. “This threatens irreparable harm to patients and AbbVie. Payer Matrix should, therefore, be enjoined from including AbbVie’s drugs in its alternate funding program and should be ordered to compensate AbbVie for the funds it fraudulently diverted from the PAP.”

The company is demanding a jury trial.

Report Finds Use of Models Is Up, Consideration of Them Is Down

Numerous firms offer these programs, as well as similar ones known as copay maximizers. These companies have plans classify certain drugs as “non-essential health benefits” per the Affordable Care Act (ACA), and then the maximizer secures funding for patients who are prescribed those drugs considered non-essential from manufacturers’ or charitable foundations’ patient assistance programs, allowing patients to get their medication for free.

These companies have come under fire as well, with Johnson & Johnson filing a lawsuit (Case 2:22-cv-02632) last year against maximizer firm SaveOnSP, which works with Cigna’s PBM, Express Scripts.

However, use of alternate funding models continues as payers struggle to pay for specialty drugs.

In the recently released 2023 Trends in Specialty Drug Benefits Report, Pharmaceutical Strategies Group (PSG), an EPIC company, found that 12% of health plans and employers are currently using alternative funding models, while 21% are considering using them. Conducted from Sept. 20, 2022, through Oct. 21, 2022, the survey included 182 benefits leaders from employers, unions/Taft-Hartley plans and health plans representing plan sponsors of approximately 86.7 million covered lives. Last year’s report found that 8% of respondents were using an alternative funding model, while 31% were exploring their use.

This year’s report also revealed that 68% of respondents said that the models are not at all or slightly sustainable. It also found that larger employers — those with at least 10,000 covered lives — were more likely than smaller ones to be both using and exploring using alternative funding programs. The highest rates of use were found in the South (21%) and Northeast (14%), followed by the West and Midwest, each with 6% of respondents.

Asked about the findings, PSG’s Renee Rayburg, R.Ph., vice president of specialty clinical consulting, and Morgan Lee, Ph.D., senior director of research and strategy, told AIS Health that the sustainability finding may “partly explain” the decline in the percent of respondents exploring their use.

“But at the same time, the increase in use of these models compared to last year shows that some are willing to use this option while it’s available because of its potential for cost savings,” they add.

Supporters of Alternate Funding Models Defend Approach

Seth Friedman, pharmacy & health plan services practice leader at Arthur J. Gallagher & Co., tells AIS Health that many of his company’s clients use “advocacy firms” such as Payer Matrix, as well as others, and that they had had “good experiences” with those firms. “We find it interesting that AbbVie is going after Payer Matrix only, i.e. why are they being singled out when there are other firms that run the same/similar programs, including PBMs?” he asks.

“AbbVie, the maker of Humira, the highest-grossing medication in history, has a longstanding history of protecting their cash cow with lawsuits and legal battles. This time, not against another drug manufacturer, but against a small company,” says Ferrin Williams, Pharm.D., M.B.A., chief pharmacy officer at Scripta Insights.

According to Williams, “it’s interesting that AbbVie chose to sue a company so much smaller than them vs. one of the larger PBM programs that also offers a similar type of alternative funding program. Unfortunately, the American legal system has evolved to where we often see litigation used as a weapon. Whether with or without merit, the lawsuit will be expensive for all involved. Hopefully, it won’t impact patients who need their medicine and can’t afford it.”

She says her company has employer group clients that have contracted with Payer Matrix and other alternate funding companies. Asked specifically about her firm’s experience with Payer Matrix, she replies, “it’s a mixed bag when it comes to employer and patient feedback” of that program. “Some employers and patients have touted the decreased cost and support in accessing their prescription specialty drugs, while others complained of their PBMs not integrating fluidly with Payer Matrix. We do see that these programs can cause some frustration with members, as there is disruption from the normal way they fill scripts.”

PayerAlly is another company that has clients with “varying opinions” on alternate funding companies, which are “very popular with self-funded groups” says Kerri Tanner, Pharm.D., R.Ph., chief pharmacy officer for the pharmacy consulting firm. She says that her company’s clients use “manufacturer funding broadly in a variety of ways,” including alternate funding, copay accumulators and maximizers. “In the self-funded market, alternative funding is one of the ways employers manage high-cost specialty medications, and the value driven for some clients is significant. Some self-funded clients find the continued coverage of high-cost specialty medications to be a considerable risk to their ability to continue to have [a] pharmacy benefit.”

While declining to comment on the lawsuit itself, Tanner tells AIS Health that “as it relates to alternative funding, our firm has some concerns over the ability for the lawsuit to manifest into market-level changes. The decision to provide alternative funding to the patient typically resides within the scope of the manufacturer. The manufacturers who govern most of the alternative funding programs can deny coverage under the program. Manufacturers have continuously allowed those submissions for coverage by third-party vendors to be approved. The PBM programs or alternative funding vendors seek to remove the cost burden of the specialty medication from the patient and from the payer, and while alternative funding vendors make revenue for their services, many of their clients have knowingly agreed to pay those fees as a tradeoff for reduced specialty drug costs.”

The lawsuit, states Williams, “unfortunately…may impact plan sponsors’ use of these programs. It’s likely AbbVie goes after a plan sponsor next to set precedents, as AbbVie is such a serial litigant. Benefits leaders worry a lot about disruption to their members. So, they can be risk-averse if they are concerned about possible confusion for their members.”

She says that among the various strategies available to employers to manage specialty drugs and make sure their members can access them, “alternative funding programs sit somewhere between copay assistance maximizer programs,…and international sourcing that sends patients their prescription drugs from other countries, such as Canada. Given that the cost of prescription drugs in America continues to be such a critical issue for plan sponsors and their members, it isn’t surprising to us that programs like Payer Matrix, and even our own program at Scripta, are growing rapidly in popularity.”

While the case may have “some impact to plan sponsors, causing an increase in their cost for these medications specifically, there may be a more operational cost as they look to re-direct care to manufacturers with medications in a similar class that continue to allow for these programs to persist,” observes Tanner. “Plan sponsors may look to align over time with manufacturers who are specifically interested [in] collaboration of programs which reduce overall costs while allowing manufacturers to gain market share.”

Programs’ Detractors Decry Alternate Funding Models

Critics of the programs are just as passionate in their condemnation of them.

When Madelaine A. Feldman, M.D., a clinical assistant professor of medicine at Tulane University School of Medicine and provider with The Rheumatology Group in New Orleans, is asked to comment on AbbVie’s filing of the lawsuit, she responds, “I am glad, and I hope that AbbVie is successful. Alternative funding programs (AFPs) are just a symptom of a larger problem within self-funded employer health plans. I understand that employers are desperate to reduce their drug spend. Consequently, any program that promises them lower costs is desirable. But in general, it has been said that self-funded employers pay 30% to 40% more than they need to on drugs because of tricky business in the contracts they are given by the PBMs,…between varying definitions of what a specialty drug is, to changing maximum allowable cost (MAC) lists to telling employers that white bagging is cheaper for them.”

“These programs pervert the meaning of a benefit design,” maintains Elan Rubinstein, Pharm. D., principal at EB Rubinstein Associates. “They trick beneficiaries into thinking that they have a defined set of benefits — as per their Evidence of Coverage documents — only to find out when they are very ill and less able to fight that they are not covered. They are an abomination.”

“I understand self-insured employers’ frustration with the high prices of specialty pharmaceuticals, the increasing number of their beneficiaries who may receive or who are receiving these products [and] with the growing share of specialty pharmaceuticals of total prescription drug spend. [Add to that] the unwillingness of their contracted pharmacy benefit managers to act as fiduciaries, to address these challenges solely for the benefit of PBMs’ self-insured employer clients,” he says. “These factors explain these employers’ interest in achieving savings on prescription drug benefit expenditures through alternative funding programs — yet I agree with AbbVie in this case and with Johnson & Johnson in a similar case against SaveOnSP: Alternative funding programs represent improper ways to go about achieving savings.”

Rubinstein, who was involved in policy development for the ACA’s pharmacy benefit, explains that that law’s “mandated pharmacy benefit envisioned at least minimum coverage levels in all therapeutic categories for medically necessary pharmaceuticals. In developing ACA pharmacy policies, I did not envision elimination of coverage on a case-by-case basis so that specific beneficiaries would be considered uninsured only for particular products, so that those insured patients would then be forced to apply to manufacturer-sponsored assistance programs intended for uninsured and underinsured persons.”

Such alternate funding programs, he asserts, are “a perversion of the [ACA’s] intent.”

In addition, he says, they are discriminatory. “Alternative funding discriminates against individual insured beneficiaries whose medical conditions require expensive specialty pharmaceuticals, by eliminating coverage for those specific specialty pharmaceuticals and requiring patients to participate in a process intended for uninsured and underinsured individuals.”

Feldman, who also is president of the Coalition of State Rheumatology Organizations, tells AIS Health that she has heard from rheumatology practices “that the alternative funders keep calling them trying to get various types of assistance, but they don’t want the physician to be involved at all. They continue to call and remind the practice that they are not supposed to contact any assistance program or even obtain a copay card for a patient. The AFP wants to make sure that they make the money even if it delays assistance for the patient.”

Alternate funding companies, she contends, “are abusing the manufacturer’s assistance programs. I understand the predicament many self-funded employers are in with rising health care costs, particularly in their specialty pharmacy spend. However, these programs have used deceit by claiming patients are ‘uninsured’ when actually they are only uninsured for a specific drug.”

Feldman says she has a letter to a rheumatology practice from one company — not Payer Matrix — that wanted a rheumatologist “to change the patient to a different medication than Humira because of AbbVie’s patient assistance ‘restrictions.’ Are you kidding me??? Now they are trying to make the doctor complicit in their deceit.”

In addition, she says, “all of the alternative funders are proudly stating that they will obtain medications from out of the country. Except for certain personal use exceptions, out-of-the-country importation is illegal.”

“On top of all of that, they charge the employer 20% to 30% of the price of whatever they obtain for the patient — including things, such as copay cards, the doctors’ offices get for the patient for free,” she says. “At least initially, they would pretend to be the patient, and now they are having the patient sign power of attorney in some cases.”

“From what I have heard, AFPs may be trying to ‘legitimize’ that the patient is truly ‘uninsured’ for the drug but putting them through a sham prior auth process that automatically denies the patient and makes them legitimately uninsured for the drug,” says Feldman. “But from what I have been told, the ‘fix is in’ for a denial before the PA is even done.”

“My guess is that PayerMatrix will change their name and rebrand because of the bad reputation that [they] have earned,” says Julie Baak, practice manager of the Arthritis Center in Bridgeton, Missouri, whose practice has had experience with Payer Matrix.

Asked about possible impacts of the lawsuit, Rubinstein notes that Johnson & Johnson filed its lawsuit in early May last year, and that case “is continuing with no immediate end in sight. Lawsuits take time — possibly years — to run through the courts.

“In the meantime, fully insured and very ill patients — whose families believe that their employers have granted them access (to which they have contributed premium payments) to benefit coverages stated in their Evidence of Coverage documents — will be harmed, even while self-insured employers achieve savings on their pharmacy benefit expenditures through these perverted programs.

“I sympathize with self-insured employers’ frustration with growing specialty pharmacy spend, with frustration that these products are way more expensive in the United States than in other developed nations and that the situation is getting worse even as new miraculous therapies receive FDA approval,” he continues. “But alternative funding programs are the wrong way for self-insured employers to go about achieving savings in programs that they have guaranteed to their covered employees and their families. For those reasons, I hope that other pharmaceutical manufacturers soon follow Johnson & Johnson’s and AbbVie’s lead.”

Contact Feldman at nolarheum@gmail.com, Friedman at Seth_Friedman@ajg.com, Rubinstein at elan.b.rubinstein@gmail.com, Tanner at kerritanner@payerally.com and Williams via Elizabeth Tran at elizabeth@lkprinc.com.