Emerging Payer-Driven Cost Containment Strategies: Part 1

Part 1: When Short-Term Savings Come at a Cost: The Unintended Consequences of Alternative Funding Programs

Rare disease innovation brings hope to the 95% of patients living with a rare disease who are waiting for an FDA-approved treatment for their condition.¹ However, the promise of innovation can only be realized when patients can access the therapies designed to help them.

For these patients, access is everything. When living with complex, often life-threatening conditions, timely access to therapy can mean the difference between stability and irreversible progression—or even survival. In some cases, timely access can have a profound impact on a patient’s outcome.

Yet even before new barriers emerge, the treatment journey is already highly fragmented. For many rare disease patients, this complexity is compounded by the often-lengthy path to diagnosis, which can delay treatment before the care journey truly begins. Once diagnosed, patients and caregivers frequently encounter additional obstacles navigating providers, payers, and support programs. In fact, insights from a PANTHERx^® Morning Consult survey found that 90% of patients and caregivers experience delays in care due to communication gaps and coordination failures across the healthcare system.²

Against this already complex backdrop, a new set of payer-driven cost containment strategies is creating additional friction: alternative funding programs (AFPs).

Why Alternative Funding Programs Are Growing
The rise of AFPs is not happening in a vacuum. Several structural shifts are driving their adoption:

• Expansion of specialty and rare disease therapies: As innovation expands, more patients now have access to therapies that carry significant costs.
• High cost of innovation: Rare disease therapies are often priced at a premium due to small patient populations and complex development pathways.
• Employer and payer pressure to control costs: Particularly among smaller employer-sponsored plans, AFPs are positioned to reduce drug spend through alternative benefit design.

At their core, AFPs aim to shift financial responsibility — but in practice, that shift often comes at the expense of therapy access.

How These Programs Work in Practice
While models vary, common AFP strategies include:

• Requiring patients to try lower-cost therapies, often for non-FDA approved indications
• Excluding high-cost rare disease therapies from coverage and redirecting patients to manufacturer patient assistance programs (PAPs)
• Embedding AFP enrollment at the employer level, often across entire populations
• Leveraging international sourcing arrangements for select medications; however, many rare disease therapies cannot be accessed through these programs due to limited availability and distribution restrictions.

The result: patients are frequently denied coverage for the therapy their physician prescribed, despite evidence supporting its efficacy.

The Hidden Cost Shift
Although AFPs are marketed as cost-saving solutions, they do not eliminate costs; they shift them elsewhere in the healthcare system. While these models may generate short-term savings for employers, they can also create access barriers, treatment delays, and added administrative complexity for patients with rare and complex diseases.

When access to medically necessary therapies is delayed or denied, the consequences can extend beyond pharmacy spend, potentially contributing to disease progression, preventable hospitalizations, increased healthcare utilization, and higher total costs of care over time. In addition, AFP vendors may charge fees of 25% or more of the calculated pharmacy-only savings they generate.

These dynamics raise questions about AFPs being a viable solution for rare disease pharmacy cost containment.

A Patient at the Center: Baby HPP
For one patient, these dynamics became more than a system issue — they became a matter of survival.

“Baby HPP,” an infant diagnosed with hypophosphatasia (HPP), required immediate access to a life-saving rare disease therapy. While hospitalized, he began treatment and showed clear clinical improvement.

• However, as discharge approached and access needed to be secured beforehand, the family encountered unforeseen obstacles: Their insurance included an alternative funding program.
• Coverage for the prescribed therapy was denied.
• The denial was issued despite the therapy being clinically indicated and having already demonstrated benefits for the patient.
• The patient remained in the NICU for an additional 15 days.

PANTHERx intervened so the patient could be discharged:

• The manufacturer provided temporary access to therapy.
• PANTHERx Rare worked alongside the care team to navigate the case.
• Coverage was ultimately secured through the patient’s insurance medical benefit after escalation.

However, this resolution came at a significant cost
Because access to therapy was delayed by the alternative funding program, Baby HPP remained hospitalized for an additional 15 days despite being otherwise clinically appropriate for discharge. For infants with perinatal/infantile-onset HPP—the most severe form of the disease—extended hospitalization can be both medically and financially burdensome. HPP is associated with significant healthcare resource utilization, including respiratory support, feeding challenges, skeletal complications, and intensive multidisciplinary care. Published data demonstrates that healthcare utilization increases substantially with disease severity, with one reported patient accumulating 725 inpatient hospital days during the first 2.5 years of life.³

Based on published estimates of $10,000 to $20,000 or more per day for Level IV NICU care, the extended hospital stay of 15 additional days likely resulted in $150,000 to $300,000 in avoidable inpatient costs. A conservative midpoint estimate is approximately $190,000.⁴

Baby HPP’s experience demonstrates how a coverage delay intended to reduce pharmacy spending can ultimately generate substantially higher medical costs. In this case, a 15-day hospitalization delay may have resulted in nearly $190,000 in additional healthcare expenditures.

Conclusion
As rare disease innovation accelerates, access must remain a central consideration in benefit design. Cost-containment strategies should be evaluated not only on their ability to reduce pharmacy spending, but also on their impact on patient outcomes and total cost of care. Baby HPP’s experience highlights the importance of balancing financial stewardship with timely access to clinically necessary therapies.

References

1. U.S. Government Accountability Office. Rare Disease Drugs: FDA Has Steps Underway to Strengthen Coordination of Activities Supporting Drug Development. GAO-25-106774, 18 Nov. 2024, www.gao.gov/products/gao-25-106774
2. Morning Consult in partnership with PANTHERx Rare. The State of Rare Disease Care. Survey of 226 rare disease stakeholders fielded Jan. 27–Feb. 11, 2026, among 226 rare disease stakeholders. Findings reflect experiences across the broader rare disease care ecosystem and multiple specialty pharmacy providers.
3. Daniel AB, Saraff V, Shaw NJ, et al. Healthcare resource utilization in the management of hypophosphatasia in three patients displaying a spectrum of manifestations. Orphanet J Rare Dis. 2018;13(1):142. doi:10.1186/s13023-018-0869-4.
4. CoveredUSA Editorial Team. How Much Does a NICU Stay Cost? Daily Charges Decoded (2026). Published May 18, 2026. Accessed July 9, 2026.
5. Valencia Z, Sen A, Martin K. NICU Admissions and Spending Increased Slightly from 2017-2021. Health Care Cost Institute. Published July 25, 2023.