The hidden risks of specialty drug carve-outs

Last updated: 10/7/2026

It often starts with a simple promise: lower specialty drug costs.

For employers under pressure to manage rising Rx expenses, Alternative Funding Programs (AFPs) can seem like a practical solution – carving out certain high-cost medications with third-party AFPs filling the coverage gap. But the reality doesn’t always match the pitch.

One analysis found fewer than half of employers using AFPs actually reduced their specialty drug costs, and their employees waited an average of 68 days to obtain their prescribed medications. For one Capital Blue Cross client, the trade-offs became clear only after an employee lost access to an expensive medication.

The scenario: when coverage gaps emerge

Recently, an employer group elected to carve out several specialty medications with a third-party AFP – including therapies for Multiple Sclerosis (MS). Shortly thereafter, an employee at the company received an MS diagnosis and was prescribed a specialty medication to treat the condition.

Because the medication had been designated “non-essential” under the AFP, it was excluded from the employer’s health benefit plan coverage. The employee was directed by the AFP to seek coverage through the drug manufacturer’s Patient Assistance Program – a central feature for many AFP models.

Patient Assistance Programs are typically designed for uninsured or low-income individuals, with strict eligibility requirements. In this case, the employee’s household income exceeded the program threshold. As a result, access to the medication depended on eligibility criteria that were not aligned with the employee’s circumstances and were outside the employer’s control.

With no plan coverage and no external funding, the employee was left facing annual out-of-pocket costs of around $80,000. What had been positioned as a cost-saving strategy instead created confusion and stress at a critical moment in care.

The employer solicited help from Capital, which assisted the member in accessing the medication. Ultimately, the employer chose to reintegrate specialty medications into its health plan administered by Capital, reversing the carve-out.

Impact on member

For employees, the implications of AFPs can extend far beyond benefit design. In this case, the member experienced:

• Loss of plan coverage for a medically necessary therapy.
• Denial of eligibility for manufacturer assistance.
• Exposure to significant out-of-pocket costs.

In addition to the expense, research suggests AFPs delay access to medications. One survey found that the average wait to access medication through an AFP was 68 days, and one in four reported that delays worsened their condition.

Impact on employer

While AFPs are designed to control costs, the downstream impact can create new challenges for employers. In this case, the employer encountered:

• Increased administrative burden.
• IFragmentation across multiple vendors.
• IEmployee dissatisfaction and potential risks to retention and workforce stability.

Perhaps most importantly, AFPs can shift risk rather than eliminate it. When external funding mechanisms – such as Patient Assistance Programs – don’t deliver, the consequences often return to the employer in the form of urgent employee needs, reputational impact, and unplanned costs.

Reassessing the trade-off

This story underscores a critical question for employers: Are short-term gains worth long-term risk? Before implementing any carve-out approach, decision-makers may want to consider:

• Do your employees realistically qualify for low-income assistance programs?
• What is the total financial exposure for members who do not qualify?
• How will fragmentation caused by hiring multiple vendors affect care coordination and member experience?
• How will this impact your current rebate guarantees and contracting structure?
• What is the contingency plan if third-party funding is unavailable, delayed, or denied?
• Do plan documents and member communications clearly reflect how these arrangements operate in practice?

Carving-out drugs doesn’t always eliminate cost – it can shift it, often to the employees least equipped to absorb it and back to the employer when gaps inevitably surface.