That is the allegation in a series of lawsuits filed today by several union health plans against eight large drugmakers. They charge that, rather than save consumers money, prescription drug coupons illegally subsidize co-pays for brand-name meds and can actually increase health insurance premiums, which can cause consumers to hit benefit caps or lose coverage altogether.
The lawsuit reflects an ongoing, behind-the-scenes battle over the cost of medicines. Insurers and pharmacy benefit managers have used tiered co-pays to encourage consumers to use lower-cost generics or favored brand-name drugs that carry lower price tags. Drugmakers have fought back with coupons or co-pay cards to preserve market share. Pfizer, for instance, began aggressively marketing a card for its Lipitor cholesterol well before the first generic version arrived late last year.
The coupons can lower co-pays for brand-name drugs to about the same cost as a generic, or simply offer a flat discount off the co-pay. This means that employers and unions that offer prescription drug coverage can pay more when coupons are used. But consumers like them. In Massachusetts, where there have been repeated efforts to overturn a state ban against coupons (see this), patient groups have repeatedly sided with the pharmaceutical industry to argue such discounting provides needed relief to people who have difficulty affording their meds.
However, four union health plans and a consumer advocacy group maintain coupons are a thinly disguised gambit to promote brand-name meds at the expense of generics. In arguing their case, the plans cite a federal statute that prohibits commercial bribery and charge coupons are illegal, because the undisclosed payments to patients and pharmacies are made through a so-called ‘shadow claims system,’ which is designed to hide the payment information from the health plans. In effect, the lawsuits charge the health plans are spending more than they should.
“Pharmaceutical corporations are duping consumers with misleading coupons that are more about increasing corporate profits than actually reducing the cost of drugs for consumers ” said Wells Wilkinson, director of the Prescription Access Litigation project at Community Catalyst, which worked with four health plans to file the lawsuits. “If not stopped, the use of these deceptive coupons will increase costs for consumers’ health plans by billions of dollars, contributing to higher premiums and the increasing loss of coverage and benefits for Americans.”
The drug makers that were targeted are Abbott Laboratories, Amgen, AstraZeneca, Bristol-Meyers-Squibb, GlaxoSmithKline, Merck, Novartis and Pfizer. The lawsuits were filed by the AFSCME District Council 37 Health & Security Plan Trust, Sergeants Benevolent Association, the New England Carpenters, and the Plumbers and Pipefitters Local 572 Health and Welfare Fund. These provide drug benefits for civilian and uniformed municipals workers, retirees and their dependents in New York City; plumbers in various states, and carpenters in New England.
How does the alleged shadow claims system work? The lawsuits maintain the coupons "are designed to undermine cost-sharing arrangements. By eliminating or reducing member co-pays for branded drugs, plan members have no incentive to use less-expensive generic drugs, and health benefit providers end up paying for more costly branded drugs," according to the lawsuits filed by four union health plans against the drugmakers (here is one of the lawsuits).
"Presenting a co-pay subsidy card to a pharmacist triggers a secondary form of insurance - provided by the manufacturer - that functionally reduces the price of the drug without disclosing that price reduction to the insurer. Each and every subsidy is calculated and processed electronically; the health benefit plans receive electronic records falsely indicating that the members paid their personal cost-share obligations, yet the manufacturer’s digital paper trail discloses the truth - that the copayments were subsidized by the manufacturer."
For their part, drugmakers defend the use of coupons and co-pay cards as a way to help pressed consumers afford their meds. A spokesman for Pfizer sends us this statement: "Given the larger cost-sharing burden being placed on patients, Pfizer supports the use of company sponsored programs which help patients with out-of-pocket expenses for the medicines prescribed by their physician.
"...While many health plans have raised their co-pays and/or are encouraging switching to generic medications to achieve cost-savings, these treatments may not be appropriate for all patients. The purpose of co-pay cards is to support the medical treatment choices made by prescribers by better enabling patients to afford these medications."
UPDATE: And PhRMA senior vp Matt Bennett sent us this: "Copay coupons address a serious problem of high cost sharing for medicines. They play a valuable role in increasing access to medicines and improving patient adherence to prescribed therapies, generating better health outcomes and reducing the use of avoidable and costly medical care. Today’s levels of cost sharing can pose a significant access barrier for patients, resulting in low adherence and poor health outcomes...
“Copay coupons help patients adhere to prescribed therapies by reducing high out of pocket costs. In fact, a recent analysis by the Amundsen group shows that the majority of copay coupon spending is for medicines for which substitutes are not available. This analysis of prescription drug claims data also found that copay coupons were most often used for brand medicines which health plans had placed on a preferred tier (often tied to deep negotiated discounts), and that use of the cards had no relationship to lower use of generic drugs in any of the major therapeutic classes studied.”
coupon pic thx to fontplaydotcom on flickr
15 Comments
This lawsuit is very interesting. I hope the plaintiffs prevail. For pharma these coupons and cards do get them brand scripts because patients don't fully understand how insurance really works. The higher costs to the plan will absolutely result in higher premiums for all but the patient won't connect they copay card with it.
The cards are also a source of fraud to pharma but the prize is the bulk script that far outweighs the fraudulent redemption of coupons. Pfizer really shed a negative light on these programs when they used them as a last ditch effort to save branded scripts.
These tactics are often used to reduce patient out-of-pocket costs for crap drugs that offer zero benefit over generic alternatives (e.g. Nexium). But copay cards are also provided for products with no generic alternatives (Gleevec is a good example).
Tiering is supposed to be a way to force patients to have skin in the game and make cost-effective decisions. However, PBMs will put anything in a Tier 3/4 position if they don't get the rebates they want - regardless of whether there are viable generic alternatives.
That's the role of the PBM though - control costs. The tiered system is in place to encourage using the lowest cost effective solution - generic or not.
And before there is a pile in the rabbit about PBMs protecting price to generate profit - 2012 is the first year they may have to pay reimbursements to subscribers under the Medical Loss Ratio (MLR) rules of Obama care. In short, insurers and PBMs have to use 80% or 85%, depending on group size, of premiums on direct healthcare reimbursement coats or refund the difference.
They're trying to keeps costs low so they can keep premiums low which now has the mandated MLR check to ensure premiums go to care.
should we go after food companies? I just used a double coupon at Kroger for brand name soup. It cost 1.25 before the coupon versus 1.05 after coupon use. The house brand was .85 cents.
I feel kinda dirty, liked I have been subjected to an illegal bribe?
Groupon is not gonna like this.
These cards ultimately serve the purposes of pharma, not patients. They do increase costs to the overall system and as a taxpayer, I am against them.
With all the off-label promotion, outright bribes, trips etc over the last 10-15 years, does anyone really believe the pharma companies put patients first with these cards?
Hopefully this craziness will be forced to end.
hate to tell you doc, but in a business model where you are incentivized to produce/use more resources, can anyone really believe every test/procedure that docs order puts patients first?
add to that, that on the other end of the "out-right bribes, trips etc over the past 1-15 years" there was a doc reviving them, well does anyone really believer that the physician puts patients first?
@Viktor using grocery coupons is not relevant here - unless you have some little know insurance that pays for most of your grocery bill minus your copay.
Certainly there are examples of products using coupons to compete with generics, but it would be interesting to know what the actual mix is between those and savings programs intended to level the playing field between similar branded products. The reality (if you understand how insurance works) is that the tier of copay has more to do with pharma rebates and market share (value to the insurer) than the incremental benefit of the product to the patient. Yes, ONE role of PBMs is to control costs, but it is also to maximize their profits (just like pharma). Anyone who belives that insurers are building their co-pay tiers soley around outcomes and providing savings to the patients is mistaken. The "savings" for insurers are not just found in the cheap price they pay for generics, but more importantly in the high rebate kickbacks they are able to extract from branded products willing to pay their way into a preferred position. When a coupon is used in this instance it means less rebate for the insurer. Pharma still pays and the patient saves, but the insurer doesn't get their cut. These lawsuits are about insurers protecting their cut, not about saving patient money on premiums.
@Will Obamacare is mandating 80-85% of premiums go directly yo care or the difference is refunded to subscribers. Defending 'profit' beyond those margins is a thing of the past. Insurers are now in the same cost containment cycle as most other companies.
It would be interesting to get more detail on the split between coupons for the competing branded meds versus those competing with generics.
Will - Nicely put that is exactly what this is about. Also I noticed these insurance plans seem to be state/union issued... if so Pharma sponsord copay cards are not valid for these members - only commercial or private plans work.
Will said:
"Anyone who belives that insurers are building their co-pay tiers soley around outcomes and providing savings to the patients is mistaken."
I would have used "delusional" in that last phrase . . .
Viktor, Please don't try to justify bad behavior by pointing out other's bad behavior. I wouldn't let my child do that, why should business?
These cards benefit pharma companies.
I work for a not-for-profit insurer where we manage our own pharmacy benefit. I can tell you that manufacturer rebates do not come close to off-setting the savings of using multi-source generic products. If the big PBM's are enriching themselves by steering patients to brands then they are not acting in their client's best interests. One of many reasons why we manage our own pharmacy benefit.
"Illegal Bribes" is probably an understatement. Insurance companies are using several tactics, which results in an increase in payment to the end consumer.
My thoughts are that you may have overlooked what happens when an insurance company uses co-pay cards and there is no generic available. My experience is that the insurance company ignores their own co-pay or discount policy, and passes nearly the full retail price the consumer.
My pharmacy now charges me $339.96 for what is supposed to be a $20.00 co-pay for brand name prescriptions.
I have been discussing the problem with my insurance company for over a month now, and each discussion results in a prices increase. The first discussion raised the co-pay price from $20.00 to $125.00. The next discussion increased the co-pay price from $125.00 to $300.00. My last discussion with my insurance comapny increased the co-pay price to $339.96. I am told that the medicine is "not on the prefferred list" although there is no generic brand.
In my case, one company (Praxco) has offered a (the only) generic brand for my prescription, but that offer has been in limbo at the FDA for more than a year now.
Which begs the question, what are the options for the consumer (or patient) using an insurance company co-pay?
The only thing I can recommend at the moment would be to inform your local prosecutor of the discrepancy between the insurance company's policy (co-pay statement) and the price paid to your local pharmacy.
Larry's estimate of a 25% increase to insurance companies pails incomparison to what I see as the prescription insurance policy increase to the consumer.
This doesn't make any sense. How is your insurance company using copay cards? Copay cards are provided by manufacturers directly to patients to reduce or eliminate their cost-sharing. This defeats the formulary structure.
Your benefit documents should clearly state what your cost-sharing is for different scenarios.