Photo by Lomo-Cam via Flickr
A recent New York Times article highlighted an increasing trend in pharmaceutical consumerism. Many drug companies are providing copayment or coinsurance payment assistance. These subsidies now exist “for about half of the top 100 brand-name drugs sold in this country,” according to health analyst Richard Evans of Sector & Sovereign Research. Some patients receive copayment cards or coupons from their physicians while others find them on the internet .
In mid-2006, pharmaceutical companies introduced coupons to reduce beneficiaries’ out-of-pocket costs for expensive drugs. The “pharmaceutical subsidies” act as a counter-incentive, steering patients toward more expensive drugs–which wind up costing the consumer less– or zero–out-of-pocket. As a result, the use of pharmaceutical copayment cards or coupons has tripled since their inception.
According to the NY Times, “[d]rug companies say the [copayment assistance] plans help some patients afford medicines that they otherwise could not.” However, this seemingly altruistic explanation rings–shall we say– like something less than the entire truth. For starters, these coupons are widely available on the internet and physicians who distribute the cards do not screen patients for financial need. As the NYTimes reports,
Executives at Medicis, the company that sells Solodyn, have told investors that the co-payment card is used by an “overwhelming majority” of patients, and is largely responsible for doubling use of the drug, to 26,000 prescriptions a week.
That sounds like brilliant marketing, not need-based financial assistance.
Also, when we think of those who are most in need, we often think (rightly or wrongly) of the uninsured, the poor and the elderly none of whom benefit from the pharmaceutical subsidy! As the Amgen First Step Program website states, it is “a medical benefit co-pay coupon program to help commercially insured eligible patients with their deductible, co-insurance, and/or co-pay requirements” for listed drugs. Excluded from the program are the uninsured or those in publicly funded health insurance plans.
It is unsurprising that the uninsured are excluded from participation. According to Joshua Schimmer, a biotechnology analyst, “it seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly.” For example, over the past five years, Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, while increasing copayment assistance to a maximum $1,200 a month. In order for the pricing system to work, pharmaceutical companies rely on consumers to choose the subsidized drug and insurers to foot the increased bill.
It is likewise unsurprising that the publicly insured are excluded, but for a very different reason; to offer subsidies to Medicare or Medicaid patients would be illegal. Under 42 U.S.C. § 1320a-7b (1),(2) , the knowing and willful offer, payment, or receipt of any remuneration in return for the purchase of any good “for which payment may be made in whole or in part under a Federal health care program” is a felony punishable by up to $25,000 or five years imprisonment. Illegal remuneration includes “waiver of coinsurance and deductible amounts (or any part thereof)…” ( § 1320a-7a (i)(6) ).
The pharmaceutical copay cards and coupons are a big problem. First, they circumvent the cost sharing structures established by health insurance plans, raising systemic health costs. As the NYTimes reported:
“The member is somewhat insulated from the cost of the prescription,” said Kevin Slavik, senior director of pharmacy at the Health Care Service Corporation, which runs Blue Cross and Blue Shield plans in Illinois and three other states. “In essence, it drives up the total cost of providing the prescription benefit.”
That increased cost is passed on to the privately insured in the form of increased premiums and to the public through increased taxes. As Eileen Wood, vice president of the Capital District Physicians’ Health Plan, told NPR in 2009:
those coupons come with a consequence. If everyone started using coupons to get the more expensive drugs, “we’d have to raise premiums,” she says. “There’s no question about that.”
Furthermore, publicly funded plans must also pay the increased price of prescription drug benefit, which is passed on to taxpayers. Any benefit to the coupon user in the form of reduced out-of-pocket expenses is diminished by higher premiums and taxes. In the final analysis, the only real beneficiaries of these “pharmaceutical subsidies” are the drug companies who offer them.
This issue is not one that is likely to disappear. Currently, Massachusetts is the only state that does not allow pharmaceutical coupons; it is possible that other states or the federal government will follow suit. As for insurers, some may begin requiring patients to try generic drugs first, as Capital District Physicians’ Health Plan has, or simply drop coverage of these drugs altogether. Either way, drug company coupons will remain a topic to watch in 2011.
Photo by Lomo-Cam via Flickr
A recent New York Times article highlighted an increasing trend in pharmaceutical consumerism. Many drug companies are providing copayment or coinsurance payment assistance. These subsidies now exist “for about half of the top 100 brand-name drugs sold in this country,” according to health analyst Richard Evans of Sector & Sovereign Research. Some patients receive copayment cards or coupons from their physicians while others find them on the internet .
In mid-2006, pharmaceutical companies introduced coupons to reduce beneficiaries’ out-of-pocket costs for expensive drugs. The “pharmaceutical subsidies” act as a counter-incentive, steering patients toward more expensive drugs–which wind up costing the consumer less– or zero–out-of-pocket. As a result, the use of pharmaceutical copayment cards or coupons has tripled since their inception.
According to the NY Times, “[d]rug companies say the [copayment assistance] plans help some patients afford medicines that they otherwise could not.” However, this seemingly altruistic explanation rings–shall we say– like something less than the entire truth. For starters, these coupons are widely available on the internet and physicians who distribute the cards do not screen patients for financial need. As the NYTimes reports,
That sounds like brilliant marketing, not need-based financial assistance.
Also, when we think of those who are most in need, we often think (rightly or wrongly) of the uninsured, the poor and the elderly none of whom benefit from the pharmaceutical subsidy! As the Amgen First Step Program website states, it is “a medical benefit co-pay coupon program to help commercially insured eligible patients with their deductible, co-insurance, and/or co-pay requirements” for listed drugs. Excluded from the program are the uninsured or those in publicly funded health insurance plans.
It is unsurprising that the uninsured are excluded from participation. According to Joshua Schimmer, a biotechnology analyst, “it seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly.” For example, over the past five years, Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, while increasing copayment assistance to a maximum $1,200 a month. In order for the pricing system to work, pharmaceutical companies rely on consumers to choose the subsidized drug and insurers to foot the increased bill.
It is likewise unsurprising that the publicly insured are excluded, but for a very different reason; to offer subsidies to Medicare or Medicaid patients would be illegal. Under 42 U.S.C. § 1320a-7b (1),(2) , the knowing and willful offer, payment, or receipt of any remuneration in return for the purchase of any good “for which payment may be made in whole or in part under a Federal health care program” is a felony punishable by up to $25,000 or five years imprisonment. Illegal remuneration includes “waiver of coinsurance and deductible amounts (or any part thereof)…” ( § 1320a-7a (i)(6) ).
The pharmaceutical copay cards and coupons are a big problem. First, they circumvent the cost sharing structures established by health insurance plans, raising systemic health costs. As the NYTimes reported:
“The member is somewhat insulated from the cost of the prescription,” said Kevin Slavik, senior director of pharmacy at the Health Care Service Corporation, which runs Blue Cross and Blue Shield plans in Illinois and three other states. “In essence, it drives up the total cost of providing the prescription benefit.”
That increased cost is passed on to the privately insured in the form of increased premiums and to the public through increased taxes. As Eileen Wood, vice president of the Capital District Physicians’ Health Plan, told NPR in 2009:
Furthermore, publicly funded plans must also pay the increased price of prescription drug benefit, which is passed on to taxpayers. Any benefit to the coupon user in the form of reduced out-of-pocket expenses is diminished by higher premiums and taxes. In the final analysis, the only real beneficiaries of these “pharmaceutical subsidies” are the drug companies who offer them.
This issue is not one that is likely to disappear. Currently, Massachusetts is the only state that does not allow pharmaceutical coupons; it is possible that other states or the federal government will follow suit. As for insurers, some may begin requiring patients to try generic drugs first, as Capital District Physicians’ Health Plan has, or simply drop coverage of these drugs altogether. Either way, drug company coupons will remain a topic to watch in 2011.