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The Co-Pay Coupon Controversy: Time for Detente?

Posted Nov 26 2013 12:00am
Kate Greenwood_high res 2011 comp Cross-Posted at Bill of Health

At the end of last month, the Secretary of Health and Human Services Kathleen Sebelius made headlines when, in a letter addressed to Representative Jim McDermott (D-WA), she announced that “[qualified health plans], other programs related to the Federally-facilitated Marketplace, and other programs under Title I of the Affordable Care Act” were not “federal health care programs under section 1128B of the Social Security Act”.  One implication of the Secretary’s interpretation is that the “anti-kickback act”, which is found in Section 1128B, does not apply to qualified health plans.  And that, in turn, means, among other things, that individuals insured under those plans, unlike individuals on Medicare or Medicaid, will be able to use drug company coupons to defray the cost of their prescription drugs.

Prescription drug coupons have been a source of controversy, favored by branded manufacturers and patients, and opposed by generic manufacturers, health insurers, third party payers, and pharmaceutical benefit managers.  Joseph Ross and Aaron Kesselheim studied a large number of coupons advertised on the website and found that ”62% (231 of 374) were for brand-name medications for which lower-cost therapeutic alternatives were available.”  Ross and Kesselheim argue that the coupons are costly at the population level, but also for individual patients.  This is because the coupons are nearly always time-delimited and the short-term savings do not typically outweigh the long-term cost of taking a branded drug.  On the other hand,  in an article in last week’s JAMA, Leah Zullig and colleagues pointed out that reducing co-payments has been proven to improve medication adherence, a problem which there ”is an increasing business case for addressing[.]“

The coupon controversy has carried over into the courts.  On March 7, 2012, seven lawsuits were filed in district courts by third party payers against a number of drugmakers, alleging that prescription drug coupons violate antitrust, commercial bribery, and racketeering laws.  (This post  at FDA Law Blog includes links to the seven complaints, and this one provides an update on the status of the litigation as of late June 2013.)

On June 3, 2013, Judge Paul Oetken of the Southern District of New York dismissed  one of the seven suits, brought against Bristol-Myers Squibb and Otsuka, finding that the challenged coupons were not fraudulent because the program is “‘open and notorious,’ information about its terms and conditions is readily available on a number of public websites, and Plaintiffs do not allege that anyone is deceived about the effect of these programs.”  The court dismissed one of the plaintiffs’ claims–that the defendants committed fraud “by reporting benchmark prices to reporting agencies while failing to account for the routine waiver of co-pays”–without prejudice to refile, which the plaintiffs did.  A review of the seven dockets this morning, November 26, 2013, reveals that there are motions to dismiss pending in all that were not voluntarily dismissed by the plaintiffs.

The likely outcome of the ongoing litigation is that if an insurer wants to end the use of coupons, it will have to include a provision in its insurance contracts barring their use.  Note, though, that Ross and Kesselheim found that fully 38% of the coupons offered were for prescription drugs for which there was no therapeutic alternative.  The public policy arguments against using coupons are significantly weaker with regard to such drugs.

A better approach to cutting costs, I think, is to focus on doctors, not patients.    Rather than take away patients’ coupons–which can be perilous, as JC Penney can tell you –insurers and third party payers should make it easier for doctors to make cost-effective prescribing decisions and harder for them to prescribe brand-name drugs that have generic substitutes or alternatives.  As Judge Oetken held, “neither precedent nor logic” supports assigning to patients a duty to “pressure physicians to choose generics.”  Physicians should be choosing generics, where appropriate, in the first instance.  Focusing on helping them do so would be fairer and more productive than continuing the fight against coupons.

1. At Regulatory Focus, Alexander Gaffney reports on efforts by members of Congress to exempt user fees like those that support the Food and Drug Administration’s drug and device approval processes from sequestration.  While appropriated funding that is subject to sequestration can be used to pay down the national debt, user fee funding may not be spent and so is sitting in an account unable to be used.

2. Gaffney also reports on a “flurry” of untitled letters alleging violations of advertising rules and regulations sent by the FDA’s Office of Prescription Drug Promotion in recent weeks, including one sent to the manufacturer of the recently-approved morning sickness drug Diclegis “the day the drug was approved, possibly marking a new speed record for the time between product approval and the first alleged marketing violation.”

3. In JAMA, Leah Zullig and colleagues survey the literature on improving medication adherence.  They conclude as follows: “To date, improving medication adherence has proven elusiveyet recent advances in understanding of how to help patients sustain adherence are helping to identify the major ingredients needed for success. The challenges now involve how to create and sustain large-scale programs that ensure patient adherence on a national scale.”

4. Also this past week, Duke Law’s Center for Innovation Policy hosted a conference on  “New Approaches and Incentives in Drug Development” which brought together “leading figures from the private sector, government, and academia” to ask whether “alternative economic incentives, such as targeted public funding or exclusivity terms based on research risk or disease, [should] be considered[.]“  A recorded broadcast of the conference will be posted to the conference website next month.

5. Finally, Nicole Huberfeld has just posted what looks like a fascinating essay in which she presents empirical evidence that despite the “bleak picture” painted by the media, in fact “the Medicaid expansion is progressing apace.”  Huberfeld also contends that her data show “dynamic negotiations occurring within states and between the federal and state governments, which indicates that the vision of state sovereignty projected by the Court in NFIB v. Sebelius was incorrect and unnecessary.”

Capture The National Childhood Vaccine Act of 1986 requires parties seeking relief for vaccine-related injuries to proceed through a federal vaccination claims system.   If a plaintiff prevails in her suit, she (or her estate) will receive damages for pain, suffering, and expenses.  Significantly, other awards include death benefits or future earnings.  On October 28, 2013, the Federal Circuit answered in the negative the question of “whether the estate of a petitioner who dies prior to judgment is entitled to compensation for lost future earnings.” 

Tembenis v. Secretary of Health & Human Services arose out of the epilepsy four-month-old Elias Tembenis developed following vaccination for Diptheria–Tetanus–acellular–Pertussis.  His parents filed a Petition for Vaccine Compensation but while the petition was still pending, Elias died of his disorder at age seven.  In 2010, a special master determined the vaccine caused Elias’ epilepsy and death.

After the special master’s determination, Elias’ estate and the Secretary of Health and Human Services agreed on damages.  The estate received a $250,000 death benefit, $175,000 for actual pain and suffering and past unreimbursable expenses, and $659,955.61 in future lost earnings.  The Secretary reserved the right to challenge the future lost earnings award; the special master determined that Federal Circuit precedent suggested that the estate was entitled to lost earnings.   The Secretary appealed to the Claims Court which upheld the special master’s ruling.

The Secretary then appealed to the Federal Circuit.  The Circuit court analyzed 42 U.S.C. § 300aa–15(a)(3)(B):

In the case of any person who has sustained a vaccine-related injury before attaining the age of 18 and whose earning capacity is or has been impaired by reason of such person’s vaccine-related injury for which compensation is to be awarded and whose vaccine-related injury is of sufficient severity to permit reasonable anticipation that such person is likely to suffer impaired earning capacity at age 18 and beyond, compensation after attaining the age of 18 for loss of earnings determined on the basis of the average gross weekly earnings of workers in the private, non-farm sector,  . . .

The Federal Circuit interpreted the language to determine the statute only allows for recovery of future lost earnings.  The Court acknowledged the statute does not expressly require a claimant to be alive, but it also does not expressly state an estate can recover future lost earnings of a decedent.

The Court observed that the word “impaired” implies the victim must be living.  When the claimant dies before 18, no reasonable expectation exists that she would be working after 18.  Thus entitlement to a future lost earnings award is dependent upon the claimant being alive.  Further, the Court stated, receiving both a death benefit and a future lost earnings award would be duplicative.  The Court took pains to express sympathy to the family, noting that the death benefit of $250,000 was due to be increased as it had not been amended since the statute’s enactment in 1986.  However, the amount of payment can only be changed by Congress and even if it does happen, it will be of no consolation or compensation to the Tembenis family.

1. Of great interest this past week were the continuing issues at Princeton University, where there has been an outbreak of a form of bacterial meningitis that is rare in this country and trustees were weighing whether to offer a vaccine that has been approved in Australia and Europe but not here in the United States.

2. In the New England Journal of Medicine, Janet Woodcock and colleagues from the FDA’s Center for Drug Evaluation and Research discuss the new “breakthrough therapy” designation and provide a helpful chart comparing it to the FDA’s other accelerated approval programs.  Woodcock and colleagues conclude that “[a]s the pace of scientific discovery continues to increase, drug development pathways will need to evolve in parallel.”

3. At the FDA Law Blog, Dara Katcher Levy comments on a November 8, 2013 Warning Letter, in which the FDA’s Office of Prescription Drug Promotion “alleges that statements made by Aegerion Pharmacueticals’ CEO during broadcast interviews on a CNBC talk show, ‘Fast Money,’ constitute evidence of a new, unapproved, intended use for its drug, Juxtapid (lomitapide) capsules.”  Ms. Levy explains that “[t]his is the first OPDP Warning Letter that takes issue with an initial broadcast of statements aimed at the financial community, rather than the re-distribution of these materials for purposes of product promotion or as part of a ‘media pitch’” and writes that she is “interested to see whether OPDP will be increasing its enforcement focus on investor-related materials and other materials intended for the financial community.”

3. At JAMA, Bridget Kuehn addresses the American Psychiatric Association’s contribution to the Choosing Wisely initiative, five recommendations for when physicians should avoid–and patients should question–prescribing an anti-psychotic medication.  Kuehn quotes Robert Rosenheck: “The unanswered question is how to discourage inappropriate use of the drugs without impinging on physicians’ rights to prescribe them off label when they feel their use is warranted[.]“

5. Finally, Ed Silverman at Pharmalot reports on the European Medicines Agency’s decision to delay finalizing its new policy on disclosing patient-level clinical trial data.  Silverman writes: “There was no indication that the draft policy will be changed, but the potential delay does suggest the possibility that the agency may consider modifying its language. If nothing else, the move underscores the volatility surrounding its plan and vehemence with which the larger issue of disclosing clinical trial data is regarded.”

Furmanek Blog In August of this year, a federal district court upheld a California ordinance requiring drug manufacturers who sell drugs in Alameda County to implement and fund a drug disposal program.  This ordinance, which shifts the costs of drug disposal from local governments back to the originators of the drugs, is the first of its kind but if sustained it won’t be the last.  In December 2012, PhRMA, the trade organization for drug manufacturers, challenged the ordinance on constitutional grounds, stating that it impermissibly interfered with interstate commerce.  The District Court disagreed.  Facing the possibility of incurring massive costs if such ordinances were implemented nationwide, PhRMA now appeal s.

Alameda County’s ordinance provides that manufacturers of drugs which are sold or distributed in Alameda County are responsible for operating “Product Stewardship Programs.”  These programs must pay for the costs of “collecting, transporting and disposing of Unwanted Products collected from Residential Generators and the recycling or disposal, or both, of packaging collected with the Unwanted Product.”  Additionally, the manufacturers are expected to pay administrative fees associated with enforcing the ordinance, which are estimated at $200,000 annually.  The ordinance prohibits manufacturers from shifting any of these costs to the consumers.

PhRMA argued that the ordinance was a per se violation of the Commerce Clause because it discriminated against interstate commerce by shifting local costs to interstate manufacturers, who would presumably shift these costs to consumers nationwide.  The District Court rejected the assertion that this was the type of discrimination which implicates the Commerce Clause.  Because PhRMA failed to demonstrate, or even argue, that the ordinance favors in-state drug manufacturers over out-of-state manufacturers, the Court stated there was no per se violation of the Commerce Clause.

The Court went on to hold that the ordinance did not attempt to directly regulate interstate commerce because the ordinance applies only to activities which occur within Alameda County, i.e. the sale, distribution and disposal of drugs within that jurisdiction.  Next, the Court held that the balancing test used for activities which have an indirect effect on interstate commerce was likewise unmet.  Alameda County had shown a legitimate interest in regulating drug disposal for health and environmental reasons and PhRMA failed to show that its burden in funding the program outweighed those interests.

This is a case to watch.  If this ordinance is upheld, similar ordinances will likely be enacted throughout the rest of California and potentially around the United States.

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