Bill would pro­hibit drug coupons

Los Angeles Times - - BUSINESS - DAVID LAZARUS

When it comes to fix­ing the dys­func­tional U.S. health­care sys­tem, state As­sem­bly­man Jim Wood (D-Healds­burg) knows there are big­ger fish to fry than drug-com­pany dis­count coupons.

But, as he told me: “You’ve got to start some­where.”

Wood’s anti-coupon bill, AB 265, was ap­proved by the Assem­bly last week. The leg­is­la­tion is now mak­ing its way through the state Se­nate.

It’s a tricky busi­ness, this bill, be­cause what it would do is pro­hibit phar­ma­ceu­ti­cal com­pa­nies from of­fer­ing dis­counts to pa­tients for name-brand drugs if there’s a cheaper generic avail­able.

“A lot of peo­ple won’t like that,” ac­knowl­edged Wood, a den­tist who now serves as chair­man of the Assem­bly Health Com­mit­tee.

“When folks are of­fered a coupon, they’ll take it, and the drug com­pa­nies know this,” he said. “What con­sumers may not re­al­ize is that this con­trib­utes to in­creases in in­surance pre­mi­ums.”

It’s a sim­ple, and sneaky, mar­ket­ing ploy. Rather than cut sky-high prices for name-brand meds, drug com­pa­nies have found will­ing ac­com­plices in pa­tients who’d rather take the drugs they see ad­ver­tised on TV than a generic equiv­a­lent with a long, un­pro­nounce­able name.

The catch is that while con­sumers may re­duce their out-of-pocket ex­penses, the drug com­pany is able to pro­tect its over­all rev­enue — and keep share­hold­ers happy — by con­tin­u­ing to seek full re­im­burse­ment from in­sur­ers.

And that means we all pay for this du­bi­ous prac­tice in the form of higher rates.

“This be­hav­ior is purely profit-driven,” Wood said. “The drug com­pa­nies want to hold on to mar­ket share for as long as they can. But some­body has to pay for it.”

A re­cent study by re­searchers at UCLA, Har­vard and North­west­ern found that coupons en­abled phar­ma­ceu­ti­cal com­pa­nies to mask price hikes, al­low­ing them to raise prices

sig­nif­i­cantly faster than for drugs with­out coupons.

Spend­ing on about two dozen drugs sold with coupons was as much as $2.7 bil­lion higher over five years than it would have been if the coupons weren’t used, the re­searchers es­ti­mated.

Mas­sachusetts pro­hib­ited use of drug coupons if a generic equiv­a­lent was avail­able five years ago. Sim­i­lar leg­is­la­tion is pend­ing in New Jersey. Fed­eral law for­bids use of such coupons by Medi­care and Med­i­caid ben­e­fi­cia­ries.

Wood’s bill would bar drug com­pa­nies “from of­fer­ing in Cal­i­for­nia any dis­count, re­pay­ment, prod­uct voucher or other re­duc­tion in an in­di­vid­ual’s outof-pocket ex­penses ... for any pre­scrip­tion drug if a lower cost generic drug is cov­ered un­der the in­di­vid­ual’s health plan.”

Matt Sch­mitt, an as­sis­tant pro­fes­sor of strat­egy at the UCLA An­der­son School of Man­age­ment and coau­thor of the above study, told me that the leg­is­la­tion would help con­sumers by pro­mot­ing use of generic drugs and elim­i­nat­ing at least one rea­son for in­surance rate hikes.

He said drug com­pa­nies have fig­ured out that it’s cheaper and more ben­e­fi­cial for them to of­fer dis­counts for name-brand meds than to cut prices.

“That may be good for drug com­pa­nies,” Sch­mitt said, “but in­sur­ers get stuck pay­ing full cost for branded drugs, which drives up pre­mi­ums for ev­ery­one.”

Not sur­pris­ingly, the drug in­dus­try has its knick­ers in a twist over the Cal­i­for­nia bill — and is ex­pected to mount an ag­gres­sive lob­by­ing cam­paign ahead of a state Se­nate vote. The in­dus­try’s of­fi­cial po­si­tion is that if coupons save peo­ple money, what’s the harm?

“This leg­is­la­tion is try­ing to solve a prob­lem with­out iden­ti­fy­ing what the prob­lem is,” de­clared Priscilla Van­derVeer, a spokes­woman for Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica, or PhRMA, the drug in­dus­try’s main lob­by­ing group.

The prob­lem, of course, is that in­sanely high drug prices ex­ploit a cap­tive mar­ket of sick peo­ple, which is a preda­tory and deeply im­moral busi­ness prac­tice.

The av­er­age cost of pre­scrip­tion drugs in­creased nearly 9% last year, ac­cord­ing to the Tru­veris Na­tional Drug In­dex.

Over the last three years, drug prices have risen an av­er­age of 10% an­nu­ally.

The Fi­nan­cial Times re­ported Fri­day that one lead­ing drug com­pany, Pfizer, has raised the U.S. price of nearly 100 drugs an av­er­age of 20% so far this year. The meds in­clude best­sellers such as Vi­a­gra and the pain med­i­ca­tion Lyrica.

More broadly, drug costs for peo­ple un­der 65 will climb al­most 12% this year, ac­cord­ing to the re­search firm Segal Con­sult­ing. Av­er­age wages, mean­while, are likely to grow just 2.5%.

Charg­ing what­ever the mar­ket will bear may be a sound busi­ness prac­tice for most con­sumer goods. If Kanye West and Adi­das can get away with a price of more than $1,000 for a pair of Yeezy sneak­ers, more power to them.

But the rea­son most other de­vel­oped coun­tries reg­u­late drug prices is be­cause sick peo­ple of­ten have no choice — it lit­er­ally may be a mat­ter of life and death. As such, the mar­ket “will bear” vir­tu­ally any price man­u­fac­tur­ers set.

That’s why in­sulin prices have soared al­most 300% over the last decade. That’s why the drug com­pany My­lan thought that it would get away with jack­ing up the price of EpiPens from $94 to $609.

Need­less to say, My­lan re­sponded to crit­ics last year not by cut­ting the price of EpiPens but by of­fer­ing a dis­count coupon.

I asked PhRMA’s Van­derVeer if she thought pre­scrip­tion meds are priced fairly in the U.S.

She hes­i­tated. “I don’t un­der­stand the ques­tion.”

I asked again: Are U.S. drug prices fair to pa­tients?

“We care about peo­ple ac­cess­ing medicine,” Van­derVeer replied.

That’s nice, but ac­cess is just part of the equa­tion. Not rip­ping peo­ple off is an­other.

Dis­count coupons might seem like a bless­ing for any­one on a tight bud­get. But when you fac­tor in in­evitable hikes in in­surance rates, the coupons turn out to be lit­tle more than a bait and switch.

Wood called drug dis­count coupons “a small piece of a re­ally, re­ally huge puzzle,” and he’s right.

He’s also right that you’ve got to start some­where.

Gary Coron­ado Los An­ge­les Times

THE STATE ASSEM­BLY has passed a bill that would pro­hibit drug com­pa­nies from is­su­ing coupons de­signed to steer pa­tients away from cheaper gener­ics.

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