That Drug Coupon Isn’t Really Clip­ping Costs

▶▶“Free” co­pays spur sales of branded medicines, with in­sur­ers un­hap­pily foot­ing the bill ▶▶“It is a bril­liant mar­ket­ing strat­egy” that side­steps ef­forts to dis­cour­age ex­pen­sive reme­dies

Bloomberg Businessweek (Asia) - - Companies/industries - −Cyn­thia Koons and Robert Lan­greth

When Valeant Phar­ma­ceu­ti­cals In­ter­na­tional ran a TV ad af­ter this year’s Emmy Awards broad­cast fea­tur­ing ac­tor Mario Lopez pro­mot­ing its new an­ti­fun­gal toe treat­ment, Jublia, the spot drew some barbs. But it’s also lured plenty of curious con­sumers who heeded the com­pany’s in­vi­ta­tion to visit the drug’s web­site for sav­ings. There they found an on­line coupon that promised no out-of-pocket costs for el­i­gi­ble pa­tients. That’s a great deal for con­sumers, be­cause the prescription medicine costs more than $1,000 for an 8-mil­li­liter bot­tle. It’s an of­fer many of their in­sur­ers would pre­fer to refuse.

Jublia’s mar­ket­ing tack is part of a high-stakes game of chicken in which in­sur­ance com­pa­nies raise co­pays on some drugs to as high as $100 to dis­cour­age their use, only to see phar­ma­ceu­ti­cal com­pa­nies pick up the tab for those co­pays—seek­ing to leave in­sur­ers on the hook for the bal­ance, of­ten in the hun­dreds and some­times thou­sands of dol­lars per monthly prescription.

“It is a bril­liant mar­ket­ing strat­egy” on Big Pharma’s part, says Adri­ane Fugh-Berman, an as­so­ciate pro­fes­sor of phar­ma­col­ogy and phys­i­ol­ogy at Ge­orge­town Univer­sity, who’s been a paid wit­ness in law­suits against some drug com­pa­nies. She calls the prac­tice an “in­sid­i­ous” way to cir­cum­vent in­sur­ance com­pa­nies and em­ploy­ers who in­creas­ingly are try­ing to get pa­tients to share the pain of soaring drug prices. Valeant didn’t re­spond to re­quests for com­ment.

In 2015 the phar­ma­ceu­ti­cal in­dus­try will spend an es­ti­mated $7 bil­lion— up from just $1 bil­lion in 2010—to hand out coupons and dis­count cards to cover some or all pa­tient co­pay­ments for drugs from fi­bromyal­gia pain treat­ments to brand-name diabetes pills, ac­cord­ing to data from IMS Health Hold­ings.

Re­search shows that the amount of money con­sumers have to shell out for phar­ma­ceu­ti­cals af­fects their will­ing­ness to buy a medicine. When pa­tients have a co­pay above $50, they’re more than four times as likely to aban­don a prescription at the counter than when they have no co­pay, ac­cord­ing to a 2010 study pub­lished in the An­nals of In­ter­nal Medicine. The power to in­flu­ence pa­tient choices is one rea­son co­pay coupons are dis­al­lowed en­tirely in the fed­eral Medi­care pro­gram, where they’re con­sid­ered an il­le­gal in­duce­ment.

Drug com­pa­nies say they’re just making the drugs more af­ford­able for con­sumers. Pa­tients could be stuck pay­ing 20 per­cent or more of a drug’s price in the form of a co­pay, com­pared with about 7 per­cent of the cost of a physi­cian visit or 4 per­cent of a to­tal hos­pi­tal bill, says Merck Chief Ex­ec­u­tive Of­fi­cer Ken­neth Frazier. “What we want to be able to do is help pa­tients who need prod­ucts and can’t af­ford to get them,” he says. “Coupons can be help­ful in that sense.”

Holly Camp­bell, a spokes­woman for the trade group Phar­ma­ceu­ti­cal

Re­search and Man­u­fac­tur­ers of Amer­ica, con­curs. “Co­pay off­set pro­grams can play an im­por­tant role in main­tain­ing ac­cess to needed medicines, es­pe­cially for pa­tients tak­ing spe­cialty medicines or with chronic con­di­tions,” she says. “To­day, too many pa­tients find that they are fac­ing very high cost shar­ing that puts their abil­ity to stay on a needed ther­apy at risk.”

Al­tru­ism aside, pick­ing up co­pays is very good busi­ness for drug com­pa­nies. Man­u­fac­tur­ers can earn a 4-to-1 to 6-to-1 re­turn on in­vest­ment on co­pay coupon pro­grams, ac­cord­ing to the Phar­ma­ceu­ti­cal Care Man­age­ment As­so­ci­a­tion, which rep­re­sents phar­macy ben­e­fit man­agers, the com­pa­nies that man­age drug plans for in­sur­ers and em­ploy­ers.

Co­pay coupons—which can be pa­per coupons, dis­count cards, or elec­tronic codes used at phar­ma­cies— are dis­trib­uted through com­pany web­sites, mag­a­zines, and doc­tors’ of­fices.

In­sur­ance com­pa­nies and the prescription ben­e­fits man­agers they work with are fight­ing back, drop­ping drugs from their plans. And con­sul­tant Dan Pol­lard, who started MyDrugCosts to con­sult with em­ploy­ers about low­er­ing their health-care ex­penses, is de­vel­op­ing a re­wards pro­gram that would pro­vide a cash in­cen­tive to pa­tients who es­chew coupons. “We’re chang­ing the eco­nomics for the con­sumer,” he says.

Phar­macy ben­e­fit man­agers such as Ex­press Scripts Hold­ing and CVS Health have in­creased bans on some drugs, partly in re­sponse to the pro­lif­er­a­tion of coupon pro­grams. Ex­press Scripts will ex­clude about 80 drugs from its largest for­mu­lary in 2016. That’s up from 48 medicines in 2014. CVS will ex­clude about 120 drugs in 2016.

Unit­edHealth Group, the na­tion’s largest health in­surer, with about 46 mil­lion mem­bers, has been one of the in­dus­try lead­ers in com­bat­ing co­pay coupons. In 2013 the in­surer started block­ing the ac­cep­tance of them for six ex­pen­sive spe­cialty drugs, in­clud­ing medicines for mul­ti­ple scle­ro­sis, rheuma­toid arthri­tis, and hep­ati­tis C, ac­cord­ing to con­sul­tant ZS As­so­ciates. Since then, Unit­edHealth has ex­panded that no­coupon list to 35 spe­cialty drugs, adding medicines for growth hor­mones, pul­monary hy­per­ten­sion, and in­fer­til­ity.

All the drugs have op­tions that are more af­ford­able, ac­cord­ing to Lynne High, a spokes­woman for Unit­edHealth. Man­u­fac­turer coupons “can drive pa­tients away from lower-cost, ther­a­peu­ti­cally equiv­a­lent al­ter­na­tives and can sig­nif­i­cantly in­crease over­all health­care costs,” she says.

Stud­ies have pro­duced mixed re­sults over whether the ben­e­fits coupons pro­vided to con­sumers out­weigh the higher costs they may in­cur. The coupons are most con­tro­ver­sial when used for ev­ery­day drugs. One 2013 anal­y­sis in the New Eng­land Jour­nal of Medicine found that 62 per­cent of coupons stud­ied were for brand-name drugs for which lower-cost al­ter­na­tives were avail­able. Older medicines to treat toe fun­gus, for ex­am­ple, can be had for $30 or less, a frac­tion of to­day’s new branded prescription reme­dies.

When low- or no-co­pay pro­mo­tions are used for very ex­pen­sive spe­cialty drugs, though, such as medicines for rheuma­toid arthri­tis and mul­ti­ple scle­ro­sis that can cost $2,500 a month or more, a 2014 study in Health Af­fairs found, coupons re­duced a con­sumer’s share of the drug cost to less than $250—and usu­ally much less. That’s low enough that pa­tients were more likely to con­tinue tak­ing needed pre­scrip­tions.

For phar­ma­cists who’ve seen the dis­count cards and coupon pro­grams pro­lif­er­ate over the years, the punch­coun­ter­punch be­tween in­sur­ers and drug­mak­ers seems like more trou­ble than it’s worth. “Th­ese cards are put out to level the play­ing field for the con­sumer,” says Andy Miller, an in­de­pen­dent phar­ma­cist in Brat­tle­boro, Vt. “We’re cre­at­ing sys­tems within sys­tems. Maybe drug com­pa­nies should just lower the pric­ing.”

The bot­tom line The phar­ma­ceu­ti­cal in­dus­try will spend an es­ti­mated $7 bil­lion this year on coupons to off­set in­sured pa­tients’ co­pays for their drugs.

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