Pharmaceutical Marketing & Economic issues: Drug copay subsidies (“coupons”) and potential consumer and State interests Wells G. Wilkinson Staff Attorney, Community Catalyst Director, Prescription Access Litigation Attorney General Education Program, George Mason School of Law May 2012
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Pharmaceutical Marketing & Economic issues:
Drug copay subsidies (“coupons”) and potential consumer and State interests
Community Catalyst is a national non-profit health advocacy organization working to ensure that everyone has access to high-quality, affordable health care
• Collaborates with national, state and local consumer organizations, policymakers and foundations
• Builds and supports consumer advocacy networks in more than 40 states
• Runs successful state and federal issue campaigns: Children’s Health, Delivery System Reform, Dental Access, Community Benefits from non-profit hospitals, and prescription drug access and quality, including the Prescription Access Litigation (PAL) project.
Other prescription drug advocacy by Community Catalyst
2006: The Prescription Project • Funded/collaboration with PEW Charitable Trusts
• Highlighted conflicts of interest (COI) arising in prescribing context due to industry – provider financial relationships.
2011: Partnership to Advance Conflict-Free Medical Education
• 3-year collaborative with PEW, the American Medical Student Association (AMSA) and the National Physician Alliance (NPA),
• funded by the State Attorney General Consumer and Provider Grant Program (Neurontin settlement, 2004).
• Aims to implement and evaluate COI policies at academic medical centers – e.g. bans on gifts/meals/entertainment, or participation in promotional speakers bureaus or ghost writing; transparency & disclosures, etc.
Coalition members have brought 32 class action lawsuits in partnership with private class action firms, yielding:
Injunctive relief:
The settlement of the McKesson/First Databank AWP pricing fraud yielded a price rollback of 98% of all brand-name drugs in Sept. 2009, estimated to have saved Medicaid programs $500 Million in first year.
Financial recoveries:
17 settlements to date, totaling $1.3 billion in recoveries
Disclosure: PAL has been funded by grants from foundations (Atlantic Philanthropies, Nathan Cummings Foundation, etc.) and some donations by attorneys and law firms. See lists at www.prescriptionaccess.org.
Response to cost sharing 90% of health plans (but generally not Medicaid) use differential cost-sharing, or out of pocket co-payments:
Cost sharing – higher member co-payments for expensive drugs and lower co-payments for therapeutically equivalent but less expensive drugs (usually generics) – can align the member’s long-term interest in keeping costs from growing with the health plan’s immediate interest in paying for lower cost drugs where possible.
Cost sharing makes a plan member sensitive to the significant differences in price between brands and generics.
• Co-pays subsidies (‘coupons’) undo the alignment of interests and consumer price sensitivity created by cost-sharing under formularies.
• Misnamed as co-pay ‘coupons’ or co-pay ‘savings cards’ these subsidies are not price reductions; they allow the manufacturer to pay the beneficiary’s co-payment.
• After using a co-pay ‘coupon’ the out-of-pocket cost of a brand-name drug may be lower than or equal to the out-of-pocket cost (co-payment) for a generic drug.
• Co-pay subsidies total $4 billion a year in payments from drugmakers to pharmacies, via third-party administrators. (PCMA Nov. 2011)
Cost-sharing incentives can have both benefits and disadvantages for consumers
Pfizer offers the following co-pay subsidy: “If your insurance co-pay is : $54 or less, you pay only $4. $55 or more, save $50 off your monthly cost, up to $600 of savings per calendar year.” Source: https://www.lipitor.com/patients/LIPITORforYou.aspx
This promotion reduces a plan member’s out-of-pocket cost for Lipitor to an amount below the average co-payment for competing generic drugs like simvistatin or pravastatin.
Cost impact of selecting brand-name drug over generic therapeutic alternatives
1 Based on estimated $300 monthly health insurance premium, total cost before cost
sharing, individual plan. Drug prices from www.goodrx.com, as of 5-1-2012.
• Used to promote half of the top 109 best-selling drugs by revenue in 2009.
• Used with 100-125 Million, or 13% of all brand-name prescriptions (Cleveland Research, 2011)
• Projected to cause $32 Billion in increased drug costs through 2021 for state government employee plans, employers, private market health plans, and unions (PCMA,
2011)
• Indirectly drive up total health care costs, impacting all consumers
• Likely to be driving 2-out-of-3 seniors that used coupons to switch from generic to a brand (National Coal. on HC, 2012)
Co-pay subsidies driving Medicare costs, despite ban under federal programs
The National Coalition on Health Care surveyed seniors covered by Part-D, Medicare Advantage, or retiree plans, finding:
• 6% of seniors had used a co-pay coupon (despite federal ban on use in federal health plans)
• 4% (i.e. 2 out of 3) had switched from a generic to a brand-name drug due to the copay subsidy.
• 93% do not know coupons not allowed under Medicare, 3% not sure. Only 3% of seniors were aware of ban on coupons in federal health programs like Medicare.
(Source: National Coalition on Health Care, April 2012)
Co-pay subsidies are administered at the pharmacy through a ‘shadow claims system’ designed to be invisible to health plans and PBMs. (PCMA, 2011)
Co-pay subsidies likely include additional ‘administrative fee’ of at least $1-$5 paid to pharmacists. (Cleveland Research, 2012)
Use of a co-pay coupons by consumers will unwittingly provide drugmakers with access to their private drug history information, opening consumers up to highly effective and personally invasive direct marketing. (PCMA, 2011)
Many co-pay coupon offers are restricted to patients covered by insurance.
Consumer interests in preventing drug marketing using co-pay subsidies
Help align a consumer’s long-term interest in lower health care costs with their employer or health plan’s interest in preventing wasteful or unnecessary spending on expensive drugs.
Prevent drug-makers from accessing personal health information in prescription records.
Prevent the lure of a ‘good deal’ on an expensive drug product from distracting patients from a full consideration of the risks and benefits of taking a prescription drug.
Health Plan design changes • Contracting by public and private health plans and employers, through
their pharmacy benefit managers (PBMs), to ban pharmacies from accepting these payments, and to require transparency of pharmacy financial transactions with drug makers.
• Health plans may need assistance to prevent unfair contracting practices by PBMs or pharmacies from interfering with such protective contract terms.
Consumer Education • Helping consumers understand how using co-pay coupons has
significant hidden costs , and will provide drug makers with access to their private health information.