Pharmaceutical Coupons A Health Choice

One of the biggest challenges facing health care reform is how to control health care costs while maintaining a high quality of care that is both effective and efficient. While much of the debate that led up to the passage of the Affordable Care Act (ACA) discussed controlling health care costs, the $1 trillion price tag on the legislation has left many Americans wondering how this complex and complicated legislation will actually reduce health care costs.

Many of the provisions in the ACA do not specifically address how the legislation will control health care costs. For example, there are a number of provisions, which assert that the use of health information technology (HIT) and electronic medical records (EMRs) will reduce medical errors and save money. However, no data to date has proven these claims, and numerous issues such as privacy, compatibility, training, and funding present significant obstacles to achieving this goal. As a result, it may be years before Americans realize the costs benefits, if any, from HIT and EMRs.

Other provisions that address costs include reducing fraud, waste and abuse in Medicare and Medicaid. But these provisions do not “control costs,” they merely act as oversight and provide additional funding to give the government the resources they need to effectively monitor these federal programs.

Accordingly, supporters of the ACA who believe it will help control health care costs often point to the provision that helped closed the doughnut hole, which refers to the gap in coverage that leaves Medicare beneficiaries on the hook for the cost of prescription drugs when the cost of their prescription drugs passes $2,700 in a year. The success of this provision was achieved through an $80 billion agreement between the Obama administration and pharmaceutical companies.

Eventually, this agreement found its way into the ACA by fixing the gap and providing that seniors receive a 50% discount on the brand name drugs they purchase while they are in the “doughnut hole.” The provision became effective January 1, 2011.

Since the provision addressed high prices for prescription drugs for Medicare beneficiaries, many policymakers and media sources utilized the image of elderly patients having to pay out of pocket expenses to assert that health care costs continue to rise because prescription drug prices are too high.

In fact, the New York Times continued this myth in a recent story by suggesting that pharmaceutical companies are leading to an overall increase in health care costs by using co-payment cards and coupons that “are just marketing gimmicks.” Co-payment coupons and cards are distributed by drug company sales representatives to doctors, and are also often available directly to patients over the Internet. Patients present them at the drugstore when paying for their prescriptions

Drug companies cannot offer co-payment assistance for patients in federal programs like Medicare because such offers are considered an inducement to use a drug and in violation of anti-kickback laws. Some companies have responded by contributing to, or even helping to set up, charitable foundations that can provide co-payment assistance legally.

The Food and Drug Administration, meanwhile, is studying the effect of the discounts on consumer perceptions, concerned that the coupons will make consumers believe that a drug is safer or better than it really is.

Background

Pharmaceutical companies frequently use rebates, coupons, and co-payment cards to assist patients with paying for prescriptions. As the Times points out, “With drug prices rising and many people out of work, pharmaceutical companies are increasingly helping patients with their co-payments.” In fact, according to IMS Health, an information company that tracks the pharmaceutical industry, “the use of such co-payment cards and coupons and other types of discounts has more than tripled since mid-2006.”

Health insurers and some consumer groups say that in many cases, the coupons “circumvent the system of higher co-pays on costlier drugs that insurers use to encourage consumers to use less expensive products.” However, drug companies say the plans help some patients afford medicines that they otherwise could not. For example, Pfizer last month introduced a new card that can reduce the co-pay on its blockbuster drug Lipitor to $4 a month, a savings of up to $50. That brings the out-of-pocket cost in line with what consumers might pay at Wal-Mart for a generic version of a competing cholesterol-lowering drug.

Critics however believe that this process insulates the consumer from the cost of the prescription, and “In essence, it drives up the total cost of providing the prescription benefit.” They further assert that any “shift to brand-name drugs can have a big impact on health care costs.” But what about very expensive drugs or treatments which there are no generic for?

In some cases, as the Times explains, “co-payments can be up to 20 percent of the price of the drug,” especially for chronic conditions, which can cost up to $800 a month. Accordingly, as Robert M. Myers, President of Jazz Pharmaceuticals told analysts in November, “The coupon program helps patients get low monthly out-of-pocket costs.” Drug companies further defend the coupons, saying they are “helpful to consumers and allow patients and doctors to make decisions based on medical reasons, not costs, because in many cases, such as with Lipitor, the rival drugs are not exact generics.”

Joshua J. Ofman, vice president for reimbursement and payment policy at Amgen told the Times that the co-pay assistance is aimed at ensuring that differences in co-payments between the two drugs “aren’t driving medical decisions.” Companies also say that lower co-payments help patients stay on their medicines. The Times also acknowledged “Studies that have shown that patients are more likely to quit taking their drugs when the co-pay is high.”

If patients are more likely to quit taking their drugs when the co-pay is high, why would we want to prevent companies from providing coupons to reduce that cost? Chances are, if patients quit taking their medicine in these cases, the costs associated with their discontinuation of care, including hospitalization and the potential for developing symptoms that are more serious will far exceed any increased cost for the use of a brand name drug.

Discussion

The main problem with the Times article is that it fails to recognize or even mention that prescription medicine costs are not what is driving increased spending for health services or insurance. As we previously noted, prescription medicines account for only 10 cents of every dollar spent on health care, and while many people consider spending on prescription drugs in the U.S. to be increasing or very expensive, money spent on drugs is considerably less than spending on hospital care or physician services. In addition, chronic disease, which accounts for $3 out of every $4 spent on healthcare, is what threatens the U.S. health care system, not the cost of medicines.

Moreover, the Times article also neglects to mention that although 81% of drug sales in 2009 were for brands for which a generic existed (up from 61% of the time 2003), 92% of the time patients get the generic. In fact, many states require that a pharmacy give a generic if it is available and a doctor has not expressly stated a need for the brand name drug.

As one commentator carefully pointed out, the pharmaceutical companies are not necessarily the ones to blame for high prescription costs when “America’s health insurance companies increased their profits by 56 percent in 2009, a year that saw 2.7 million people lose their private coverage.” In fact, the nation’s five largest for-profit insurers closed 2009 with a combined profit of $12.2 billion, according to a report by the advocacy group Health Care for American Now (HCAN).

In that case, why should the pharmaceutical companies be taking the blame when they are the ones trying to reduce costs for patients, and the insurance companies are merely trying to squeeze out every time from their policyholders?

Conclusion

In the end, “Helping patients with co-pays is a good marketing program at a time when the abandonment rate of prescriptions is at an all time high.” As we noted above, when patients do not take their medications, “there is a strong chance that their health conditions can worsen and cause higher costs to an already strained health care system.”

Patients have the choice to ask for generic or a branded product and by reducing the costs of co-pay, companies are merely offering patients a choice. Given that generics still make up a huge percentage of total number of prescriptions, to “suggest that drug companies are driving up health costs for insurers is a one-sided argument that negates the patients right to choose.”