Drug coupons are bargain for manufacturers, not patients, says trade group | St. Louis Public Radio

Drug coupons are bargain for manufacturers, not patients, says trade group

Nov 29, 2011

This article first appeared in the St. Louis Beacon, Nov. 29, 2011 - Like the makers of brand-name grocery items, some drug manufacturers offer coupons in connection with the purchase of their products. The pharmaceutical industry and major drug companies, such as Pfizer, defend coupons and other discounts as a way to make some drugs more affordable to consumers. But the Pharmaceutical Care Management Association argued in a recent report that the savings aren't a good deal for taxpayers in the long run.

The association is a trade group that says it uses the buying power of millions of health-plan enrollees to get lower prices for prescription drugs from sources ranging from retail to mail-order pharmacies.

"Copay coupons" for certain prescription drugs are proliferating in nearly every state, including Missouri and Illinois. Most aren't offered directly by drug makers but through paper coupons and plastic cards, which end up generating income for pharmacy benefit managers, according to Mike Patton, executive director of the Illinois Pharmacists Association in Springfield. He says these managers earn money through the rebates, which can also help a prescription drug company increase its market share.

The trade association argues in its report that the coupons will force prescriptions drug prices to rise an additional $681 million over the next decade in Missouri. In Illinois, it says the drug costs will rise another $1.5 billion during the same period. The group says the costs will increase in part because the coupon system encourages consumers to buy brand name drugs instead of generics.

"Brand copay coupons lure patients from generics to expensive brands and stick employers, unions and government employees health programs with the extra costs," Mark Merritt, PCMA's president and CEO, says in the report.

An employee's drug plan usually assigns higher copays to brand-name drugs to help reduce the overall cost of the drug plan and health-care cost in general. But some copay coupons are said to undercut preference for generics by persuading consumers to choose brand-name drugs.

For example, employees might be required to make a $4 copay for a generic drug. The full price of a brand-name drug for the same medical condition might cost $150, with the health plan paying $100 and the employee paying the remaining $50. But drug manufacturers might tilt employees toward more expensive brand-name products by offering copay discounts that cover all but $4 of the employee's out-of-pocket costs for the brand-name drug. This means the employee can buy the brand name for the same copay needed for the generic.

The employee's health plan reaps no savings in this hypothetical deal. The manufacturer still expects the plan to cover its $100 share of the cost if the employee chooses the $150 brand name drug.

Coupons Are Needed, Drug Companies Say

The pharmaceutical industry and individual drug companies take issue with this analysis. MacKay Jimeson, a spokesperson for Pfizer, says one goal is to make sure medicine is within the reach of consumers who otherwise wouldn't be able to afford it. He says copay cards are available for some Pfizer products, including Lipitor, the best selling cholesterol drug for which there is no generic at this point. Some cholesterol drugs are available in generic form, but Lipitor is regarded as the most effective medicine. He says a copay card is offered to allow consumers to buy this medicine with a $4 copay.

Under health-benefit plans, "the average copay for Lipitor is about $25," Jimeson says. "If the copay card is good for up to $25, you pay $4. If the brand Lipitor is the correct medication for the patient and the copay is a factor, offering the copay card eliminates the copay as a factor and provides (consumer) access to the brand. It really empowers physicians to make decisions based on the clinical needs of the patients as opposed to cost."

Copay cards in general are available to all consumers, regardless of income. Beyond the copay card option, Jimeson says Pfizer offers other assistance for consumers unable to afford their medicine due to income issues or hardships. He says some kind of program was needed because helping consumers cover their drug costs can keep them out of the hospital.

"Patients who do not take medications as prescribed by their doctors result in $300 billion in unnecessary cost to the health-care system every year," he says.

Everett Neville, a vice president at Express Scripts, says drug companies in general don't necessarily lose money by giving the consumer a discount on the copay for medication.

"Keep in mind that it only cost them probably $5 to make the product," Neville says. "There is a huge markup. They have a monopoly, so they set the prices at what they think the value of the drug is, not the cost of producing it."

He says research and marketing are also factored into pricing the drug.

Brand Loyalty Can Be Costly

Contrary to views of the pharmaceutical industry, the association insists in its report that the coupon promotions are mainly marketing campaigns to promote "brand loyalty." The association argues that each 1 percentage point decrease in the "generic drug dispensing rate raises the amount that employers, unions, state governments and consumers spend on prescription drugs by $3 billion annually.

But Neville doesn't think all coupon programs are a bad idea, citing the use of coupons for costly drugs for rare illnesses.

"In our situation, it's a little more nuanced. There are some really expensive drugs that can be very" costly for consumers to cover the copay, he says. Examples include specialty drugs costing as much as $4,000 that might have a 25 percent copay. They are expensive in part, he says, because a relatively few patients need the them. The limited demand makes the cost of developing the drugs disproportionately high, Neville says.

"A 25 percent copay is $1,000 a month, so (in that case) a copay coupon could be helpful," he says."But if it's being used to get around the benefit design, we would not see this as good for the industry because it would drive up the cost over time."

Copay coupons are limited to the private market. Federal health programs forbid them, partly because they add to the cost of health care.

The report says if Medicare didn't have a ban on copay coupons, the cost of Medicare's drug program would increase by another $18 billion between next year and 2021.

The cost of Lipitor and discount coupons might become a moot issue on Nov. 30. That's the day the drug's patent expires, Jimeson says. That usually means a sharp drop in the price of the medication.

Funding for the Beacon's health reporting is provided in part by the Missouri Foundation for Health, a philanthropic organization that aims to improve the health of the people in the communities it serves.