Marketing Scheme Costs Employers Millions

January 1, 2011


EXECUTIVES of a small insurance company in Albany were mystified when, almost overnight, its payments for a certain class of antibiotics nearly doubled, threatening to add about a half-million dollars annually in costs.

The reason, it turned out, was that patients were using a card distributed by the maker of an expensive antibiotic used to treat acne, sharply reducing their insurance co-payments. With their out-of-pocket costs much lower, consumers had switched from generic alternatives to the more expensive drug.

With drug prices rising and many people out of work, pharmaceutical companies are increasingly helping patients with their co-payments. The use of such co-payment cards and coupons and other types of discounts has more than tripled since mid-2006, according to IMS Health, an information company that tracks the pharmaceutical industry.

Last month, for instance, Pfizer 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.

Drug companies say the plans help some patients afford medicines that they otherwise could not.

But health insurers and some consumer groups say that in many cases, the coupons are just marketing gimmicks that are leading to an overall increase in health care costs. That is because they circumvent the system of higher co-pays on costlier drugs that insurers use to encourage consumers to use less expensive products.

“The member is somewhat insulated from the cost of the prescription,” said Kevin Slavik, senior director of pharmacy at the Health Care Service Corporation, which runs Blue Cross and Blue Shield plans in Illinois and three other states. “In essence, it drives up the total cost of providing the prescription benefit.”

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.

The acne drug that produced higher costs in 2008 for the Albany insurance company was Solodyn, a once-a-day formulation of an antibiotic called minocycline. A month’s supply of Solodyn sells for more than $700 on, compared with about $40 a month for capsules of generic minocycline, which are generally taken twice a day.

Executives at Medicis, the company that sells Solodyn, have told investors that the co-payment card is used by an “overwhelming majority” of patients, and is largely responsible for doubling use of the drug, to 26,000 prescriptions a week.

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.

Any shift to brand-name drugs can have a big impact on health care costs.

At District Council 37, a union representing public employees in New York City, 59 percent of claims for statins in the year ended in June 2009 were for brand-name products that cost the plan $17.3 million. The other 41 percent of claims were for generic statins, which cost only $179,000. A year ago, the health plan eliminated the co-pay on generic statins to encourage more use of them.

For very expensive drugs, co-pay assistance is almost de rigueur, because in some cases co-payments can be up to 20 percent of the price of the drug. Novartis’s new pill for multiple sclerosis, Gilenya, costs $48,000 a year, compared with $30,000 to $40,000 for rival drugs, which are injected. Novartis is offering to cover the entire co-pay, up to $800 a month, which is 20 percent of the drug’s monthly cost.

“It seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly” to insulate consumers, said Joshua Schimmer, biotechnology analyst at Leerink Swann, an investment bank.

Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, to about $30,000 a year, over the last five years, according to a recent report from the securities firm Jefferies & Company. To cushion patients, the company recently increased its co-pay assistance to as much as $1,200 a month.

“We do want to avoid big jumps in price, abrupt changes in price, which can have a negative impact on payers, physicians and, most importantly, patients,” Robert M. Myers, Jazz’s president, told analysts in November, as the company increased Xyrem’s price by 22 percent. He added: “The coupon program, I will point out, does help patients get low monthly out-of-pocket costs, and this is a program that we are definitely committed to.”

Drug companies defend the coupons, saying they are helpful to consumers and allow patients and doctors to make decisions based on medical reasons, not costs. In many cases, such as with Lipitor and Solodyn, the rival drugs are not exact generics.

Jonah Shacknai, the chief executive of Medicis, said Solodyn’s once-a-day formulation reduces side effects and makes it easier for people to take their medicine. He also said many insurers paid far less for the drug than the price on

“No one is forcing anyone to prescribe Solodyn,” he said. “We think the public wins because we have facilitated access to a product that dermatologists are eager to prescribe.”

Amgen is offering to defray co-payments in excess of $25 per month for its new drug Xgeva, which helps prevent fractures caused by cancer that has spread to bones. In some clinical trials sponsored by Amgen, Xgeva proved more effective than its competitor, Zometa from Novartis, but at $1,650 a month, Xgeva’s wholesale price is twice as much.

The co-pay assistance is aimed at ensuring that differences in co-payments between the two drugs “aren’t driving medical decisions,” said Joshua J. Ofman, vice president for reimbursement and payment policy at Amgen.

Companies also say that lower co-payments help patients stay on their medicines. Studies have shown that patients are more likely to quit taking their drugs when the co-pay is high.

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.

Massachusetts also bars drug company coupons, and on similar grounds. It is the only state to do so.

That became an issue for Tamara Starr, 25, a graduate student in journalism, when she moved from New York to Boston in 2008. In New York, she paid only $25 for a three-month supply of Betaseron, the Bayer drug that she uses to treat multiple sclerosis.

But in Boston, her co-pay is $75 a month. She said she was taking the drug as little as once a month, instead of every other day as she was supposed to. She has been hospitalized three times in the last year with symptoms from her disease, like vision loss. “I don’t want to make the choice of paying that $75 a month or putting that $75 toward my groceries,” Ms. Starr said.

Last spring, the Massachusetts House of Representatives voted 156 to 0 to repeal the ban on coupons. The state Senate eventually passed a more narrowly worded repeal, but it came too late in the session for the two bills to be reconciled.

Editor’s Note:  EXECUTIVES at insurers and pharmacy benefit management companies say they would like to counter the cards and coupons but are not sure exactly how to do so. One problem is that the information they receive from pharmacies does not specify whether the co-pay was made by the patient or by the drug company.

“The payer doesn’t know, and the P.B.M. doesn’t know,” said F. Everett Neville, chief trade relations officer at Express Scripts, a pharmacy benefits manager. “We have no ability to stop it and no ability to prohibit it.”

THIS WAS RECEIVED BY A PBM REPRESENTITIVE: It’s ironic that I had scanned in an example of this earlier today (see attachment). Concerning XXXX coverage, we specifically excluded drugs like the one mentioned in the article below after a series of emails on 10/27/2010.  That took care of those old antibiotics that were “reformulated” and then aggressively marketed to dermatologists.  It seems dermatologists are targeted for many of these campaigns.  The difficulty is that (PBM) never knows when one of these “copay cards” are used because it acts as secondary coverage.  The pharmacy processes the prescription on the (PBM) card as primary and then runs the copay card as secondary, so as far as we can tell, the patient paid the full copay.