A while back I wrote about drug company copay assistance programs. The purpose of these is to entice patients to use higher-cost brand drugs by blunting health plan incentives for enrollees to choose lower-cost drug options. Here is what the May 2022 NBER Digest has to say:
Coupons that reduce copayment costs for brand-name drugs undermine insurers’ efforts to promote more cost-effective drug therapies.
Copays on brand-name drugs are often a function of the drug’s price. It’s cheaper for drug makers to reduce the cost to patients by reimbursing their copays than reducing the cost to both patient and health plan with lower drug prices. By the way, it is illegal to offer Medicare drug plan members copay assistance because it runs afoul of antikickback statutes.
Now it turns out drug makers aren’t the only ones profiting from copay assistance. It was reported in the Wall Street Journal that a drug-benefit middleman exploited a copay assistance program designed to benefit patients. Johnson & Johnson Healthcare Systems says it lost at least $100 million to the scheme. A drug benefits middleman would inflate patients’ copays in order for patients to qualify for higher copay assistance. It would then take a cut of the copay assistance and forward much of the savings to the health plan payer. Johnson & Johnson alleges its copay assistance costs were not only inflated but being used to lower drug costs for the payer rather than going entirely for the patient. More about this here.
Past research has shown that copay assistance increases utilization of brand-name drugs by 21% to 23%, when private insurance is compared to Medicare Advantage plans (MA). Medicare Advantage is a good control group since copay assistance is not allowed in government programs. Copay assistance also boosts prices and total expenditures. This is from a February 2022 National Bureau of Economic Research (NBER) working paper.
For this category of drugs, we estimate that coupons raise negotiated prices by 8% and result in just under $1 billion in increased U.S. spending annually. Combined, the results suggest copayment coupons increase spending on couponed drugs without bioequivalent generics by up to 30 percent.
In the quarters after a copay assistance coupon is introduced, use of the drug by commercially insured patients rises compared to MA plans. A graphic that illustrates this is available here.