An acquaintance complained to me that a drug she needed for was available for a $5 copay, but not if you’re on Medicare. She wondered why Medicare beneficiaries did not qualify for the low copay. I already knew the answer. Copay assistance is sometimes touted as a way to help people afford costly medications. However, it is also a way for drug companies to charge higher prices by blunting patients’ incentive to choose cheaper generic drugs. Say there are two drugs for a given condition; a newer name brand drug that costs $1,000 a month, and a cheap generic that costs $100 a month. Let’s assume the health plan copay on the $1,000 a month drug is $350, while the cheaper, generic copay is $100 a month. Drug makers quietly fund a nonprofit organization whose mission is to help patients afford their medications, but mostly the donors’ expensive drugs, not cheap generics. If a patient agrees to take the expensive drug, the copy assistance organization provides a copay assistance card (i.e., a gift card only good on a specific drug) that pays for all or most of the copay. This blunts the patient’s incentive to choose the cheaper drug, while the health plan gets stuck paying $650 a month for the expensive drug.
Copay gift cards are considered a kickback under federal health care programs. Medicare beneficiaries are not allowed to use copay cards precisely because they are an inducement to spend taxpayers’ money. These cards are also not allowed with plans compliant with health savings accounts (HSAs) but are legal to use with other private health plans. Health plans are designed with cost-sharing – think deductibles and copayments and an out-of-pocket maximum – to coincide with a specific monthly premium. Lower cost-sharing usually results in higher premiums. Lower premiums usually come with higher cost-sharing. Health plans grapple with ways to prevent copay assistance cards from steering plan members away from high quality generic drugs when they are available. The following is from the Washington Post:
Drugmakers argue that insurers and pharmacy benefit managers use co-pay accumulators and other strategies to delay or deny care, and steer patients toward medicines that insurers prefer instead. Insurers counter that coupon cards and other patient financial assistance from drug manufacturers drive up premiums and encourage patients to use higher-priced, brand-name drugs instead of less-expensive generics.
One strategy some health plans have used is to pocket the copay assistance, which is (presumably) only possible because health insurers own the three biggest pharmacy benefit managers (PBMs). Alternatively, health plans sometimes refuse to recognize copay assistance towards health plan deductibles and maximum out-of-pocket cost sharing. This is called copay accumulators. More from the WaPo:
For 16 years, Larry Gruber, a fitness coach from Wilton Manors, Florida, received a coupon card to help him pay for a psoriatic arthritis medication he needs that costs more than $7,700 a month.
Each year, Amgen, which makes the drug, called Enbrel, sent the coupon card worth thousands of dollars, and that counted toward Gruber’s health insurance deductible and out-of-pocket maximum.
Using the card, Gruber usually met that maximum by February, leaving his health insurance to fully cover his in-network medical costs and reducing his cost for the drug to $0 for the rest of the year.
When Gruber changed insurers his new health plan [Oscar] required him to meet his deductible out of his own pocket rather than credit copay gift coupons towards the out-of-pocket maximum. Gruber expected his share of the cost to be around $3,000. Instead, it was $10,600. There are two sides (at least) to every story. One patient advocate told WaPo:
“Why does it make a difference to Oscar if they get the money from a drug company or, you know, his mother or him?” he said of Gruber’s experience. “They’re still getting the money.”
Health plans counter with:
If manufacturers priced their drugs affordably, patients like Gruber wouldn’t need financial assistance, said Sean Dickson, a senior vice president for AHIP, a trade association representing insurers.
It is easy to agree with either of the above points – and both above points. The Affordable Care Act (ACA) banned annual and lifetime caps on benefits. The ACA also mandated drug coverage. These regulations combined to create a market for costly drugs and created an opportunity to charge high drug prices.
About half of state restricts so-called copay accumulators or at least bans the use in cases when a drug does not have a generic equivalent or a biosimilar. It is a difficult situation for patients who need expensive drugs. There are no easy answers; we want patients to be able to afford their drugs, but also individuals to be able to afford their insurance premiums.
Read more at Washington Post: Patients can save thousands with drug coupons, but only if insurers honor them