Why Industry Drug-Assistance Programs Are a Sham

You probably heard about the recent price hike for a drug critical to AIDS patients when the manufacturer sold it to an evil hedge fund manager who promptly marked it up 5,000%. This  prompted Los Angeles Times columnist Michael Hiltzik to revisit programs sponsored by pharmaceutical companies that purport to help people who can’t afford their costly meds.

Such patient-assistance programs, said Hiltzik, are a “sham.”

Drugmakers cover the patient’s co-pay or other costs in such programs, which involve about 300 drugs. Insurers, health-care economists and government agencies loathe the programs, according to Hiltzik, because “they’re often marketing schemes dressed up to look like altruism.”

One academic called the assistance programs “a triple boon for manufacturers,” because they increase demand for the product, allow companies to charge more for it and position themselves as the good guys for, basically, juicing a market, then exploiting it. “Manufacturers,” wrote Emory University’s David Howard last year, “can afford to pay a lot of $25 of $50 co-payments in return for even a small increase in sales of a $50,000 drug.”

Turing Pharmaceuticals makes Daraprim, which treats toxoplasmosis, an infection particularly threatening to people with AIDS. When the price jumped from $13.50 to $750 per pill, Turing said a patient-assistance program would cover low-income patients who can’t afford their share of the cost.

Is that “generosity”? Or just another example of a drugmaker using a patient-assistance program to pressure insurers into paying for its expensive drug? Hiltzik recalled how earlier this year, another member of the Big Pharma club, Gilead Sciences, limited its patient-assistance program for Sovaldi and Harvoni, drugs that treat hepatitis C for more money than most people make in a year. Although the drugs work well, they cost nearly $100,000 per treatment, so insurers were limiting them to only the sickest hep C patients, which is more than a little penny-wise, pound-foolish.

As Hiltzik wrote, “Gilead hoped that covering patient co-pays would pressure the insurers into allowing broader use of the drugs. When that didn’t happen, the firm shut down assistance for enrollees of insurers that were still applying restrictions; the hope plainly was that patients would scream at the insurers.”

So the descriptor “patient-assistance program” was not only a misnomer, it was a blatant falsehood. The AIDS Healthcare Foundation accused Gilead of “holding hepatitis C patients hostage as a negotiating strategy with health insurers for drugs that they ridiculously overpriced in the first place.”

That’s why private insurers and Medicare dislike the programs; “subsidizing the patients undermines what may be their most important tool for controlling health-care costs,” Hiltzik explained, “which is steering patients to low-cost alternative drugs or generics. The patients are immunized against their small share of the cost, but the insurers and government still have to pick up the rest.”

Even if patients get drug company assistance, it’s not necessarily good for them, either, if they get hooked on the high-priced product Big Pharma promotes when equally effective, less expensive options exist. Hiltzik referred to a survey in 2013 of coupon programs, which are a related kind of promotion. Downloaded from the manufacturers’ websites, the coupons limit or cover the patient’s co-pay for the first purchase of the drug. But, as Hiltzik reported, “Of the nearly 400 coupons for brand-name drugs examined by the authors, 62% were for products for which lower-cost alternatives were available.”

So you might get short-term savings but you’re locked into higher costs in the long term. By the time the discount ends, according to the survey, “patients may have developed loyalty to the particular brand or may be skeptical about switching away from a medication that they perceive as effective.”

Medicare prohibits co-pay patient-assistance programs that are affiliated directly with a drug manufacturer. Medicare’s overseer, the Dept. of Health and Human Services, warns that manufacturer subsidies to Medicare or Medicaid patients might run afoul of federal anti-kickback laws, which prohibit payments for the purpose of inducing people to choose a certain service.

Proven charities may provide assistance to low-income patients, but there have been problems, there, too. As Hiltzik recalled, a couple of years ago the Chronic Disease Fund (CDF) was accused of having an illegally close relationship with Questcor, the manufacturer of a multiple sclerosis drug that sold for $28,000 per vial, a cost CDF covered.

Even if these programs are not what they seem to be, the fundamental issue remains: How do people who can’t afford them get the drugs they need? Hiltzik didn’t see that as an insurmountable problem. “For one thing,” he wrote, “insurers don’t object so much to assistance programs for drugs that truly are uniquely effective, and at prices that are rational; their big problem is with expensive brand names that are just as effective as alternative treatments, or even inferior.”

But we still need policies that drive all prescription costs down, whether it’s a cap on patient co-pays, permission for foreign drugmakers to import less expensive drugs from overseas and/or allowing Medicare to negotiate with drugmakers for lower prices. In 2003, Congress forbade such commerce when it implemented the Medicare prescription drug program, known as Part D.

The latter idea might not lower prices that much anyway. Part D is required to offer a wide range of drugs, which limits Medicare’s bargaining power. Hiltzik noted that health economist Austin Frakt suggested tying Medicare’s required drug list to that of Veterans Affairs, which can negotiate with manufacturers and also can be more discriminating about the drugs it provides.

“The VA has used this authority to exclude many of the me-too drugs that drive health-care costs higher,” Hiltzik wrote. “Frakt calculated in 2011 that the VA paid 40% less for drugs than Medicare, while covering 59% of the most popular 200 drugs, compared with Medicare’s 85%. The change, he estimated, could save Medicare more than $14 billion a year. It might have a considerable multiplier effect nationwide by providing a truly effective benchmark for drug prices.”

Any conscientious, patient-centered effort to address the soaring rate of drugs would be better, Hiltzik concluded, than “the self-interested patient-assistance programs that cut prices for the few while keeping them bloated for everyone else. Drug companies shouldn’t be permitted to hide their fattening profits behind the shroud of philanthropy. That just costs everyone real money.”

To learn more, read Patrick’s newsletter, “Becoming a Smarter Buyer of Prescription Drugs.” 

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