Health Plans Mount Litigation Challenge over Prescription Drug Coupons in US
The debate over prescription drug coupons in the United States has escalated, with insurers alleging the practice is "illegal".
IHS Global Insight Perspective
Eight drug makers are facing lawsuits from four union health plans who say prescription drug coupons are illegal, violate the commercial bribery legislations, and increase long-term healthcare costs.
The contention is that the coupons subsidise or offer a discount on the co-pay which, if favoured by the patient, will result in higher costs for the employer health plans. There are also fears that this practice could cause consumers to reach the benefit cap set by the health plan sooner than if they used lower-priced generics or alternative brand-name drugs.
The litigations reflect on the increasing row between health insurers, pharmacy benefit managers and Big Pharma firms over higher-priced brand-name drugs, where the latter is using this new practice to retain market share.
Big Pharma Versus Health Plans
For four health plans and one consumer advocacy, prescription drug coupons have been a bane and the organisations have taken eight drug makers to court in the United States over the practice. Big Pharma firms such as Pfizer, Merck & Co, Amgen, Bristol-Myers Squibb, Abbott Laboratories (all US), Novartis (Switzerland), AstraZeneca and GlaxoSmithKline (both UK) are all involved in the lawsuit. According to Pharmalot.com, the lawsuits were filed by AFSCME District Council 37 Health & Security Plan Trust, Sergeants Benevolent Association, the New England Carpenters, and the Plumbers and Pipefitters Local 572 Health and Welfare Fund, as well as Community Catalyst.
A class action complaint was filed in the US District Court for New Jersey, noting the practice of "unlawful prescription co-payment subsidy program", describing it as "undisclosed kickbacks to privately insured individuals" to influence the usage of brand-name drugs. On this premise, the lawsuit brought by the health plans contends that the cost-sharing provisions have been undermined by the coupons, essentially subsidizing consumers' portion of the co-pay agreement and encouraging uptake of the brand-name drug propagated by the coupon. This, in turn, drives up health-plan costs and "falsely inflates reimbursement rates" for prescription drugs. Furthermore, the health plans in their lawsuit cite a study which estimates prescription drug coupons could increase health benefit providers' prescription drug costs by USD32 billion in the next decade.
Calling it "insurance fraud", the lawsuit alleges that brand name drug makers are violating the Racketeer Influenced and Corrupt Organization Act and federal antitrust laws which prohibit commercial bribery.
The full legal complaint can be accessed here (source: Pharmalot.com).
Outlook and Implications
The row over prescription drug coupons has been simmering for a while and it is no surprise that the controversy has erupted into class-action lawsuits, forcing the previously behind-the-scenes squabble into the open. The coupons were essentially introduced by Big Pharma firms as a practice to retain market share at a time when cost-reduction efforts in health plans began to directly affect brand-name drug-revenue prospects. Faced with lower-priced generic competition as well as brand name alternatives, the coupons provided a way for Big Pharma to maintain contact with the patient and continue to propagate their brand name drugs by subsidising co-pays or offering a flat discount. For health plans, as detailed in the lawsuit document, the practice meant that lower priced alternatives and generics were not preferred by patients, which proved to be costly for the employers' portion of co-payment. This cost-sharing arrangement provision is central to the new dynamic of the health insurance industry as the health reform roll-out occurs.
The pharmaceutical industry has indicated that its practice of offering coupons provides support in making out-of-pocket payments to patients and helps to improve access. Health plans, on the other hand, refute this, arguing that the process will increase long-term health-expenditure costs, indicating that the higher priced brand-name drugs will make an increasing contribution to such costs. The debate is expected to intensify, as for the next five years Big Pharma corporate strategy is set on seeking different ways to optimise revenue generation from marketed brand-name products in the face of blockbuster drugs going off-patent and affecting overall revenues. For the government, the push towards higher uptake of generic drugs could be affected by this practice, although in the near term the implications are likely to be minimal as generic versions of blockbuster patent drugs are expected to increase by 2015.
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