The Co-Pay Coupon Controversy: Time for Detente?

By Kate Greenwood

Cross-Posted at Health Reform Watch

At the end of last month, the Secretary of Health and Human Services Kathleen Sebelius made headlines when, in a letter addressed to Representative Jim McDermott (D-WA), she announced that “[qualified health plans], other programs related to the Federally-facilitated Marketplace, and other programs under Title I of the Affordable Care Act” were not “federal health care programs under section 1128B of the Social Security Act”.  One implication of the Secretary’s interpretation is that the “anti-kickback act”, which is found in Section 1128B, does not apply to qualified health plans.  And that, in turn, means, among other things, that individuals insured under those plans, unlike individuals on Medicare or Medicaid, will be able to use drug company coupons to defray the cost of their prescription drugs.

Prescription drug coupons have been a source of controversy, favored by branded manufacturers and patients, and opposed by generic manufacturers, health insurers, third party payers, and pharmaceutical benefit managers.  Joseph Ross and Aaron Kesselheim studied a large number of coupons advertised on the website and found that “62% (231 of 374) were for brand-name medications for which lower-cost therapeutic alternatives were available.”  Ross and Kesselheim argue that the coupons are costly at the population level, but also for individual patients.  This is because the coupons are nearly always time-delimited and the short-term savings do not typically outweigh the long-term cost of taking a branded drug.  On the other hand,  in an article in last week’s JAMA, Leah Zullig and colleagues pointed out that reducing co-payments has been proven to improve medication adherence, a problem which there “is an increasing business case for addressing[.]”

The coupon controversy has carried over into the courts.  On March 7, 2012, seven lawsuits were filed in district courts by third party payers against a number of drugmakers, alleging that prescription drug coupons violate antitrust, commercial bribery, and racketeering laws.  (This post at FDA Law Blog includes links to the seven complaints, and this one provides an update on the status of the litigation as of late June 2013.)

On June 3, 2013, Judge Paul Oetken of the Southern District of New York dismissed one of the seven suits, brought against Bristol-Myers Squibb and Otsuka, finding that the challenged coupons were not fraudulent because the program is “‘open and notorious,’ information about its terms and conditions is readily available on a number of public websites, and Plaintiffs do not allege that anyone is deceived about the effect of these programs.”  The court dismissed one of the plaintiffs’ claims–that the defendants committed fraud “by reporting benchmark prices to reporting agencies while failing to account for the routine waiver of co-pays”–without prejudice to refile, which the plaintiffs did.  A review of the seven dockets this morning, November 26, 2013, reveals that there are motions to dismiss pending in all that were not voluntarily dismissed by the plaintiffs.

The likely outcome of the ongoing litigation is that if an insurer wants to end the use of coupons, it will have to include a provision in its insurance contracts barring their use.  Note, though, that Ross and Kesselheim found that fully 38% of the coupons offered were for prescription drugs for which there was no therapeutic alternative.  The public policy arguments against using coupons are significantly weaker with regard to such drugs.

A better approach to cutting costs, I think, is to focus on doctors, not patients.    Rather than take away patients’ coupons–which can be perilous, as JC Penney can tell you–insurers and third party payers should make it easier for doctors to make cost-effective prescribing decisions and harder for them to prescribe brand-name drugs that have generic substitutes or alternatives.  As Judge Oetken held, “neither precedent nor logic” supports assigning to patients a duty to “pressure physicians to choose generics.”  Physicians should be choosing generics, where appropriate, in the first instance.  Focusing on helping them do so would be fairer and more productive than continuing the fight against coupons.

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