Aug. 9 (UPI) -- Manufacturer coupons and rebates may seem to save consumers money on brand-name prescription drugs -- but they may not in the long run because of how the savings are applied to deductibles and contribute to rising premiums.
Drug company offers may lower the out-of-pocket cost at the pharmacy, but insurance companies have found ways to cancel out the savings.
Instead of coupons and rebates, insurers, Medicare and the Trump administration would rather see lower drug prices across the board. They are working to negotiate lower prices or facilitate more competition that would bring the same result.
Meanwhile, consumers are caught in the middle, looking for ways to make the drugs more affordable.
One way to ease the burden is through manufacturer coupons, in which a drug rebate of $100 to $200 per month can cushion the blow of drugs that cost hundreds, or even thousands, of dollars. Coupons are offered for many essential medications for life-threatening or chronic conditions, including multiple sclerosis, diabetes, rheumatoid arthritis, multiple sclerosis, hepatitis C, HIV and cancer.
But insurance providers are changing how these payments are applied toward deductibles and out-of-pocket cost limits when they learn about the coupons -- using a concept called copay accumulators. They say it saves money by keeping premiums from skyrocketing.
The industry's lobbying group, America's Health Insurance Plan, is backing the practice.
"It's important when talking about this issue that we clarify the copay coupon sham upfront," Cathryn Donaldson, spokeswoman for the lobbying group, told UPI. "Copay coupon programs are a marketing scheme leveraged by Big Pharma to keep drug costs high for everyone. Manufacturers use coupons to steer patients toward more expensive medications, even when there might be a less costly but equally effective option [generic] available."
When a consumer uses coupons, their upfront cost is reduced, but the insurers are still footing their full share of the cost. And that ultimately gets passed on to consumers and employers in the form of higher premiums.
"The bigger question is why do we need copay coupons at all?" she asked. "Pretty logical to say that patients wouldn't need coupons if prices were lower."
Drug companies have been rolling out new drugs and advertising their benefits. The price isn't one of them.
The type 2 diabetes drug Invokana, for example, has a list price of around $550 for a month's supply.
Drug manufacturer Janssen Pharmaceuticals offers a savings program of up to $200 per month, plus the first month free, for patients with commercial or private insurance, up to $3,000.
For patients with insurance plans using the copay accumulator, the $350 or so a month they pay for the drug wouldn't count toward their deductible but not the $200.
Matthew Schmitt, an assistant professor at the UCLA Anderson School of Management who has studied drug coupons, said using the accumulator is a reasonable practice.
"Aspects of insurance like the deductible and out-of-pocket maximum refer to the enrollee's financial responsibility," Schmitt told UPI. "If services are provided to enrollees for less than the sticker price, then the financial burden on the enrollee is not the sticker price, but rather the discounted price. Imagine that I charge you $5,000 for a procedure but then only collect $100. It's hard for me to see any sense in which you have incurred $5,000 in spending, whereas $100 seems very reasonable."
True cost of discounts
PhRMA, a lobby group for the drug industry, is running ads criticizing these programs.
"Middlemen, like insurers and pharmacy benefit managers, are marketing accumulator programs in a misleading way to suggest they will provide greater cost protection for patients when the reality is the opposite," Holly Campbell, deputy vice president for human affairs at phRMA, said in a website posting.
"Often, patients discover too late that these programs were added to their insurance coverage, finding out at the pharmacy that the copay accumulator they used does not count toward their deductible or out-of-pocket maximum."
She cited data from the Kaiser Foundation that since 2006 deductibles have increased 300 percent, and there has been an 89 percent rise in how much consumers pay in coinsurance.
In 2016, Schmitt released a study with two other authors that found coupons covering the co-pays are driving prices higher. The findings were published in the National Bureau of Economic Research and The New England Journal of Medicine.
"The key takeaway from the research is that copay coupons for insured consumers shift prescriptions from inexpensive generic drugs to expensive branded drugs," he said. "For each drug with a copay coupon, our estimates imply that overall pharmaceutical spending increases by $30 to $120 million over the first five years following generic entry. The more that insurers need to pay for prescription drugs, the more that consumers will have to pay for prescription drug insurance."
The study found spending on 23 medicines sold through coupons was up to $2.7 billion higher over five years than if the coupons were not used. In 2007, one-quarter of brand-name sales were from drugs backed by copay coupons, and by 2010 it had doubled as these coupons have become more available online and from physicians.
For the study, researchers obtained data from an examination of Massachusetts' ban on copay coupons for drugs with a government-approved bioequivalent generic.
Conversely, he noted that insurers and pharmacy benefit managers are excluding more drugs from formularies that heavily rely on copay coupons to promote utilization.
During the first quarter of this year, the list price of drugs increased 6.2 percent, but the real net price went down 5.6 percent -- compared with 1.6 in the same period last year -- according to data obtained by CNBC from SSR Health, which tracks the pharmacy industry. In addition, list prices have declined 6.2 percent.
These coupons have not applied to Medicare and other government-sponsored insurance programs because of anti-kickback statutes, though the Trump administration is proposing to change that ban.
Manufacturers also give rebates to insurance payers such as Aetna and benefit plans, including Express Scripts, something Schmitt sees as a way to reduce prices.
"The argument is somewhat straightforward: Drug manufacturers might be much less likely to make price concessions if any such concessions immediately become public," Schmitt said. "Rather than give good discounts to powerful buyers, manufacturers may be less willing to give those discounts if there will be substantial pressure to offer the same discounts to all buyers. Of course, there is a question whether those powerful buyers -- insurers and pharmacy benefit managers -- will pass those discounts onto consumers in the form of lower premiums and/or copays."
He noted the existence of "secret rebates" also makes studying drug pricing extremely difficult, because the price observed in typical data sources is not the actual price that most buyers pay.
"Excessively high drug prices, foreign freeloading and a system rigged to reward list price increases, are burdening the American people," Trump said at the time.
He added, "Lower-cost drugs are kept out of the market by drug companies gaming regulatory processes and the patent system in order to unfairly maintain monopolies."
In the meantime, newer drugs on the offer might offer better treatment -- even lifesaving -- but the costs can be prohibitive.