Executives of a small insurance company in Albany were mystified when, almost overnight, its payments for a certain class of antibiotics nearly doubled, threatening to add about a half-million dollars annually in costs.
The reason, it turned out, was that patients were using a card distributed by the maker of an expensive antibiotic used to treat acne, sharply reducing their insurance co-payments. With their out-of-pocket costs much lower, consumers had switched from generic alternatives to the more expensive drug. ...
The use of such co-payment cards and coupons and other types of discounts has more than tripled since mid-2006, according to IMS Health, an information company that tracks the pharmaceutical industry.
Last month, for instance, Pfizer introduced a new card that can reduce the co-pay on its blockbuster drug Lipitor to $4 a month, a savings of up to $50. That brings the out-of-pocket cost in line with what consumers might pay at Wal-Mart for a generic version of a competing cholesterol-lowering drug.
Drug companies say the plans help some patients afford medicines that they otherwise could not.
But health insurers and some consumer groups say that in many cases, the coupons are just marketing gimmicks that are leading to an overall increase in health care costs. That is because they circumvent the system of higher co-pays on costlier drugs that insurers use to encourage consumers to use less expensive products. ...
For very expensive drugs, co-pay assistance is almost de rigueur, because in some cases co-payments can be up to 20 percent of the price of the drug. Novartis’s new pill for multiple sclerosis, Gilenya, costs $48,000 a year, compared with $30,000 to $40,000 for rival drugs, which are injected. Novartis is offering to cover the entire co-pay, up to $800 a month, which is 20 percent of the drug’s monthly cost.
“It seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly” to insulate consumers, said Joshua Schimmer, biotechnology analyst at Leerink Swann, an investment bank.
--Andrew Pollack, NYT, on exploiting the moral hazard of insurance for profit