Drug discount cards might work against payers' programs

September 1, 2011

Drug discount programs for consumers can drive high costs.

Key Points

WHILE STAKEHOLDERS are in agreement about improving quality and cutting costs, the path to resolution is not always clear. That seems to be the situation with drug discount programs for consumers. They might reduce the financial burden for members or improve adherence, but they might likewise attract consumers to non-preferred drugs.

A case in point is Lipitor, the top selling drug in the United States, bringing in $7.5 billion annually. Its manufacturer, Pfizer, introduced a program last December enabling patients to purchase a month's supply for only a $4 copay.

Lipitor is expected to go off patent in November, but for now, payers see the program as a final attempt to drive patients to the brand drug in its waning months of patent protection. The program, capping out at $600 per-member, per-year, will be valid through 2012.

Once the generic atorvastatin becomes available, the substitution will be automatic for many pharmacy benefit programs. Ultimately, the patients accustomed to the brand discount cards will still benefit as they pay a relatively low copay for the generic instead.

PAYERS MISS OUT

However, such brand discount programs often work against payers' efforts to promote the use of less expensive generics. Despite the lower cost for consumers using a copay discount card on a brand drug, a payer is responsible for the higher balance of the more expensive branded product if the generic alternative isn't filled.

In addition, pharmacy benefit plans could miss out on the rebates from manufacturers in certain instances when couponing drives patients to specific drugs. Manufacturers offer PBMs and plans rebates to encourage good formulary positions-specifically Tier 2 (preferred brand) rather than Tier 3 (non-preferred). The discount cards can drive patients to a brand, regardless of the tier. This means that pharmacy programs might be losing out on opportunities to leverage for rebates.

There are 295 drug discount programs representing 13% of branded drugs, according to the Cleveland Research Company, an independent investment research firm. That's up from 86 just two years ago. Half of the 100 top-selling drugs in the United States have coupon programs, according to Sector and Sovereign Research.

Drug discount cards may only be used by commercial payers, except in Massachusetts, which enforces a total ban on all drug coupons. Although most discount programs target a specific medication, some drug manufacturers are offering a multi-use card that applies to more than one drug.

"Discount cards are a big problem," says Charles Cote, vice president, strategic communications for the Pharmaceutical Care Management Assn. (PCMA), which represents pharmacy benefit managers. "The intention is to create brand loyalty."

The cost of a drug card program for patients is far less than what the manufacturer would pay in rebates to a PBM or a plan for better formulary positioning.

"We share common goals with payers and PBMs and are currently working cooperatively with them to make healthcare more affordable and to improve the patient experience and healthcare outcomes," says Clavelli in support of Pfizer's initiative.

Walter Kalmans, president, Lontra Ventures, a consulting firm, says manufacturers can create competitive positioning by gaining additional share without having to provide payers rebates for a Tier 2 position.