We will use actual claims data to ask and answer each of the following questions:
1. Do copay card programs lead to less generic usage? Certainly, there are a few copay card offset programs that lead commercially insured patients to fill a branded (and more
expensive) product when there is a perfectly good generic that is a near, but not exact, substitute.
However, for the highest-dollar-value therapeutic classes, the intensity of copay card use has no relationship to generic
uptake. Our analysis of the top three classes by Per Member Per Year (PMPY) cost to PBMs and insurers shows that the rate
of generic uptake or conversion is not correlated to the percentage of prescriptions that use a copay offset in the 15 largest
2. Do copay card programs lead to the use of higher-cost brands? In these large therapeutic classes, there are actually far more copay card program transactions that are used by Tier 2 contracted
prescriptions than by Tier 3 non-contracted prescriptions. Due to the deep discounts now required to obtain preferred Tier
2 status (see "Out of Control," Pharm Exec May 2011), the contracted brands are almost universally the lower-cost brand for employers and manufacturers. For example,
in the DDP4 class, Januvia, which has paid for Tier 2 status in more commercial payers than its competitors, also pays for
more transactions with copay card offsets than all of its competitors combined. In the first half of 2011, 63 percent of Januvia
prescriptions that used an offset would have gotten a Tier 2 copay card without a program.
The competitive dynamics in almost any class led to this same result. The largest brands in the class have an advantage in
negotiating for Tier 2 access, as they have the most drug spend "in play." The third or fourth brand to launch in the class
ends up "non-preferred," and, in order to get high-quality access for its drug, initiates a copay card program. The larger
brands, despite having contracted to get patients lower copayments, are afraid to lose their advantage and "double down" by
instituting a copay card offset program. This doesn't make a lot of business sense for the manufacturers, but they may not
even realize that it is possible to optimize contracting and copay card offset spending at a payer, or even geographic, level.
3. Where does the money go? Subsidizing Specialty Tiers? No one really knows how much all the U.S. pharmaceutical manufacturers spend on copay card programs in aggregate across all
brands. By working across 30 therapeutic areas, comparing actual redemptions from our clients with what we see in APLD, and
taking a SWAG at claims that we can't see in specialty pharmacy, we have estimated the 2011 spending on copay card offset
programs to be about $4 billion. This represents about 2 percent of gross branded drug spend in the U.S., although the experience
varies quite significantly by therapeutic markets.
The PCMA white paper infers that all this money is being spent keeping patients away from perfectly good therapeutic—though
not chemically equivalent—generic alternatives. The truth is that the largest budgets for copay card offset programs are found
in specialty brands where there are no substitutes. For TNF inhibitors, MS therapies, HIV products, Hepatitis B and C therapies,
and oral oncolytics, individual brands may be spending $20 million to $140 million per year. Collectively, we estimate that
specialty products represent just over 51 percent of total annual spending on copay card programs and coupons.
This is because the difference between Tier 2 and Tier 3 out-of-pocket costs for a retail product in diabetes, dyslipedimia,
or asthma may be $25, while the average offset for the specialty products is closer to $125. Specialty tier cost-sharing can
be particularly onerous due to the incidence of co-insurance and deductibles for both contracted and non-contracted brands.
Every commercial payer has some cohort of patients, oftentimes in their "at risk" books of business, which have excessive
patient cost sharing for biologics. In the largest specialty classes (TNF inhibitors, MS, oncology), we observe that between
5 percent and 15 percent of new commercially insured patients may be exposed to co-insurance or copayments greater than $400
per month regardless of the branded product's contract status. Manufacturers who have done the analysis are often stunned
to find out that they may be paying a hefty rebate to payers who have co-insurance or high deductible designs. In the absence
of copay card offset programs, as many as one-third of these patients would be abandoning their initial prescriptions. Without
the support of the manufacturers, patients with severely debilitating diseases could go undertreated or even untreated. Worse,
they could be exposed to substantial risk for medical claims as a result. Employers and insurers could not want that outcome.
Without the support provided by manufacturers, they would have many more untreated—or treated but unhappy—members. And we
can imagine how many additional complaints their employer customers would be fielding!
In Medicare Part D, Amundsen has analyzed more than a dozen specialty products where the Standard Eligible population will
face a "specialty tier" copay of more than $300 per prescription. Over a third of those patients will "abandon" their prescription.
Many will never be treated.
If CMS were to allow copay card offset programs, there is absolutely no basis for projecting an $18 billion dollar increase
in cost. First, more than half the utilization of branded drugs in Part D is from the low-income subsidy cohort who have copays
under $6.60 and wouldn't need a copay card offset. Second, the real cost of allowing copay card offsets could actually be
zero. Combined medical and pharmacy costs in Medicare for oncology, rheumatology, and MS might actually be lower as a result
of compliant patients who would remain adherent to their therapy.
4. What's Wrong with a Positive ROI? Copay card offset programs are one of the best places for a pharmaceutical company to invest. And the fact that the returns
are as high as 4:1 (and up to 6:1) is an indication of how valuable the offers are to patients. PCMA would have you believe
that the source of that high return is from saving prescriptions that would have otherwise been filled with a generic medication.
In fact, it is far more likely to come from patients who would have gone untreated or come from improved adherence through
lower monthly out-of-pocket expenses.
The expected return on investments in copay card offset programs will depend on how long each is designed to last, the richness
of the benefit, how broadly it is distributed, competitive programs, and where in the product lifecycle a program is introduced.
Many programs that we have evaluated actually have negative returns, as they simply offer too much subsidy to patients who
would be happy to pay a Tier 2 (and rebated) copay.
The two instances where copay card offset and coupon programs that Amundsen has analyzed consistently produce positive returns
are at the time of launch, or in classes where continuing patients are sensitive to the monthly out-of-pocket expense. At
launch, when a new medication would likely have a Tier 3 copay before the manufacturers could get a contract in place, copay
card offset programs make new therapies affordable. Later in the lifecycle, a well-designed program can often add 30 to 60
days of additional patient adherence to therapy in a year. In many disease areas, such as hypertension, diabetes, asthma,
and stroke, studies have shown that improved compliance will lead to lower hospitalization rates and annual medical costs.
As with specialty coverage, employers and insurers should be thanking the pharmaceutical marketers for the help in getting—and
keeping—patients on their medications.
At the end of 2012, when there are multiple generic suppliers of atorvastatin and managed care plans have instituted MACs
on the molecule and NDC-blocked the branded version, we will know whether Pfizer's high-profile attempt to hold branded share
of Lipitor with a pay-down to $4 will actually cost employers and insurers more money. If that is the case, then those payers
should bring it up in negotiations with Pfizer, and anyone who emulates the company, when it tries to get preferred, unrestricted
status for its remaining branded products. Until then, let the case be clear that coupons and copay cards, in aggregate, are
a good thing for patients, physicians, and employers, along with the manufacturers.
Mason Tenaglia is Managing Director of the Amundsen Group and a member of Pharm Exec's Editorial Advisory Board. He can be reached at email@example.com