Drug co-pay assistance programs facing increasing state, federal scrutiny

WASHINGTON — Charity-run funds to help patients pay high co-payments face new scrutiny by prosecutors in two states and increased federal oversight, amid increasing questions about how they mask high drug prices.

Three drugmakers — Gilead Sciences, Jazz Pharmaceuticals and Biogen — disclosed subpoenas this spring related to their funding of co-pay assistance programs. Valeant Pharmaceuticals, already under fire here for its high drug prices, announced last October that the U.S. attorneys for both the Southern District of New York and Massachusetts had subpoenaed information about its contributions to patient assistance programs.

The Department of Health and Human Services' office of the inspector general (OIG) stepped up its oversight of patient groups' relationships with pharmaceutical companies beginning late last year by alerting patient groups to possible violations of Medicare's anti-kickback rules. A key issue: Groups favoring patients on certain drugs.

"The PR (public relations) nightmare of patients not getting their drugs would drag down (pharmaceutical companies') entire pricing approach," said Peter Bach, a physician who heads the Memorial Sloan Kettering Cancer Center's Center for Health Policy and Outcomes. "So it's easily worth it to them to donate to a charity, even if it costs them a few million dollars."

Several groups, such as the Chronic Disease Fund — now called Good Days — had to change the way they operate following an earlier probe. Bloomberg Businessweek reported last month that five former employees of another group, the Caring Voice Coalition, said it sometimes favored donor companies' drugs over those sold by other companies.

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Patient groups funded by drugmakers are largely mum on high drug prices

Pam Harris, president and co-founder of Caring Voice Coalition, said in a statement that the group "awards assistance to applicants without regard to any donor’s interest, an individual’s choice of insurer, physician, pharmacy, drug therapy, identity of any referring person or organization, or the amount of any contributions made by a donor whose services or products are used or may be used by an applicant."

The group is "undertaking a thorough process to ensure that the work of CVC always has and will continue to meet or exceed the regulations of our industry as outlined by the OIG," she said.

Alan Balch, CEO of the Patient Advocate Foundation, said in a statement that the group's programs "have never been designed to favor a donor’s drugs or patients on those drugs."  PAF has always been run according to law, its HHS inspector general advisory opinion, "ethical principles and best practices," Balch said.

The inspector general opinions carry "a lot of weight" for the patient charities and need to be followed closely given the increased scrutiny the assistance programs are getting, said attorney Janet Rehnquist, a former HHS inspector general. They don't, however, cover the drugmakers who fund them.

Drugmakers aren't allowed to directly cover patients' prescription co-payments for Medicare or Medicaid, but they can donate to patient charities as long as they are independent of the pharmaceutical companies.

Those who get their insurance through employers or private insurance companies can use what are known as co-pay coupons, which drugmakers distribute liberally online and in magazines. There's some disagreement over whether the coupons are allowed with plans purchased on the state or federal exchanges, but pharmacists seldom know where a person purchased their plans.

Massachusetts state legislators rejected an attempt this year to permanently lift a ban on the use of the coupons in that state, but consumers there can continue using them for at least another year. The state already bans the use of coupons when there is a generic equivalent of the brand name drug.

One of the issues some find troubling about both co-pay assistance and coupons is that neither are for the uninsured. Insurers say they use co -payments to steer patients to less expensive drugs that are equally effective. So when co-payments are subsidized, patients are insulated from the high cost of a drug and insurers and employer bear the brunt of the drug price, which then gets built into premiums paid by consumers.

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Mark Merritt, who heads the trade group for drug benefit management companies, notes about 100 million prescriptions are filled each year with co-pay coupons, while most of those people would have been able to get low-cost generic drugs.

A 2013 article in the New England Journal of Medicine found 62% of coupons used in 2010 were for brand name medications that had lower-cost alternatives. A lower-cost generic was available 58% of the time.

"It's a shadow world with a shadow claims system that's not transparent to payors or insurers," Merritt of the Pharmaceutical Care Management Association said of co-pay assistance and coupons. "It's designed to move market share for expensive brand drugs."

But Marc Boutin, CEO of the National Health Council, said high co-payments are "no longer a method to get to to the most effective, lowest cost product, which we support" and are now sometimes used for generic drugs and those for deadly illnesses, including HIV.

There needs to be a "systemic fix" to give patients access to drugs they need, said Boutin, whose group receives 65% of its money from drugmakers and others in the industry.

Boutin said he doesn't like co-payment assistance programs, adding that only two of his more than 100 members have them. "But there’s clearly a gap needs to be filled and I'd want to do it through assistance if the only other options are bankruptcy or life and death," he said.

His member groups, Boutin said, get an average of 17% of their money from industry, especially drugmakers, and he encourages them to find more sources of money so they're don't rely too much on industry. The reliance on drug company money creates a conflict of interest for patient groups, said oncologist and former White House policy adviser Ezekiel Emanuel.

Some say patients and drugmakers' goals converge on their own.

Patients and the charities that specialize in their diseases are looking for faster access to drugs "without the need for anything else to influence them,” said Eric Hargan, a former HHS deputy general counsel who now represents drug companies and other health care clients as a partner in the law firm Greenberg Traurig.

But Bach, whose center developed a drug value pricing tool, said co-pay assistance programs "solve the immediate need of the patient in front of you but exacerbate the problem that caused the need in the first place."