Big Pharma hides costs with bait and switch

Drug companies offer copay breaks to get big insurance payments

THE ADS FOR high-end prescription drugs seem ubiquitous. Invokana, Xarelto, Abilify, and Humira are just a few names familiar to anyone with a television.

The drugs are some of the stars of the more than $5 billion in direct-to-consumer advertising the pharmaceutical industry does each year to convince patients to ask their doctors to prescribe the medicines. In most of the ads, viewers see a tagline offering a reduced price to qualified buyers, a hook that gives consumers a financial incentive to try the drug.

The qualified buyers targeted by the ads are not low-income patients who couldn’t otherwise afford the drugs. Instead, the ads are mostly aimed at consumers with commercial insurance. The drug companies offer them a coupon or a card that drastically reduces or waives their co-pay. The approach means consumers with a choice of a brand-name or a generic drug have an incentive to choose the brand-name. In instances where there is no generic alternative, the waiver of the co-pay provides an incentive for the patient to try the drug.

With the cost of drugs one of the biggest factors driving up health care costs, insurance companies are increasing co-pays and deductibles for prescriptions in an effort to make consumers more price-conscious and steer them toward cheaper options. The drug company ads are an under-the-radar effort to steer consumers with private insurance in the other direction.

For example, someone needing a blood thinner could obtain a prescription for the generic drug warfarin and face a co-pay of just a few dollars for a 30- or 90-day supply. By contrast, someone taking Xarelto or Eliquis, two brand-name blood thinners that are used in the treatment of blood clots, will likely pay the highest tier of co-pays, as high as $50 in many plans. For a maintenance drug like Xarelto, co-pays could total $600 over the course of a year.

For someone who can use either drug, the choice would be fairly simple. But Johnson & Johnson, the manufacturer of Xarelto, gives potential customers with commercial insurance a card they can present to their local pharmacy entitling them to a free, 30-day trial and a waiver on all co-pays. The customer sees their cost go down, while the insurer is stuck with the tab for the higher-cost drug. Under one Massachusetts HMO, the insurer pays about $340 per 30-day prescription for Xarelto.Xarelto

For some drugs, especially with no low-cost alternative, the price to insurers is even higher. Humira, a very costly treatment for arthritis and psoriasis, is another brand-name drug where the co-pay assistance is popular, a result of aggressive advertising that topped $200 million last year as the drug’s patent expired. Under one Massachusetts HMO plan, the insurer pays $4,353 for a 28-day prescription, while the consumer is responsible for a co-pay of $125. With the co-pay assistance, however, the patient would pay as little as $5 a month, while the insurance company would still pay its portion.

In Massachusetts, there is a law that prohibits discounts, coupons, rebates, or co-pay assistance for prescription drugs, the only state to ban such price reductions. But in a quirk of law, there is an exemption that was passed that makes the statute moot that is set to expire in 2019. State Rep. Ted Speliotis has filed a bill at the request of a constituent that would make the exemption permanent, though it still leaves the ban on the books.

State Rep. Christine Barber of Somerville, a former health care policy advisor who as a legislative aide helped write the state’s 2006 universal health care law, says the discounts by manufacturers are just a placebo to mask the problems of inflated drug prices. “Discounts and coupons are not a way of actually addressing the rising costs of prescription drug prices,” she says. “Coupons are a way to increase sales for higher cost drugs, not a way that is actually getting at the cost of prescriptions.”

The drug company discounts are not available to people on government health plans such as Medicare, Medicaid, or those provided through the Veterans Administration. The government health plans pay much less for drugs, and Medicare, which is the world’s biggest purchaser of prescription medications, is prohibited by law from entering negotiations with drug manufacturers.

Meet the Author

Jack Sullivan

Senior Investigative Reporter, CommonWealth

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

Dr. Donald Berwick, who was administrator of the Centers for Medicare and Medicaid Services under former President Barack Obama, says the secrecy with which health insurers bargain and contract with pharmaceutical companies makes comparison shopping difficult. Health insurers will not publicly reveal how much they pay for drugs, calling it proprietary information, though they are bound by law to tell customers.

“A lot of it is opaque,” says Berwick, a pediatrician and one-time Massachusetts gubernatorial candidate. “We’ve got to make drug policy more transparent.”