Featured Health Business Daily Story, March 30, 2012

Consumer Groups File Class Action Over Copay Coupons, Allege Bribery and Fraud

Reprinted from DRUG BENEFIT NEWS, biweekly news, proven cost management strategies and unique data for health plans, PBMs, pharma companies and employers.

March 23, 2012Volume 13Issue 6

Contributing to the ongoing debate over copay coupons offered by drug manufacturers, four proposed class-action lawsuits have been filed that characterize the brand-name drug promotions as illegal subsidies and “undisclosed kickbacks” — a claim one legal expert says is absurd, while another source doubts the suits will have much of an impact on the widely used industry practice.

The four union health plans that filed the lawsuits in New York, Chicago, Philadelphia and Newark, N.J., are members of Prescription Access Litigation (PAL), a coalition that is a project of Boston-based consumer advocacy group Community Catalyst. This is the first known lawsuit to challenge the legality and use of copay coupons.

“Copay coupons and other forms of direct-to-consumer advertising really misalign the efforts we’re taking to marshal our resources in a sensible way to continue a decent benefit,” contends Audrey Browne, acting counsel for the AFSCME District Council 37 (DC37) Health & Security Plan, one of the plaintiffs. Because the plan offers only supplemental benefits such as dental, vision and prescription drugs to 313,000 New York City employees, retirees and dependents, 75% of its budget goes to the generics-focused drug benefit, and the plan can’t afford to lose money to “aggressive marketing schemes,” she tells DBN.

The suits allege that copay coupons are a form of insurance fraud and violate the Racketeer Influenced and Corrupt Organization (RICO) Act in that they mask the true costs for reimbursement of the drugs being subsidized, representing inflated reimbursement amounts to the health plans. Moreover, they charge that copay coupons are a form of commercial bribery prohibited by the Robinson-Patman Act because they induce consumers to purchase the defendants’ brand-name drugs when less-expensive therapeutic alternatives are available and consumers are unaware that their plans end up paying much more for the promoted products.

“What’s interesting to me is this idea that there’s a surreptitious kickback paid through coupons that have been used so widely and so publicly for so many years; that seems to be an absurd premise for a lawsuit,” asserts William Sarraille, a partner and senior member of the Healthcare Practice group in the Washington, D.C., office of Sidley Austin LLP.

But Wilkinson says it was the rapid proliferation of copay coupons in recent years, combined with study findings that their use could lead to significant increases in drug costs, that led the organization and its members to take action.

Pointing to a Cleveland Research analysis that drug promotions had quadrupled between 2009 and 2011, he says, “It shows the industry’s eagerness to latch on to this promotional tactic and abuse it based on its successes.”

Meanwhile, the Pharmaceutical Care Management Association estimated in a November 2011 study that copay coupons could raise drug costs by $32 billion over a 10-year period (DBN 11/11/11, p. 8). “I think that raised the red flag for many health plans and also consumer advocates like us,” says Wilkinson. “We were already trying to understand the scope of the coupon problem and were also exploring potential solutions and ways to address them, but the coupon study kind of alerted the rest of the industry to the prevalence of their use and their impact.”

“The complaint is a direct assault on the verisimilitude of pharmaceutical manufacturers’ position that coupon programs are good for consumers,” observes Rob Noel, practice leader, managed care market at Pharmaceutical Strategies Group, LLC. “Short term, individual consumers using the coupons save some money at the cost of potentially billions of dollars to plan sponsors. Long term, many of the 300-plus brand medications currently being subsidized through the use of coupons risk being excluded from coverage by plan sponsors. Economics will force consumers to use preferred drugs or pay considerably more for the excluded medications as alignment between the payer and the consumer returns to the system.”

Lawsuits Could Settle With Little Impact

But whether those complaints will facilitate a change in coupon use may be hard to predict. “I am not at all surprised by the lawsuit and have thought these coupons raised serious legal issues for some time,” says Rodger Smith, senior vice president for audit and recovery services at SCIOinspire Corp., which offers technology-driven business solutions to health plans. “Typically, as part of a settlement, plaintiffs’ lawyers work to obtain some change in the allegedly inappropriate conduct of the defendant as part of a settlement — that is one of the benefits the court evaluated when determining if the settlement should be accepted (it needs to be judged fair to the class for the settlement to pass). Whether that will be a meaningful change is yet to be seen.”

Pointing to prior lawsuits that have challenged drug companies’ efforts to delay the release of generics, Smith says it’s more likely that these cases will be settled out of court for a small percentage of the profit that the drug companies made as a result of their copay coupon programs.

DC37 has a pass-through pricing arrangement with OptumRx, the UnitedHealth Group-owned PBM. “We want to know where our money’s going and we design our contracts based on certain assumptions that we’re going to have a certain flow of generics and a certain flow of brand. But when these aggressive coupon programs redirect people from the generic to the brand, it changes every assumption that we’ve made in dollars that we’re going to be spending on drugs based on the entire contract we’ve negotiated,” explains Browne.

While DC37 has not estimated the financial impact of the coupons, she says, “Obviously, all the plaintiffs will be put to the proof and we’ll have to show the damages when we get to that stage.”

While the lawsuits address the impact of coupons on health plan costs, Wilkinson says they also raise two fundamental concerns for consumers.

“One is that some of these are going to drive up consumer costs because they’re promoting very expensive drugs that all face stiff competition from generic alternatives that are equally effective and far less expensive,” he tells DBN. “The other concern is that by using and signing up for one of these copay coupons, an individual consumer is giving the drug manufacturer a key to open their prescription drug history, which could open them up to direct marketing and all kinds of promotions. So for some consumers this could really be seen as an invasion of privacy that they’re not necessarily acknowledging or consciously allowing.”

PAL is asking that the courts rule copay coupons unlawful and order drug companies to cease their use. The cases are also seeking an award of damages on a class-wide basis for insurers whose costs were driven up as a result of these promotions and triple damages as allowed by antitrust or RICO statutes. The three other plaintiffs are Sergeants Benevolent Association, New England Carpenters and Plumbers and Pipefitters Local 572 Health and Welfare Fund.

“Given how widespread and successful this marketing tactic is, I don’t think it’s going to be something that the industry gives up easily,” concedes Wilkinson.

The eight drug companies named in the lawsuit are Abbott Laboratories, Amgen Inc., AstraZeneca Pharmaceuticals, Bristol-Myers Squibb Company, GlaxoSmithKline, Merck & Co. Inc., Novartis Pharmaceuticals Corp. and Pfizer Inc.

The Pharmaceutical Research and Manufacturers of America, the trade association representing drug companies, declined to comment on the litigation and instead released the following statement from Senior Vice President Matthew Bennett: “Copay coupons address a serious problem of high cost sharing for medicines. They play a valuable role in increasing access to medicines and improving patient adherence to prescribed therapies, generating better health outcomes and reducing the use of avoidable and costly medical care.”

Nevertheless, Browne says she believes more plans will join the class action or initiate their own litigation. “Now that we’ve put some light of day on this, I think more people are going to be signing on,” she says. “It’s not a good business practice and it interferes with the PBM contract.”


Join Noel and Brent Eberle of Navitus Health Solutions for an April 26 webinar, Health Plan Strategies to Combat Consumer Drug Copay Coupons. For more information, visit the AIS MarketPlace.

© 2012 by Atlantic Information Services, Inc. All Rights Reserved.

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