By Michael Erman and Caroline Humer
NEW YORK (Reuters) - In the escalating battle over U.S. prescription drug prices, major pharmaceutical companies are scrambling to limit the economic damage from a new U.S. insurer tactic that coaxes patients away from expensive drugs.
The latest move by insurers - which effectively forces drug companies to pay more to assist patients with their copays - is causing a decline in real U.S. drug prices this year, and is expected to become more widely adopted in 2019.
That reality is forcing drugmakers to devise their own response in the near term, according to interviews with pharmaceutical and insurance industry executives and consultants. Among major drugmakers, AbbVie Inc (NYSE:ABBV) and Amgen Inc (NASDAQ:AMGN) have said the most so far about the new tactic, and more drugmakers will likely face questions about it during quarterly earnings calls in July.
In recent years, insurers have tried to guide patients toward less expensive treatments by making them pay a higher portion of a drug's costs. Drugmakers responded by dramatically raising the financial aid they offer, in the form of "copay assistance" cards - similar to a debit card - that reduce what consumers need to pay when they place their pharmacy order.
Express Scripts Holding Co and CVS Health (NYSE:CVS), which manage prescription drug coverage for large U.S. employers, say these payments shield consumers from drug costs, making it easier for manufacturers to raise those prices. Insurers have to make up the difference.
This year, Express Scripts and others introduced a new "copay accumulator" approach for its corporate customers. The programs prevent copay card funds from counting toward a patient's required out-of-pocket spending before insurance kicks in on expensive specialty drugs, such as arthritis and HIV treatments.
As an example, a patient whose medicine costs $1,000 per month might be required to pay that amount until they reach a deductible of $2,000 set by their insurer. A copay card from the drugmaker would cover most, or all, of those costs for the patient and it would count towards the deductible. When the deductible is reached, the insurance begins to pay.
But if the insurance plan is using an accumulator, the patient could still have to pay the $2,000 out of pocket when their copay card expires or runs out of money. Some more aggressive accumulator programs will also draw more money than a drugmaker expected to pay off a copay card when the card is detected.
These tactics could force the drugmaker to keep paying the out of pocket costs. Otherwise the patient could move to an equivalent drug if one is available or abandon their prescription because it is too expensive.
PHARMA FIGHTS BACK
Drugmakers are working on ways to counter copay accumulator programs, fearing that more employer health plans will adopt them in 2019.
They include new payment options to evade detection by the pharmacy benefits managers (PBMs) so that a patient still benefits from the financial aid, said Matthew Turner, who is working with drugmakers as director of patient affordability at TrialCard, which operates copay cards for companies. He would not provide details of how those arrangements work.
Larger drugmakers may have the financial flexibility to monitor how these accumulator programs affect revenue over time, while those reliant on a small number of drugs may not be able to wait it out, Turner said.
Drugmakers are also taking a tougher stance when negotiating prices or new discounts for payers, according to insurance industry executives and pharmaceutical consultants.
They have reason for concern. A survey by the National Business Group on Health (NBGH), which represents large corporate employers, showed that 17 percent of respondents said they were currently using a copay accumulator program. Another 18 percent of respondents are considering using one next year or in 2020.
Real U.S. drug prices, including discounts and rebates, fell 5.6 percent in the first quarter of this year, mostly due to copay accumulator programs, according to Sector and Sovereign Research.
Amgen has said that it altered copay assistance cards for arthritis drug Enbrel to work only if the funds are applied to a patient's deductible. The company would not say how it responds when a patient is affected by an accumulator, adding the information was proprietary.
AbbVie in April said that about 4 percent of patients taking rival arthritis drug Humira were exposed to accumulators, but that they had no material effect on company profits.
Belgium's UCB, which makes a competing drug called Cimzia, said in February that it was reaching out to patients affected by the programs to help them stay on the medication.
Savings can be substantial for employers when accumulators coax patients to switch to a drug for which they receive the highest rebate. For instance, rebates to PBMs for Humira and Enbrel can differ by as much as $1,000 per prescription, according to Michael Rea, CEO of Rx Savings Solutions.
At CVS Health, accumulator programs help reduce specialty drug spending by about 5 percent for its customers' health plans, spokeswoman Christine Cramer said.
Express Scripts and UnitedHealth Group Inc (NYSE:UNH), told Reuters they expect the programs to expand.
UnitedHealth tracks copay assistance payments at its mail order specialty pharmacy BriovaRx and wants to introduce them to other specialty pharmacies it works with, Chief Medical Officer Dr. Sam Ho said.
UnitedHealth calls patients to tell them their copay cards will no longer count towards deductibles, and suggests switching to a less pricey drug, if available, or provides information on charity assistance, he said.
When asked how drugmakers have responded to UnitedHealth's program, Dr. Ho said the manufacturers are taking a tough stance in new price negotiations.
Kevin Cast, a partner at pharmaceutical consulting firm Archbow Consulting, said drugmakers may be better off providing greater discounts to the PBMs in exchange for ending the copay accumulator. Concocting an alternative payment method is only a temporary fix, he said.
"As soon as a copay card company makes a slight adjustment, they'll figure it out," he said.