Drug Coupons Hide True Costs From Consumers
As he makes his case for overhauling the American health care system, President Obama has used the analogy of patients getting a choice between a blue pill and a red pill. The blue pill is just as effective as the red pill, but costs half as much. If everyone would just choose the blue pill, the analogy goes, we could save our health care system a lot of money.
In the real world, that battle over blue and red pills is decades old and involves billions of dollars, but it's invisible to most of us.
Ted Serra stumbled onto the battleground because he's got pimples -- and a Solodyn Patient Access Card. "It looks like a little credit card," Serra says.
That white-and-blue piece of plastic is also a kind of weapon. It's the drug company's way of getting a patient like Serra to choose its name-brand product, even when it costs more, by subsidizing his high copay.
Solodyn's maker, Medicis, wouldn't answer questions, but you can see how the system works from Serra's experience.
Serra, a paralegal, went to his doctor a few months ago for help with acne. She prescribed Solodyn. Serra told her he'd previously taken a generic drug called minocycline that worked well. The doctor told him that the two compounds are basically the same, but that you have to take the generic version in the morning and the evening. With Solodyn, you take one dose a day.
Serra told her that if the name-brand medicine was going to cost a lot more, he'd prefer the generic. "And then she presented this card," he says. She explained that it was a coupon, and that he should give it to the pharmacist for a break on his insurance copay.
Without the card, Serra's copay would have been $154.28. But when he got to the pharmacy, he presented his card. "They went to ring it up at the register," he remembers. "And when it came up, the price was $10."
Insurance Companies Win A Round
Eileen Wood is situated on one side of this war over red and blue pills. She works as vice president of the Capital District Physicians' Health Plan, an insurance company in Albany, N.Y.
Ask Wood about the war, and she'll open the drawer in her file cabinet where she keeps zippered pouches of her least-favorite brand-name drugs. Among them is Minocin, an acne drug. She says a generic version of it costs about $50 a month. But a newer brand-name drug, Minocin Pac, costs $668.
The difference? "It has these lovely calming wipes, so that when your skin's all red you can pat this on," Wood says. "It's basically stuff you can buy over the counter." She says the marketing is very slick.
Minocin Pac may be an extreme example, but Wood says the only reason for such a disparity in prices is that insurance executives are the only people who see the full cost of the drugs. Patients don't know or care, because the majority of patients have health insurance.
Wood and her insurance colleagues went on the attack over copays. They instituted higher copays for expensive drugs with generic options as a way to encourage consumers to choose the cheaper option. In essence, they told customers that they could choose a drug like Minocin Pac and that insurance would even pay most of the cost -- but with a $40 copay. If you choose the generic, you would pay only $10.
The copay strategy worked so well that in 2003, more than half of all drugs picked up at pharmacies were generics.
Drug Companies Fire Back
The drug companies quickly caught on. They made a counterargument: that insurance companies shouldn't be steering patients' care.
"We want treatment decisions to be based on what the physician feels is best for the patient, not just the cost to the patient or what another player may decide is in their interest," says Sally Beatty of Pfizer, which makes Lipitor, the world's most popular drug.
Facing tight competition from generic drugs, Lipitor saw its sales drop after the insurance industry raised copays for name-brand drugs. By July 2007, sales were down 13 percent from the same quarter the year before.
In the case of Lipitor, there is no approved generic substitute, no drug that is chemically identical. There are generics in the same class of cholesterol-reducing drugs, but tests show a small group of patients respond better to Lipitor. For some of those patients, a $40 copay stops them from getting the medication.
By 2007, the pharmaceutical industry had mounted its counterattack: coupons to subsidize the cost of copays for consumers, like the one Serra used to buy his acne medicine -- the one that brought his copay down from $154.28 to $10.
Serra's insurance company ended up paying $514 a month for his once-a-day Solodyn. Minocycline, the twice-daily generic, costs $109 a month.
But Serra never saw those numbers. He saw a deal, and he likes deals.
An investigation by Wall Street Journal reporter Jonathan Rockoff found that in the past year, drug manufacturers have broadly expanded their subsidy programs as copays and drug costs have risen. The Journal notes that copays do affect consumer behavior. Every 10 percent rise in copays seems to lead to a 6 percent decrease in spending on drugs.
Wood says she understands the allure of the manufacturers' coupons, but she says those coupons come with a consequence. If everyone started using coupons to get the more expensive drugs, "we'd have to raise premiums," she says. "There's no question about that."
Consumers like Serra don't want to see premiums go up. But they're caught between enormous insurance companies and enormous drug companies.
Obama talks about choosing the blue pill over the red one, but the coupon cards make it hard to know which is which. It's uncomfortably clear that these cards are not the biggest weapons in this war. Drug consumers are.
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MELISSA BLOCK, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
MICHELE NORRIS, host:
And I'm Michele Norris.
Over the past several months, the reporters at NPR's Planet Money have been trying to answer a simple question. What would make our health care system more affordable? President Obama has floated one idea using the simple image of a blue pill or a red pill. And he says doctors and patients are often given a choice between the two. The blue pill is just as effective and half the cost. If everyone would just choose that blue pill, we could save our health care system a lot of money.
BLOCK: The problem is there are powerful interests lined up on both sides, blue and red. And they're waging a high stakes fight, as Chana Joffe-Walt reports as part of our collaboration with the program "This American Life."
CHANA JOFFE-WALT: Ted Serra is in the middle of a war. It's been going on for many years and involves billions of dollars. A lot of us are in this war. And like Ted, we don't even know it. Ted stumbled onto the battlefield because he's got pimples - pimples and a card.
Mr. TED SERRA: It is called the Solodyn Patient Access Card.
JOFFE-WALT: What's it look like?
Mr. SERRA: And it is - it looks like a little credit card. It's white and blue.
JOFFE-WALT: And it is a weapon, the latest weapon in this war. We'll come back to it. First, about this war. It's been escalating for decades and it is a war over drug co-payments. That money that you pay for drugs at the pharmacy, yeah, it's a war over that. Now, let's start with Eileen Wood on the one side. She's an insurance VP in Albany, New York, a company called Capital District Physicians' Health Plan. And you ask her about the war, she pushes you towards her file cabinet, her enemy drawer, where she's got plastic zipped-up pouches of her least-favorite brand-name drugs.
Ms. EILEEN WOOD (Vice President, Capital District Physicians' Health Plan): Let's look at Casodex because I love - oh, that's this one, I love this one. That's the Minocin. That's Minocin also, but this is this company.
JOFFE-WALT: Minocin that she's talking about, it's an acne drug. Then there is a generic version that cost about 50 bucks a month. Minocin PAC, which Eileen is now waving in my face, is a newer brand-name drug. It costs $668. The difference?
Ms. WOOD: It has this lovely calming wipe, so that when, you know, your skin's all red and you can pat this on and it's supposed to, you know, bring the redness down, calming serum and a calming mask. It's basically stuff you can buy over the counter. It's very - it's very slick.
JOFFE-WALT: This is an extreme example, but the way Eileen sees it, the only reason it's even allowed to happen is that she is the only one who will notice, who will see the full prices of these drugs. You and I don't care. We don't even know, because chances are, we're insured. So, Eileen, along with her insurance industry buddies, went on the attack with co-pays. They said, fine, customer, you want Minocin PAC? You can have it and we'll pay most of the cost, but you will be charged a $40 co-pay. Minocin generic is only a $10 co-pay. And the co-pay strategy worked so well that in 2003, more than 50 percent of the drugs people went and picked up from pharmacies were generics.
It was probably around then that it happened. The drug companies, they noticed. People like Sally Beatty at Pfizer. That is the company that makes, among other things, the world's most popular drug: Lipitor. Sally - not a fan of co-pays.
Ms. SALLY BEATTY (Pfizer): Now, the issue with that is that we want treatment decisions to be made based on what the physician feels is medically best for the patient, not just the cost to the patient or what another player may decide is in their interest.
JOFFE-WALT: Another player like Eileen Wood and her insurance industry buddies with their co-pays that started to hurt the drug companies. Lipitor is facing major competition from generics. By July 2007, sales were down 13 percent.
Now, there is no approved generic for Lipitor. Sally Beatty from Pfizer will say this three times in 15 minutes. And what that means is that there is no drug that is chemically identical to Lipitor. What there are are generic drugs in the same class of cholesterol-reducing drugs. And those generics are effective from most people. But there are some patients who respond better to Lipitor. And for some of those patients, a $40 co-pay stops them from getting the medication. And so, in 2007, the pharmaceutical industry marshaled its counterattack. Their essential weapon: coupons - a whole bunch of coupons.
Mr. SERRA: Okay, so I've always sort of had a little bit of acne.
(Soundbite of laughter)
JOFFE-WALT: Enter Ted Serra, the paralegal with the pimples - pimples that just a few months ago were in need of drugs. Ted went to a doctor and she put him on some antibiotics, a drug called Solodyn. Ted mentioned to the doctor that he had been on a generic before that worked pretty well, called Minocycline. And the doc said, yeah, that's basically the same, but Minocycline, you have to remember to take in the morning and the evening. Solodyn, you just take once a day.
Mr. SERRA: And I asked, you know, in terms of the cost of it, if that was going to, you know, be a big difference and then she presented this card.
JOFFE-WALT: You remember the card?
Mr. SERRA: It is called the Solodyn Patient Access Card.
JOFFE-WALT: This is the moment the drugmakers' weapon makes its way into the hands of its oblivious soldier: Ted. Ted was going to get a deal. The doctor explained that the card is a coupon. Give it to a pharmacist and it should make your co-pay very affordable, which is exactly what happened. Without the card, Ted's co-pay would've been $154.28. But when Ted got to the pharmacy, he presented his card.
Mr. SERRA: They went to ring it up at the register. And when it came up, the price was $10.
JOFFE-WALT: Ten bucks.
Mr. SERRA: Ten bucks.
JOFFE-WALT: That's pretty good for drugs.
Mr. SERRA: Yeah, it was great.
JOFFE-WALT: Solodyn Access achieved. Ted's insurance company paid $514 for Ted's once-a-day Solodyn. Minocycline, the one that you have to take twice a day, it costs $109 total. And Ted never saw those numbers. He saw a deal. He likes deals. Who wouldn't? And Eileen Wood at the insurance company, she gets that.
Ms. WOOD: I can't argue with that argument except to say there is a consequence for that, because what will you have to deal if everybody gets the more expensive drug? We'd have to raise premiums. I mean, I think there is no question about that.
Mr. SERRA: I don't want to pay more in premiums next year. And I don't want everyone around me to have to either. And so, you know, I think it's a regretful situation, but…
JOFFE-WALT: Do you think your coworkers are going to hear this and go, well, thanks a lot, Ted.
(Soundbite of laughter)
JOFFE-WALT: You and your fancy acne medicine.
Mr. SERRA: Probably.
(Soundbite of laughter)
JOFFE-WALT: Looking at this war laid out like this, it is a view of a health care system that is comprised of enormous insurance companies throwing their weight around, just as enormous drug companies striking back and then all these dupes in the middle - us, you, me, even our doctors, pesky interlopers. President Obama wants us to choose the blue pill and not the red pill because it's just as effective and half the cost. But with these cards, which one is the blue pill? We don't know, which makes it uncomfortably clear that these cards, they're not the real weapons in this war. We are.
Chana Joffe-Walt, NPR News. Transcript provided by NPR, Copyright National Public Radio.
