You may not have ever been in a position of not being able to afford your prescription drug, but you have definitely been in the position— sacked out on the couch after a long day, most likely—of hearing someone gently recite a list of harrowing side effects followed by a reassurance that if you can’t afford your medications, the drug’s maker may be able to help.
So, here’s a question: how is that possible? How do drug companies ensure that anyone who needs their medication gets it, while simultaneously ensuring that they make money from their products?
Believe it or not, providing financial assistance to patients is a booming business. With the high expense of healthcare and ever more pricey drugs, many patients have difficulty paying for their medication, whether insured by Medicare, Medicaid, private insurers or no one. (And keep in mind, even if a person has insurance, he or she might not be covered for the specific treatment at hand.) Medical debt is now the number one cause of bankruptcy in the United States. Co-pays alone can empty a wallet, and contribute to the recent rise in unfilled prescriptions.
So it makes sense that drug companies have found a way to help. After all, they are in the business of providing healthcare. Whatever cynical views a person may hold about the pharmaceutical industry, it is hard to imagine a company not putting in place some kind of program to help people who can’t afford their medication. It would also be a PR disaster to not have such a program. What is stunning—and you almost want to give this feat a round of applause—is that the world of market-driven healthcare has found a way to make assisting patients profitable.
In the interest of transparency—and that’s the only motive here, not to take sides or stoke the anti/pro pharma fires—here is a look at how pharmaceutical companies provide assistance to patients who can’t afford their medications.
Patient Assistance Programs, or PAPs, can assist patients by covering some or all of a co-pay or co-insurance fee, or by providing free drugs. Sometimes, the PAP is run by the drug company itself. For example, Vertex has a PAP set up for its new hepatitis C drug, telaprevir, which was just approved by the FDA (along with another new hep C drug by Merck, boceprevir).
But more commonly, PAPs are run by outside companies, either for-profit or non-profit. Among the for-profits, Lash, AccessMed, Covance, and PremierSource are among the largest. For the nonprofits, Healthwell Foundation and the Patient Advocacy Foundation are the most popular.
Outsourcing patient assistance to a third-party lets the manufacturer keep its distance from the charity. That’s important, because a company could be at risk of violating the antikickback statute for providing free drugs or other assistance directly to a patient or doctor’s office (this concern applies specifically to Medicare/Medicaid-covered patients). The company could be accused of trying to influence a doctor’s prescribing habits or a patient’s choice of treatment, when several options exist. Hiring a third party to manage patient assistance keeps the company’s hands clean.
Unraveling the exact connection between PAPs and drug sales is not easy, but the existence of for-profit programs provides a clue. Lash, for example, is part of AmerisourceBergen Corporation, one of the world’s largest pharmaceutical service companies. AmerisourceBergen provides specialty pharmacy services, for example, ensuring that patients undergoing treatment with anything beyond a run-of-the-mill, take-every-few-hours pill has the support and monitoring they need. AmerisourceBergen also distributes drugs, serving as a middleman between the manufacturer and the drugstore.
In short, this company has an incentive to move prescription pharmaceuticals, and managing PAPs is part of that picture. (And this explanation is not picking on AmerisourceBergen; AccessMed is owned by US Oncology, one of the largest cancer drug distributors, and which also manages dozens of community cancer practices across the country.) For the manufacturer, outsourcing its PAP to a third-party might also be financially advantageous, particularly if that third-party already has other sales and distribution contracts in place for the drug in question.
Not-for-profit companies like Healthwell receive grants from pharmaceutical companies. Those grants must be given with no tie to an actual drug, and a pharmaceutical company is prohibited from having any say in how Healthwell doles out its assistance. At least, those are the rules on paper. In practice, things might work a little differently. The nonprofit was just called out on the level of compensation among its board of directors (five out of six members receive compensation, according to the May 2011 review by the Better Business Bureau). That problem notwithstanding, nonprofit PAP management companies—and for-profit ones, for that matter—absolutely do help patients in need afford their needed medications.
All that being said, the burden of PAP paperwork on doctor’s offices also bears mentioning. Navigating PAP requirements is complicated—extremely complicated—with harrowing amounts of red tape. The applications are usually 2–5 pages long and take about 2 hours to complete per patient; and a patient might need to apply to multiple programs. Some programs require multiple denials by a private insurer before providing coverage. Patients need to provide proof of their financial status, which could include years of tax returns, bank statements, etc. (and if someone is sick, that might not be easy to accomplish). The co-pay assistance well is usually replenished on a monthly basis, and so an office administrator needs to be right on top of the timings, lest the supply run out.
In addition, Medicare benefits often lags behind the cutting-edge of treatment—it can take months for Medicare to catch up with treatment guidelines for a given disease—leaving patients stranded financially while they wait for Medicare to catch up, adding a further administrative burden to the doctor’s office. When the hours spent on the phone and completing paperwork are tallied, it often amounts to several days of work for an office administrator or nurse, none of which is covered by any insurer. That much non-reimbursed overhead cost starts to add up. (Maybe someone should create a Doctor’s Office Assistance Program…)
Still, the vital question remains: Why are PAPs a good business decision for pharmaceutical companies? Many drug makers factor in the need for such assistance into the pricing plan for a new drug, and those who don’t will probably start to do that soon. So, first of all, it’s good to be aware of the fact that the price tag for a given drug actually factors in the fact that some percentage of patients will not be able to afford the treatment.
And it’s nice to know a major reason for why a company would consider providing patient assistance to be a good business strategy. Simply, doctors might be more likely to prescribe a drug for which patients have been able to obtain financial assistance, even for patients who don’t need assistance. (In an article I wrote about PAPs for cancer drugs for Oncology Business Review, Lee Blansett, of MattsonJack/DaVinci, which works with drug companies on pricing strategies and other matters, mentions an internal study that found PAPs to have a favorable effect on prescribing “fair percentage” of doctors who were aware of these programs.)
Also, the numbers still generally add up in favor of the company. To give a rather blunt calculation (also in the article mentioned above): providing $4,000 worth of co-pay or other costs to a patient who needs several months’ worth of a drug that costs $3,000 per month still leads to a significant income for the company. These days, private insurers are taking more leeway with co-pays, which means more and more patients are likely going to need this kind of assistance. Overall, it doesn’t diminish the earnings in any significant way (especially since, again, the need for PAPs is often built into the price of a drug).
So, there you have it: a brief (or not so brief) look into the world behind those magical little words at the end of a drug commercial.
And yet! As always, questions remain. What are the exact financial ties between the for- and non-profit PAPs and pharmaceutical companies? Just out of curiosity, what would a given drug’s price tag be if PAP costs were removed from the equation? Do we all understand that PAPs are not really charities, since the need for them is factored right into a drug’s price? How does a non-profit stay unbiased when its entire existence relies on grants from pharmaceutical companies? And I’m sure you have a few of your own questions, too. We can all be happy when someone who might not otherwise be able to pay for a life-saving, or simply life-improving, drug is able to get it. But understanding how that happens also seems important.
Pill question mark: http://www.flickr.com/photos/27384147@N02/5154759016/