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Consumer group sues 8 drugmakers over drug coupons

FILE - In this Jan. 25, 2009 file photo, a bottle of Pfizer's Lipitor is shown in New York. Eight drugmakers are being sued by a consumer advocacy group that alleges their programs offering coupons to reduce copayments for brand-name medicines are illegal. Community Catalyst alleges that the couponing programs violate federal bribery laws because they're meant to conceal information about the payments from health insurance plans. FILE - In this Jan. 25, 2009 file photo, a bottle of Pfizer's Lipitor is shown in New York. Eight drugmakers are being sued by a consumer advocacy group that alleges their programs offering coupons to reduce copayments for brand-name medicines are illegal. Community Catalyst alleges that the couponing programs violate federal bribery laws because they're meant to conceal information about the payments from health insurance plans. (AP Photo/Mark Lennihan, file)
By Linda A. Johnson
AP Business Writer / March 7, 2012
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TRENTON, N.J.—Eight major drugmakers are being sued by a consumer coalition claiming the companies' popular coupon programs, which lower patient co-payments for hundreds of brand-name prescription medicines, are illegal.

Community Catalyst alleges the increasingly common coupons appear to save patients money but increase overall health care costs significantly and violate federal bribery laws by concealing information about the payments from health insurance plans.

The coupons will eventually drive up consumers' health premiums and can cause patients to reach benefit caps quicker, according to Community Catalyst's Prescription Access Litigation project, which has sued drugmakers over their pricing and promotion strategies. The group said it's seeking class action status for the lawsuit on behalf of private, union and state government insurance plans that could comprise more than 60 percent of the U.S. health care market.

Insurance plans and other prescription benefit managers for years have used tiered co-payments to steer patients to generics and lower-cost "preferred" brand-name drugs. They are now expected to fight back with more-restrictive contracts and prior reauthorization requirements meant to discourage coupon use.

The coupons either offer a set amount off a patient's co-payment for a brand-name drug such as cholesterol fighter Lipitor or heartburn pill Nexium, or they reduce the co-payment to the level for a generic drug. That's typically around $10, well below the $25 to $75 co-payment for preferred and non-preferred brand-name drugs, respectively.

"The subsidy can be as small as $5 and as high as $500" per month, said Wells Wilkinson, director of the prescription project.

Drugmakers increasingly have offered coupons to retain patients in recent years, as their top blockbusters lose patent protection and generic rivals grab billions in annual revenue almost overnight.

But coupons can raise costs sharply for employers and other prescription plan sponsors, because they cover the bulk of each prescription's cost and generic drugs usually cost 20 percent to 80 percent less than the brand name.

"The plan sponsor and the (prescription benefit manager), all they know is the co-pay was paid. They don't know by whom. They don't know how much," Wilkinson said. "They're billed for the rest, which is usually two-thirds."

On Wednesday, Community Catalyst filed identical lawsuits naming different defendants in federal courts in New York, Chicago, Philadelphia and Newark, N.J. The companies sued are Abbott Laboratories, Amgen Inc., AstraZeneca PLC, Bristol-Myers Squibb Co., GlaxoSmithKline PLC, Merck & Co. Inc., Novartis AG and Pfizer Inc.

Pfizer said it would vigorously defend against the allegations.

"Pfizer supports individualized treatment choices by physicians and their patients," the New York company said in a statement. "Given the larger cost-sharing burden being placed on patients, Pfizer supports the use of company-sponsored programs which help patients with out-of-pocket expenses for the medicines prescribed by their physician."

The other companies did not respond to requests for comment. Their trade group, Pharmaceutical Research and Manufacturers of America, wrote that co-pay coupons "help patients adhere to prescribed therapies by reducing high out-of-pocket costs," and that many co-pay coupons are for medicines with no available substitutes.

Boston-based Community Catalyst is a coalition of national, state and local groups, including health providers and major foundations focused on health issues. The plaintiffs are four union health insurance plans, which say they are struggling to cover ever-higher drug costs.

"By combining direct-to-consumer marketing and supermarket 'coupon clipping,' pharmaceutical companies are steering consumers to higher-priced drugs in the pursuit of greater profits," Edward Mullins, president of one plaintiff, the Sergeants Benevolent Association, said in a statement.

The lawsuits seek a court ruling that co-payment subsidies are illegal and an order that the defendants stop offering the subsidies. The suits also seek damages for the plaintiffs -- the extra payment for the brand-name drug over the cost of a generic -- and triple damages for the whole class as allowed under federal antitrust law.

A November report by the Pharmaceutical Care Management Association estimates that co-pay coupons, if left unchecked, will increase prescription drug costs for businesses, unions and other plan sponsors by a total of $32 billion over the next decade. The association represents prescription benefit managers hired by health plans and employers to process prescription claims and hold down prescription costs.

The coupons have become nearly ubiquitous. A December report by stock research firm Cleveland Research Co. noted that since it began tracking drug coupon programs in July 2009, the number jumped from 86 to 362. Coupons are available for drugs from Bristol-Myers-Squibb's psychiatric drug Abilify to Johnson & Johnson's prostate cancer pill Zytiga.

Besides mailings to patients, the programs are touted in television, radio and print ads, such as one for a $4 co-payment card available to many patients getting blockbuster drug Lipitor, which just got generic competition on Nov. 30. Maker Pfizer has said it is paying insurers agreeing only to cover brand-name Lipitor for the time being the difference between Lipitor's price and that of the generic, called atorvastatin.

Community Catalyst noted that drug co-payment coupons are banned by federal health plans such as Medicare and are also banned in Massachusetts under an anti-kickback law.

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Linda A. Johnson can be followed at http://twitter.com/LindaJ--onPharma

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