Feds Take a Pass on Co-Pay Offsets Under Obamacare

The implosion of the Affordable Care Act’s vaunted healthcare.gov benefit enrollment process has obscured a far more critical issue for Big Pharma: how much leeway do companies have in promoting durable brand affiliations among the potentially millions of new patients with subsidized access to new medicines?

One tactic widely used by drug makers is the issue of coupons and other incentive-based offsets against the costs patients bear in meeting co-pay requirements under private-sector PBM formulary plans.  The amounts of those co-pays are trending higher, particularly for specialty biologic medicines that are new to the market.  Assistance to patients on co-pays is now a multi-billion dollar business and is a crucial element in the strategies drug makers employ as more originator medicines face LOE.  The notable exception in providing these offsets as an option for patients is any “federal health care program,” like Medicare Part D, Medicaid and the VA formulary, where offsets are banned by statute as a market-distorting kickback.  The pregnant question hanging over the industry for the last two years is:   will this ban be extended to the Qualified Health Plans secured through the Affordable Care Act’s exchange program, which covers a potential – though at this point, wildly optimistic – pool of upwards of 30 million new medicines consumers?

The short answer – revealed yesterday – is No.  In a letter to Rep. Jim McDermott, ranking minority member of the House Ways and Means Health subcommittee, HHS Secretary Sebelius confirmed that Qualified Health Plans and other programs managed through the exchange marketplace, would not fall within the provisions of the federal anti-kickback statute as a federal health care program.  In effect, this means that drug companies may continue to offer coupons and incentives to help patients enrolled in Qualified Health Plans meet the cost of medicine co-pays.  It also avoids some of the legal complications that ongoing Patient Assistance Programs, which companies self-administer to provide free or low-cost medicines to patients who meet customized income requirements, might have faced if these Plans were subject to the anti-kickback rules.

But the industry is not completely home free on this issue.   The HHS Office of Inspector-General [OIG] 2013 work plan flagged industry compliance with the anti-kickback provisions in Medicare Part D for manufacturer coupons and other incentives as a “new OIG oversight priority for the year.” Specifically, it authorized staff “to identify the procedures that pharmaceutical manufacturers have in place to prevent the use of coupons and co-pay offsets for Part D beneficiaries.”

The centerpiece of the work is a company survey evaluating the effectiveness of these procedures; it is now being completed.  The OIG is likely to find that companies could be more proactive in building procedural safeguards against abuse.  It may be that, while big Pharma gains a measure of flexibility in helping Obamacare’s new crop of patients address the cost-share burden on drugs - particularly as signs indicate that drug coverage under many plans will be parsimonious – there will be more pressure for drug companies to invest to prevent any leakage from the offsets programs to the Medicare/Medicaid population.  However you slice it, one can be sure that more rigorous government oversight of industry competitive practices around all aspects of the Affordable Care Act is on the way.