Consumer Groups File Class Action Over Copay Coupons, Allege Bribery and Fraud

Consumer Groups File Class Action Over Copay Coupons, Allege Bribery and Fraud

Reprinted from DRUG BENEFIT NEWS, biweekly news, proven cost management strategies and unique data for health plans, PBMs, pharma companies and employers.

By Lauren Flynn Kelly, Editor
March 23, 2012 Volume 13 Issue 6

Contributing to the ongoing debate over copay coupons offered by drug manufacturers, four proposed class-action lawsuits have been filed that characterize the brand-name drug promotions as illegal subsidies and “undisclosed kickbacks” — a claim one legal expert says is absurd, while another source doubts the suits will have much of an impact on the widely used industry practice.

The four union health plans that filed the lawsuits in New York, Chicago, Philadelphia and Newark, N.J., are members of Prescription Access Litigation (PAL), a coalition that is a project of Boston-based consumer advocacy group Community Catalyst. This is the first known lawsuit to challenge the legality and use of copay coupons.

“Copay coupons and other forms of direct-to-consumer advertising really misalign the efforts we’re taking to marshal our resources in a sensible way to continue a decent benefit,” contends Audrey Browne, acting counsel for the AFSCME District Council 37 (DC37) Health & Security Plan, one of the plaintiffs. Because the plan offers only supplemental benefits such as dental, vision and prescription drugs to 313,000 New York City employees, retirees and dependents, 75% of its budget goes to the generics-focused drug benefit, and the plan can’t afford to lose money to “aggressive marketing schemes,” she tells DBN.

The suits allege that copay coupons are a form of insurance fraud and violate the Racketeer Influenced and Corrupt Organization (RICO) Act in that they mask the true costs for reimbursement of the drugs being subsidized, representing inflated reimbursement amounts to the health plans. Moreover, they charge that copay coupons are a form of commercial bribery prohibited by the Robinson-Patman Act because they induce consumers to purchase the defendants’ brand-name drugs when less-expensive therapeutic alternatives are available and consumers are unaware that their plans end up paying much more for the promoted products.

“What’s interesting to me is this idea that there’s a surreptitious kickback paid through coupons that have been used so widely and so publicly for so many years; that seems to be an absurd premise for a lawsuit,” asserts William Sarraille, a partner and senior member of the Healthcare Practice group in the Washington, D.C., office of Sidley Austin LLP.

But Wilkinson says it was the rapid proliferation of copay coupons in recent years, combined with study findings that their use could lead to significant increases in drug costs, that led the organization and its members to take action.

Pointing to a Cleveland Research analysis that drug promotions had quadrupled between 2009 and 2011, he says, “It shows the industry’s eagerness to latch on to this promotional tactic and abuse it based on its successes.”

Meanwhile, the Pharmaceutical Care Management Association estimated in a November 2011 study that copay coupons could raise drug costs by $32 billion over a 10-year period (DBN 11/11/11, p. 8). “I think that raised the red flag for many health plans and also consumer advocates like us,” says Wilkinson. “We were already trying to understand the scope of the coupon problem and were also exploring potential solutions and ways to address them, but the coupon study kind of alerted the rest of the industry to the prevalence of their use and their impact.”

“The complaint is a direct assault on the verisimilitude of pharmaceutical manufacturers’ position that coupon programs are good for consumers,” observes Rob Noel, practice leader, managed care market at Pharmaceutical Strategies Group, LLC. “Short term, individual consumers using the coupons save some money at the cost of potentially billions of dollars to plan sponsors. Long term, many of the 300-plus brand medications currently being subsidized through the use of coupons risk being excluded from coverage by plan sponsors. Economics will force consumers to use preferred drugs or pay considerably more for the excluded medications as alignment between the payer and the consumer returns to the system.”

Lawsuits Could Settle With Little Impact

But whether those complaints will facilitate a change in coupon use may be hard to predict. “I am not at all surprised by the lawsuit and have thought these coupons raised serious legal issues for some time,” says Rodger Smith, senior vice president for audit and recovery services at SCIOinspire Corp., which offers technology-driven business solutions to health plans. “Typically, as part of a settlement, plaintiffs’ lawyers work to obtain some change in the allegedly inappropriate conduct of the defendant as part of a settlement — that is one of the benefits the court evaluated when determining if the settlement should be accepted (it needs to be judged fair to the class for the settlement to pass). Whether that will be a meaningful change is yet to be seen.”

Pointing to prior lawsuits that have challenged drug companies’ efforts to delay the release of generics, Smith says it’s more likely that these cases will be settled out of court for a small percentage of the profit that the drug companies made as a result of their copay coupon programs.
DC37 has a pass-through pricing arrangement with OptumRx, the UnitedHealth Group-owned PBM. “We want to know where our money’s going and we design our contracts based on certain assumptions that we’re going to have a certain flow of generics and a certain flow of brand. But when these aggressive coupon programs redirect people from the generic to the brand, it changes every assumption that we’ve made in dollars that we’re going to be spending on drugs based on the entire contract we’ve negotiated,” explains Browne.

While DC37 has not estimated the financial impact of the coupons, she says, “Obviously, all the plaintiffs will be put to the proof and we’ll have to show the damages when we get to that stage.”

While the lawsuits address the impact of coupons on health plan costs, Wilkinson says they also raise two fundamental concerns for consumers.
“One is that some of these are going to drive up consumer costs because they’re promoting very expensive drugs that all face stiff competition from generic alternatives that are equally effective and far less expensive,” he tells DBN. “The other concern is that by using and signing up for one of these copay coupons, an individual consumer is giving the drug manufacturer a key to open their prescription drug history, which could open them up to direct marketing and all kinds of promotions. So for some consumers this could really be seen as an invasion of privacy that they’re not necessarily acknowledging or consciously allowing.”

PAL is asking that the courts rule copay coupons unlawful and order drug companies to cease their use. The cases are also seeking an award of damages on a class-wide basis for insurers whose costs were driven up as a result of these promotions and triple damages as allowed by antitrust or RICO statutes. The three other plaintiffs are Sergeants Benevolent Association, New England Carpenters and Plumbers and Pipefitters Local 572 Health and Welfare Fund.

“Given how widespread and successful this marketing tactic is, I don’t think it’s going to be something that the industry gives up easily,” concedes Wilkinson.

The eight drug companies named in the lawsuit are Abbott Laboratories, Amgen Inc., AstraZeneca Pharmaceuticals, Bristol-Myers Squibb Company, GlaxoSmithKline, Merck & Co. Inc., Novartis Pharmaceuticals Corp. and Pfizer Inc.

The Pharmaceutical Research and Manufacturers of America, the trade association representing drug companies, declined to comment on the litigation and instead released the following statement from Senior Vice President Matthew Bennett: “Copay coupons address a serious problem of high cost sharing for medicines. They play a valuable role in increasing access to medicines and improving patient adherence to prescribed therapies, generating better health outcomes and reducing the use of avoidable and costly medical care.”

Nevertheless, Browne says she believes more plans will join the class action or initiate their own litigation. “Now that we’ve put some light of day on this, I think more people are going to be signing on,” she says. “It’s not a good business practice and it interferes with the PBM contract.”

Today's Datapoint

55% of health plan members who purchase insurance on their own are say they are likely to use a state exchange, according to J.D. Power and Associates’s 2012 U.S. Member Health Plan Study.

New York Releases Proposal to Integrate Benefits and Financing for Dual Eligibles

State proposals to integrate coverage for dually eligible individuals, or people with both Medicare and Medicaid, under the Centers for Medicare and Medicaid Services’ (CMS’) new demonstrations and financing models continue to be made public for comments by stakeholders. Last week, the New York State Department of Health posted its demonstration proposal, under which, beginning in 2014, dual eligibles will be automatically enrolled into private insurance plans that provide both Medicare and Medicaid benefits, including pharmacy and long-term care benefits.

The proposal describes New York’s plan in general terms: the state will pursue an integrated financing pathway, under which it will enter into a three-way contract with CMS and private insurance companies that receive capped payments to administer both Medicare and Medicaid benefits.

According to the proposal, although beneficiaries subject to the demonstration will be passively enrolled into plans, they will have the ability to disenroll or opt out of the model. The proposal also states that New York will engage independent enrollment brokers to help affected individuals navigate plan choices and enroll into plans. In addition, New York hopes to establish an integrated appeals process for both Medicare and Medicaid benefits, though the state did not provide specifics about the new appeals structure. Implementation of the demonstration will occur in eight designated counties throughout the state, including the five counties that comprise New York City.

Beginning July of this year, New York plans to enroll dual eligibles requiring long-term care under Medicaid into managed long-term care plans. The demonstration proposal released last week largely builds on this existing framework, which sees the conversion of the Medicaid long-term care benefit from a fee-for-service model into a private managed care model.

Many details about New York’s dual eligible integration demonstration remain unclear, requiring further clarification from the state. The public can comment on New York’s proposal until April 20, 2012.
New York was one of several states that released proposals last week. The National Senior Citizens Law Center (NSCLC) has developed a new website that provides information on state demonstration proposals as they become available. NSCLC’s website also features additional resources designed to help advocates engage in stakeholder processes and provide meaningful input on state plans.

Today's Datapoint

$73 … in additional benefits and reduced cost sharing was received, on average, by Medicare beneficiaries enrolled in Medicare Advantage plans in 2010, according to an analysis by Avalere Health LLC.

Quote of the Day

“If poorly designed, workplace wellness programs can shift costs to those with the greatest health care needs; run afoul of federal anti-discrimination and privacy laws and the ACA’s prohibition on health status rating; and potentially affect which workers remain in employer plans and which end up in the new health insurance exchanges, possibly with a federal subsidy.”
— According to a new report from Georgetown University’s Health Policy Institute entitled Premium Incentives to Drive Wellness in the Workplace.

Statement by Secretary Sebelius on the Affordable Care Act

Today marks the two-year anniversary of the enactment of the Affordable Care Act, the law that gives hard working, middle-class families the security they deserve. It’s only been two years, but we’re already seeing that the law is making a difference in the lives of Americans.

It’s helping seniors. New data shows that more than 5.1 million seniors and people with disabilities on Medicare saved over $3.2 billion on prescription drugs because of the health care law. That’s about $635 per person in average savings and money back in the pockets of America’s seniors.

It’s helping women. Because of the Affordable Care Act, 45.1 million women – including 20.4 million women with private health insurance and 24.7 million women with Medicare – can receive recommended preventive services without having to pay a co-pay or deductible. Important preventive services, like mammograms and Pap smears are free. And in 2014, insurance companies can no longer charge women higher premiums just because they’re women.

It’s helping young adults. Because of the law, 2.5 million more young people have health insurance coverage.

It’s reducing premiums and lowering costs. Your insurance company can no longer raise your premiums by double digits without justification. And the law helps you get the most from their premium dollar: The health care law requires that premium dollars must be spent primarily on health care, not administrative costs like overhead or CEO salaries. So far, an estimated 74.8 million people have been protected by this new requirement.

And the law is protecting Americans with pre-existing conditions such as cancer or asthma. Already nearly 49,000 people have enrolled in the Pre-Existing Condition Insurance Plan, and it is now illegal for children under 19 to be denied coverage due to a pre-existing condition. The law also eliminated lifetime dollar limits on coverage for over 105 million Americans—they no longer have to live with the fear that if an illness strikes, they could max out their health coverage.

There are many more benefits to come from the law, too. Until then, learn more about the benefits, protections and programs of the Affordable Care Act at www.healthcare.gov. You can also see the stories of how Americans from across the country are benefiting from the law at www.healthcare.gov/mycare.

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The WH 2-Year Report and press release are also live here: http://www.whitehouse.gov/sites/default/files/uploads/careact.pdf

And here: http://www.whitehouse.gov/the-press-office/2012/03/23/new-report-affordable-care-act-gives-americans-more-security-better-bene

House Votes to Kill a Medicare Cost Panel

By ROBERT PEAR
Published: March 22, 2012

WASHINGTON — In a rebuff to President Obama, the Republican-controlled House passed a bill on Thursday to abolish a Medicare cost control board created by the new health care law.

The bill, approved by a vote of 223 to 181, provoked a full-throated debate on the merits of the law, the Affordable Care Act, on the second anniversary of its signing by Mr. Obama.

In dozens of speeches, Congressional supporters and opponents of the law previewed arguments that will be made next week when the Supreme Court hears a challenge to its constitutionality filed by 26 states.

The Obama administration, eager to showcase benefits of the law for consumers, said it had found that insurance rate increases affecting more than 42,000 people in nine states were unreasonable.

Kathleen Sebelius, the secretary of health and human services, reviewed the rates using authority provided by the new law. She said Thursday that insurers should rescind the increases, issue refunds to consumers or publicly explain their refusal to do so.

Insurers said the higher rates were justified by rising medical costs.
The stated purpose of the new panel, the Independent Payment Advisory Board, is to “reduce the per capita rate of growth in Medicare spending.”

Spending cuts recommended by the 15-member board would take effect automatically unless Congress voted to block or change them.

“The Independent Payment Advisory Board encompasses all that is wrong with the Affordable Care Act,” said Representative Michael C. Burgess, Republican of Texas. “It is not accountable to any constituency, and it exists only to cut provider payments to fit a mathematically created target.”

The House vote generally followed party lines. Seven Democrats voted for the bill, and 10 Republicans voted against it.

A number of powerful House Democrats dislike the board because, they say, it could usurp the power of Congress to set Medicare policy.

But most Democrats voted against the bill because it also included proposals that could limit patients’ ability to recover damages for injuries suffered as a result of medical malpractice.

In the Senate, Republicans said they would push for similar legislation, perhaps by offering amendments to other bills. Senate Democrats vowed to block such efforts.

Representative Allyson Y. Schwartz, Democrat of Pennsylvania, said she wanted to eliminate the board because lawmakers should “take responsibility for Medicare.” But Ms. Schwartz said Republicans had destroyed any hope of bipartisanship by “linking repeal of the board to tort reform, an unrelated, divisive and polarizing issue.”

Representative Pete Stark of California, the senior Democrat on the Ways and Means Subcommittee on Health, said that he, too, opposed the board, but that it was “far less dangerous to Medicare than the voucher plan put forth in the House Republican budget this week.”

The White House threatened to veto the House bill and defended the payment advisory board, saying it “will help reduce the rate of Medicare cost growth responsibly while protecting beneficiaries.”

Under the law, the board cannot make recommendations to “ration health care,” raise revenues or increase beneficiaries’ premiums, deductibles or co-payments.

Republicans said the board would inevitably try to save money by cutting Medicare payments to doctors, who would then be less willing to treat Medicare patients.

“I have been a practicing physician for over 15 years, and I don’t think I have seen anything potentially more detrimental to seniors’ health care than the Independent Payment Advisory Board,” said Representative Larry Bucshon, Republican of Indiana and a heart surgeon. “No president should have the power to create a board with this much control over health care.”

Representative Alcee L. Hastings, Democrat of Florida, said: “I am appalled by the hypocrisy of my Republican colleagues who keep stating that federal spending needs to be kept under control. But at the first opportunity, they wind up rejecting one of the most serious tools in place to actually tackle Medicare spending and make care more affordable.”

The Congressional Budget Office estimated that repealing the board could increase Medicare spending by a total of $3 billion from 2018 through 2022.