Insurance tactic drags down U.S. drug prices in second quarter: analyst

[September 05, 2018]  By Michael Erman

NEW YORK (Reuters) - U.S. drug prices fell again in the second quarter, likely due to a new tactic insurers are using to limit financial assistance drugmakers provide directly to consumers, according to research firm Sector and Sovereign Research (SSR).

Real U.S. drug prices, which includes discounts and rebates drugmakers provide to insurers and pharmacy benefit managers (PBMs), fell 5.8 percent in the quarter, compared with a 0.7 percent increase a year earlier, SSR analyst Richard Evans said in a research note on Tuesday. That is in line with how far prices fell in the first quarter, he said.

Lower "real" drug prices means drugmakers are receiving less revenue on sales, but does not necessarily translate into savings for patients as employers and payers are more likely to reap the benefit.

Evans believes "copay accumulator" programs, which effectively force drug companies to continue to assist patients with their copays, were to blame for the declining real drug prices.

"Unless manufacturers adapt their copay support programs fairly drastically, net price declines may worsen in 2019," Evans said.

Gilead Sciences Inc, Eli Lilly and Co, Novo Nordisk and GlaxoSmithKline Plc made the largest contribution to the real drug price decline in the quarter, according to the report.

"We continue to assess the impact of accumulators being offered in the health insurance market," GSK spokeswoman Ashley Mahoney said in an email, adding that the British drugmaker has faced pricing pressure in the U.S. market, particularly for its respiratory therapies.

In recent years, insurers have tried to guide patients toward less expensive treatments by making them pay a higher portion of a drug's costs. Drugmakers responded by raising the financial aid they offer in the form of "copay assistance" cards - similar to a debit card - that reduce consumer costs at the pharmacy.
 

PBMs, which manage prescription drug coverage for large U.S. employers, say these payments shield consumers from drug costs, making it easier for manufacturers to raise prices. Insurers have to make up the difference.

Many PBMs introduced the copay accumulator approach for their corporate customers this year. The programs prevent copay card funds from counting toward a patient's required out-of-pocket spending before insurance kicks in on expensive specialty drugs.

Major pharmaceutical companies are trying to limit the damage from the tactic.

Still, most large drug companies did not address the issue of copay accumulators during conference calls to review second quarter results. Amgen Inc and Eli Lilly played down the effect the programs were having their own bottom lines.

Evans said he believes more employers will add the programs next year. A recent survey of large corporate employers by the National Business Group on Health showed that around 25 percent of respondents already had copay accumulator programs in place, and another 3 percent will be adding them next year. An additional 21 percent is considering the programs for 2020 or 2021, the survey found.

Representatives for Gilead, Eli Lilly and Novo Nordisk could not be immediately reached for comment.

(Reporting by Michael Erman and Caroline Humer; editing by Bill Berkrot)

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