Pharma subsidies erode utility of co-pays

When does a cost-cutting incentive no longer cut costs? Here's an example, as reported by the Wall Street Journal: Drug co-pays could lose their effectiveness as a way to steer patients to lower-cost meds. Why? Because drugmakers are subsidizing co-pays for expensive drugs, removing the incentive for patients to pick cheaper ones.

The WSJ analyzed pharma subsidy programs, finding that drugmakers have expanded them greatly. Some of the most common drugs are subsidized in this way: Pfizer's Lipitor, for example. Costly drugs such as Amgen and Wyeth's Enbrel are subsidized, too. The drugmakers say they're helping patients who couldn't otherwise afford these treatments. But insurers say subsidized co-pays force them to pony up for the costlier meds--and to increase premiums as a result.

Studies have shown that co-pays do effectively reduce spending. A JAMA study found that every 10 percent increase in co-pay cuts drug spending by as much as 6 percent, the Journal notes. And drugmakers know patients pay attention to their out-of-pocket costs: Abbott chief Miles White told analysts a few months ago that patients are "very, very sensitive" to co-pays. White was announcing an expanded subsidy program for Humira--its rheumatoid arthritis drug--that would cut patients' co-pays to $60 a year from a possible $300.

What does this say about government efforts to rein in healthcare costs? Well, the Journal notes that this complicated interplay of patient, drugmaker and insurer illustrates the difficulty of truly reforming the system. What do you think?

- read the WSJ story
- see the Health Blog's take