What does pharma have in common with Target?

When the economy is in a recession, what do consumers do? They get thrifty. So discount retailers are weathering the recession better than luxury stores, for example. And not to be outdone by Target and Wal-Mart, drugmakers are getting into the discounting act. According to the Wall Street Journal, pharma firms are handing out coupons at an increasing pace, hoping that easing the co-pay burden will keep patients on branded drugs.

For instance, Sepracor offered a discount card for up to $50 off each 30-day supply of the sleep drug Lunesta--and the card was good for 12 months, or a savings of $600, the WSJ reports. Sanofi-Aventis offered a discount of $20 off its competing sleep drug AmbienCR, good for up to five prescriptions, or $100. And what do these two meds have in common? They both compete against a generic version of Ambien, that costs much less.

And there's the rub for drugmakers. As insurers steer patients toward generics with their tiered formularies, co-pays for still-on-patent drugs can top $50, while copycats go for as little as $10--or even $4 at the aforementioned discount retailers. While patients might be willing to pay the extra freight in boom times, now that folks are pinching pennies, that $30 or $40 or $50 co-pay suddenly looks quite big.

But even the bigger co-pays don't cover the lion's share of many drugs' wholesale prices, so by picking up the patient's portion of the cost, the drugmaker keeps the revenue coming on the insurer's side of the equation. Insurers may not be happy about it--because the coupons induce patients to stay on more expensive drugs rather than switching to generics as the formularies are designed to encourage--but pharma's bottom line is.

- read the WSJ piece