Merck, GlaxoSmithKline halt copay help for Obamacare patients

Merck and GlaxoSmithKline have nixed their copay assistance for Obamacare patients. The two companies say they fear subsidizing patients' drug purchases will run afoul of federal anti-kickbacks law. But many other top drugmakers- including Novartis ($NVS), Sanofi ($SNY) and Eli Lilly ($LLY)--will keep their copay cards and discounts, at least for now.

Copay discounts are a time-honored method for drugmakers to induce patients to use higher-priced branded drugs rather than cheaper alternatives, including generics. Merck ($MRK) and GSK ($GSK) wouldn't give up that opportunity lightly. Merck, for instance, offers copay savings for patients using its blockbuster diabetes med Januvia, whose U.S. sales have been down, and its combo cholesterol-fighter Vytorin, which lost significant ground after it failed a major study in 2008.

The problem is this: Patients covered through federal programs, such as Medicare and Medicaid, aren't eligible for copay assistance. But late last year, the U.S. Department of Health and Human Services said insurance plans sold through the Obamacare exchanges weren't considered federal programs. Many saw that as a green light for copay discounts for those patients.

But as Bloomberg notes, the Centers for Medicare and Medicaid Services issued a contradictory set of advice discouraging copay assistance. The agency "encourages issuers to reject such third-party payments," the guidance memo stated (as quoted by the news service).

And The Wall Street Journal points out that a new HHS rule hints that some copay help wouldn't be kosher; the rule says the health plans have to accept assistance payments for HIV/AIDS patients, but didn't address other types of drugs.

Merck and GSK aren't comfortable with the contradiction. But Johnson & Johnson ($JNJ) told Bloomberg that the company believes that October letter from HHS Secretary Kathleen Sebelius supports financial assistance from pharma companies. The industry trade group PhRMA believes assistance is allowed, too, but acknowledged confusion about the conflicting reports from HHS and CMS.

Expect some pressure on the Obama administration to clarify the situation. Low-income patients unable to afford drugs because of copay confusion--that's not the kind of press the White House needs. "This can be a significant issue for a middle-income family," PhRMA general counsel Mit Spears told Bloomberg. "I have a real hard time, just as a conceptual model, thinking the help you give a patient could be viewed as a kickback."

But CMS isn't the only group wary of copay assistance. Pharmacy benefits managers and managed care plans don't like the programs, either. PBMs use higher copays to steer patients toward lower-cost treatments, so copay assistance blunts that tool. Express Scripts and CVS/Caremark have moved to exclude certain drugs from their formularies, in some instances because copay cards amped up use of a product the PBM did not consider to be worth the extra cost.

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