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The Hidden Costs Behind Prescription Drug Company Discounts

Coupons and charity keep list prices high, costing insurers and governments more

A wall of prescription drugs at a pharmacy

Getty Images

En español | After Pamela Holt, a retired teacher in Granger, Ind., was diagnosed with multiple myeloma in 2016, she was soon overwhelmed by the cost of her medications. The largest expense? A $640-a-month copay for Celgene’s Revlimid. Holt, who lives on Social Security and a pension, quickly found herself racking up thousands of dollars in credit card debt.

So Holt sought help from the pharmaceutical company. A Celgene employee directed her to the HealthWell Foundation, a non-profit group that administers a number of disease-specific medication assistance funds—including one for multiple myeloma—designed to help patients pay their pharmaceutical bills. Today, Holt, 70, pays nothing for Revlimid.    

Sounds wonderful, yes? But it’s not so simple. Medicare — that is, taxpayers — still must pay the remainder of the drug’s more than $250,000 annual tab. Experts say the seemingly generous charitable aid that Holt receives is actually intended to reduce public pressure for drugmakers to lower their prices. It helps Holt and others like her, but at the cost of the nation’s rising health care budget. “It’s really just a racket,” she says.

The same can be said for other discounts and help for consumers funded by pharmaceutical companies — for example, manufacturers’ coupons for brand-name drugs with high sticker prices. While these can make brand-name drugs cheaper than generic equivalents for the patient, the health insurance company receives no such assistance, resulting in higher premiums and more cost-sharing for all its customers. In fact, a 2017 paper published in the American Economic Journal found that coupons increased spending on brand-name offerings by 60 percent.

pie chart showing profits made my drugmakers

AARP/Health Affairs, July 2018

Sticking to expensive drugs

Adding insult to injury: A 2013 study in the New England Journal of Medicine found that when a coupon-based discount ends — and it almost always does — consumers often stick with the brand-name drug, rather than switch to a less expensive alternative. The reason is understandable: Patients are hesitant to experiment with a medication protocol that works for them. The coupons end up functioning like those for laundry detergent or cereal: They create brand awareness and loyalty, thus fueling sales. “These coupons inflate costs for everyone,” says Jon Conradi, a spokesman for the Campaign for Sustainable Rx Pricing, an advocacy group. “Policy makers and patients shouldn’t confuse an advertising play for any kind of solution to the crisis of rising prescription drug costs.”

Charitable aid that manufacturers provide — not the same as the coupons — isn’t a fix, either. Some pharmaceutical companies operate income-based discount programs, but these are voluntary efforts. Drug companies supply nearly all the money for disease-specific funds, like the one that helped Holt, but the demand from patients far exceeds the available cash.