Testimony Opposing SB 548 An Act Relative to Manufacturer Rebates and Discount Programs

MASSPIRG strongly opposes SB 548 An Act Relative to Manufacturer Rebates and Discount Programs which will increase cost of health care by repealing the current prohibition on the drug industry marketing tactic, rx co-pay coupons, designed to increase the use of higher cost, more profitable, brand name drugs. 

Before Chairmen Richard Moore and Steven Walsh and members of the Joint Committee on Health Care Financing

Please accept this letter as testimony in opposition to Senate Bill 548, An Act Relative to Manufacturer Rebates and Discount Programs, heard before your committee on November 9, 2011.
 
MASSPIRG is a non-partisan, non-profit, member supported consumer advocacy organization with a 40 year track record of working in the public interest, and specifically working to reduce the high cost of prescription drugs and our overall health care costs.

MASSPIRG strongly opposes SB 548 An Act Relative to Manufacturer Rebates and Discount Programs which will increase cost of health care by repealing the current prohibition on the drug industry marketing tactic, rx co-pay coupons, designed to increase the use of higher cost, more profitable, brand name drugs.  

Health care costs are out of control and rising considerably faster than almost every other household expense.


 
Rise in healthcare costs compared to the rise in costs of household expenses from 2003-2009
•    Healthcare costs outpaced the rise in the average electrical bill by 53.75%
•    Healthcare costs outpaced the rise in the average cost of rent by 134%
•    Healthcare costs outpaced the rise in the average cost of food by 134%
•    Healthcare costs outpaced the rise in the average cost of living by 196%
•    Healthcare costs outpaced the rise in the average cost of public transit by 278%

In an effort to reduce and bring under control the cost of prescription drugs and health care overall, we have to rein in the drug industry’s marketing practices.

Making great strides to reduce prescription drug costs, the Massachusetts Legislature passed the Pharmaceutical and Medical Device Disclosure and Gift Ban in 2008 to rein in Big Pharma’s inappropriate, direct-to-physician marketing tactics. Among other things the law bans gifts and or payments of more than $50, including restaurant meals and entertainment, to physicians and other prescribers, from drug and medical device companies.

The legislature banned the prescription and medical device industry from picking up the tab for wining and dining our doctors for good reason — because we ultimately end up paying that bill in the form of more expensive, often unnecessary drugs.

In addition to attempts to repeal part or all of the rx gift ban, the Pharmaceutical Industry is pushing the repeal of the current prohibition of the use of rx drug co-pay coupons, in SB 548.

Prescription drug coupons like all coupons are a tried and true marketing tactic, designed to increase the sale of certain drugs. The problem is however that the so called coupons will cost Massachusetts health care consumers, employers and other plan sponsors $750 million over the next decade in higher prescription drug costs. This and other data about the impact of drug coupons on cost  is found in a new report released this month, How CoPay Coupons Could Raise Prescription Drug Costs By $32 Billion Over the Next Decade, by PCMA, the Pharmaceutical Care Management Association
 
The way the drug coupon gimmick works is this: drug companies hand out coupons for its newest, priciest drugs to doctors, pharmacists and insured patients. Consumers then fill their prescriptions with these coupons, thinking they’re getting a bargain. Now your prescription is for a more expensive drug — and even if the individual consumer is not paying the full sticker price, their insurance company is. As a result, premiums rise as they cover the new costlier drug. In general and on the average the consumer – through co pays bears 1/3 of the cost of drugs with the insurers paying about two thirds. You can imagine the success of the program if consumers actually pay less or no copay with a coupon yet the insurer then has to pay the higher cost of the brand name drug. According to the report – the industry even makes it impossible for health plan managers to know who or how many coupons are being used.

The profitability of the coupon program is confirmed through the explosion and use of them by the drug industry. According to the PCMA report, the number of copay coupon programs marketed in the US has grown 260% in the past two years, with a return on investment of between 4:1 to 6:1. 

With each new gimmick, the cost of the whole health care system goes up, without making anybody healthier. If we want to get serious about a health care system that works for consumers, we have to prevent these kinds of schemes. In fact, drug coupons are not allowed in either the Medicare or Medicaid programs as they are determined by the HHS Office of Inspector General (OIG) to violate the Anti-Kickback Statute.

Big Pharma is constantly trying to think up ways to get us to buy the newest name brand prescriptions, when often the generics give us the same medical benefit at a fraction of the cost. In fact,  for each one percentage point decrease in the generic drug dispensing rate prescription drug costs in health plans rise by $3 billion annually.  That’s the aim of the coupons — plain and simple and should not be allowed.

For these reasons I hope you will not support SB 548 or release it from your committee.

You can find a copy of the report How Copay Coupons Could Raise Prescription Drug Cost By $32 Billion Over the Next Decade, Pharmaceutical Care Management Association (PCMA), November 2011, on our website at www.MASSPIRG.org

Authors

Deirdre Cummings

Legislative Director, MASSPIRG

Deirdre runs MASSPIRG’s public health, consumer protection and tax and budget programs. Deirdre has led campaigns to improve public records law and require all state spending to be transparent and available on an easy-to-use website, close $400 million in corporate tax loopholes, protect the state’s retail sales laws to reduce overcharges and preserve price disclosures, reduce costs of health insurance and prescription drugs, and more. Deirdre also oversees a Consumer Action Center in Weymouth, Mass., which has mediated 17,000 complaints and returned $4 million to Massachusetts consumers since 1989. Deirdre currently resides in Maynard, Mass., with her family. Over the years she has visited all but one of the state's 351 towns — Gosnold.