The time was 10 AM on the morning of April 18th, 2016, when Michael Pearson, beleaguered CEO of Valeant Pharmaceuticals, sat down before the US Senate Committee on Aging hearing titled:Valeant Pharmaceuticals’ Business Model: the Repercussions for Patients and the Health Care System. If the session name alone was not damning enough, the tension was heightened by the uncertainties surrounding Mr. Pearson. Previously, the CEO had avoided past hearings, but this time, Senators Claire McCaskill (D-MO) and Susan Collins (R-ME) had indicated they would pursue contempt of Congress charges if the prodigal CEO did not appear in person. To all in attendance, it was unclear how Pearson would perform after only returning to work weeks earlier, following a long hospital-based absence reportedly battling life-threatening pneumonia. As Senators initiated what would become a nine-hour inquiry into Valeant’s actions to acquire and increase the price of rare disease medicines, one new issue came to the fore — patient assistance programs.
Mr. Pearson testified that Valeant expected to spend more than $1 Billion in 2016 on patient assistance programs for 55 of its products.[i] The disclosure and giving was intended to offset price increases on existing medicines for which Valeant had increased the list prices.
Such initiatives are not uncommon in the pharmaceutical industry. In fact, patient assistance programs have existed for decades as a critical vehicle for drug makers to maximize needy patients’ access to newer, costlier medicines by offsetting the costs. It is nearly impossible to go to a website for a medicine or view a branded television ad and not hear about potential programs that can help if “you are having challenges affording your medicines.”
Yet, as the Senate hearing would later prove, patient assistance programs are facing increased regulatory and compliance scrutiny. In this article, we ask: Why is charitable giving for a seemingly altruistic objective under inspection? How are these programs best structured? And importantly, what are optimal ways manufacturers can extend assistance to patients who stand to benefit while minimizing risk of appearing unseemly.
The Structure of Assistance
To answer these questions, we must understand the underlying regulatory structure. The end of the twentieth and beginning of the twenty-first centuries bore witness to sweeping achievements in medical breakthroughs. Arguably since the 1950’s, there has not been such an explosion in “silver bullets” to cure — or hold at bay – grievous cardiovascular, cancerous and other chronic diseases that previously snuffed out lives. Yet, this burst in innovation and the cost of the many failed drugs to achieve it, contributed to escalating costs of medicines. In an industry where discovery of a new medicine can be a risky proposition, drugmakers essentially “baked in” the price of risk for yesterday and tomorrow’s breakthroughs.
As the industry found ways to wrangle the cost of risk associated with drug development, there was no correlating increase in relative household income. Enter the advent of patient assistance. Patient assistance programs, often referred to as PAPs, became the pharmaceutical industry’s panacea to the affordability conundrum. Offered directly by the manufacturer, third-parties or through charitable foundations, PAPs typically work by offsetting the cost of care by providing free medicines, copayment support or other financial support and services.
While many American patients are obliquely aware of patient assistance programs, few know how they operate, or where their funding is sourced. To ensure that the makers of medicines are not exploiting government payers by subsidizing expensive medicines, there are federal policies that draw a firm red-line dividing what are acceptable services for a manufacturer and for a charitable third party to offer. For example, pharmaceutical companies’ free drug or copay assistance programs are allowed to offset high copayment costs for commercially-insured patients. But drug makers would fall a foul of federal anti-kickback laws if they were to offer assistance to Medicare Part D patients struggling to afford their medicines. But, as Americans live longer, and the cost of life-prolonging medicines continue to rise, it is not hard to imagine a potential collision course ahead for elderly patients needing increasing financial support.
Tax exempt charitable organizations can address the needs of Medicare patients – and provide a host of other patient services, often by securing donations from multiple manufacturers. This is because the Office of the Inspector General gave a pass to charitable groups – so long as they remain truly independent of a manufacturers’ bias. Translated into operation, this means charitable assistance programs cannot favor subsidies to any one drug or manufacturer, nor can they provide data about the amount or volume of donations it doles to any one medicine.
Greater Need Meets Greater Scrutiny
On the surface, the situation seems placid: patients get access to high quality medicines and programs exist to ensure that those who are underinsured or without means do not go into debt. Despite this, a strong undercurrent is brewing around patient assistance as the current expectation for low drug copay costs becomes less sustainable than in yesteryear.
In 2015, bad actors like Turing Pharmaceutical and Mr. Pearson accelerated exponential price increases to existing medicines, and in so doing, initiated a national debate over the affordability of medicines. Simultaneously, cost sharing implications of the Affordable Care Act began impacting American wallets. As more of the populace secured healthcare coverage, patients’ overall cost sharing burden rose 77 percent. To offset the flood of costly patients to the system, insurers hiked the prices of mandatory deductibles and “coinsurance” contributions. The average deductible payment rate between 2004 to 2014 rose 256 percent and the average coinsurance payments rose 107 percent.[ii]
As costs carried by patients and their families increase, so too does the need for assistance. Independent charitable assistance programs are needed more than ever, particularly for Medicare Part D patients hitting the “donut hole” in which their prescription costs aren’t covered. An incisive cover story in an April issue of Bloomberg Businessweek, reported that some independent charity organizations have seen manufacturer donations swell from $16 million to $136 million in a little over a decade.[iii] But at issue, according to Bloomberg, are manufacturer charitable dollars that may be earmarked to diseases that primarily would be treated by their own drug. In essence, such grants serve to subsidize sales for the expensive drug they make on the government’s dime.
Manufacturer copayment support programs for commercially-insured patients are also under a microscope. In the aforementioned Senate hearings, Senator Elizabeth Warren argued copay assistance actually benefit the drugmaker, citing “independent studies” that estimated drug companies see a return of $4 to $6 for every $1 spent on patient assistance.[iv]
Doing the Right Thing AND Minimizing Risk
No one finds it acceptable to allow a patient access crisis because it means lives are on the line. So for pharmaceuticals who face scrutiny for offering patient assistance, but desire to help patients crushed by insurance costs sharing, what are you to do?
The answer lies in recognizing the enemy, opacity. The fact is manufacturers must continue to provide needed assistance, but regardless of whether you offer free drug programs, copay card assistance – or charitable donations, following are simple steps to avoid the appearance of improper compliance:
Evan Weinberg also contributed.
This article was originally published on Pharmaceutical Compliance Monitor