Pharmaceutical company donations to patient assistance programs likely to increase profits

The authors of a recent report argued that current federal guidelines fail to prevent drug companies from making money from donations to charities to help patients directing Medicare patients to their medications, and the guidance should be revised. study in Health Affairs.

Even when charities urge patient aid to make only a small portion of sales to Medicare patients, donations to leading drug manufacturers in many circumstances are still profitable, according to researchers led by Lemore Daphne, PhD, economist and professor at Harvard Business School in Boston.

The authors noted that Medicare does not allow registrars to use drug coupons—because they may unfairly encourage patients to choose one drug over another—but that registrars may receive financial assistance from patient assistance organizations based on their circumstances and needs. HHS’ Office of Inspector General (OIG) provides formal guidance on patient assistance programs to ensure that they do not violate the federal anti-bribery law, which prohibits the provision of financial incentives to induce the purchase of certain products by a federal health care program such as Medicare.

The guidelines say drugmakers may donate to charities to help patients and allocate their donations to specific diseases or conditions (for example, multiple sclerosis), provided the charity does not define the disease so narrowly that it effectively subsidizes a particular drug made by a specific manufacturer, they added.

Looking at how charities affect drug sales, the authors found that for the 10 most expensive cases, leading drug manufacturers needed to make an average of just 3% of sales through their donations in 2017 to break even. Of all the conditions covered, the manufacturer of the leading drug for a condition could generate an average of 22% of sales in the same year.

Daphne explained that for the average case covered, the donations would be profitable if the leading manufacturer donated enough to a patient aid charity to cover cost-sharing for all patients taking medications approved for that condition, as long as at least 22% of sales came because of that help, Or he wouldn’t have gotten otherwise.

The study found that for the 10 most expensive conditions, manufacturers accounted for 67% of sales in 2010 and 89% of sales in 2017 on average. Daphne noted that even without illegally funneling donations to a foundation for a specific drug, companies can still make a profit, since there are very few drugs to treat these conditions. And the “[b]To be able to make use of your donations, in violation of the spirit of the Anti-Bribery Act, at least.”

The number of conditions eligible for assistance increased from 87 to 154 conditions from 2010 to 2017 (81 and 146 were observed in the study sample, respectively). The proportion of Medicare Advantage enrollees eligible for assistance grew from 29% to 41% over the same period, while the average expenditure on medications per patient in conditions eligible for assistance grew from $12,297 to $23,084. The percentage of Medicare Advantage cost-sharing eligible for assistance also grew from 19% to 30% during that period.

With this study, Daphne and its co-authors sought to determine whether manufacturers who donate to charities to help patients while following OIG guidelines effectively receive commissions. Daphne noted that this is important because insurance companies often provide better cost-sharing for drugs they believe are more effective. When one drug is more expensive than the other but both are equally effective, the insurance company will use cost-sharing to direct the patient to the least expensive drug, but when patient assistance programs step in to help Medicare enrollees, drug manufacturers can somehow “roll back” strategies Private insurance companies to promote effective use.

Of course, sometimes there may not be a less expensive alternative to the drugs, in which case, a solution is needed, “but having the manufacturer subsidize their own drugs is not the right solution,” because it incentivizes them to charge higher fees, Daphne said.

However, Daphne also noted that Congress, in the Inflation Cuts Act, Medicare drug expenditures are set at $2,000 per yearstarting in 2025. “So this justification for donations to independent charities has gotten a lot weaker,” she added.

In order to assess the profitability of drug companies’ donations to charities to help patients, Daphne and her colleagues used insurance claims data to compare drug spending for more than 3 million Medicare Advantage enrollees from 2010 and 2017, with data on illness cases covered by the seven largest companies. Independent charities to help patients that operate during the same period, and medicines to treat those conditions.

The study authors identified all diagnosed patients who were taking medication to treat their condition. They then estimated the total co-cost of all medications for that condition to determine a “required donation” to a patients’ charity if the company would cover all co-costs in a given condition.

The Daphne Group then calculated all sales to leading drug manufacturers whose products treated this particular condition and compared the two. Daphne said that if the total amount of cost-sharing for a condition was what the manufacturer might donate to generate at least that amount in sales, they decided the manufacturer might “break.” Even a large-scale donation of a specific condition rather than a specific drug — subsidizing all available medications for a specific condition rather than just the company’s drug — is profitable, as long as a portion of that donation can offset the cost of the company’s drug. .

The study’s main limitations are that the authors did not note “who uses the help” and “what their medication use,” Daphne noted, and the study did not identify drug manufacturers that donated to any charities to help patients. This information is not publicly available.

“What we’re showing is the incentive to donate,” Daphne said.

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    Shannon Firth She has been working in health policy as Medbag Today’s Washington correspondent since 2014. She is also a member of the site’s investigative reporting team and founder. Follow


Arnold Ventures provided funding to support this study.

Daphne serves as an expert for the Department of Justice regarding allegations of pharmaceutical manufacturers’ relationships with participating charities, and reports compensation for unrelated consulting from Bates White Economic Consulting and Intermountain Healthcare.

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