Corporate America has a thorny problem. And the name of that problem is Big Pharma.
The copay system in American healthcare is where employees who hold healthcare policies pay a particular amount out of their pocket for medical costs at the point of care. This system has come under scrutiny in the recent past and employers seem to be grappling with Big Pharma’s tactics in manipulating copay using discount cards.
A History of Copay
The American public healthcare system is woefully short of resources to help citizens access quality and affordable healthcare. The private healthcare system billed to be the bedrock on which American workers can experience better healthcare has also failed to deliver on that promise. The former cannot fill in the gaps that the latter leaves in its wake and in this context we find the copay system.
The rising costs of healthcare in the early twentieth century saw health insurance dropped off the New Deal list. With the Great Depression in full swing, physicians and doctors were forced to partner to ensure that the people in their communities were taken care of.
They instituted non-profit monthly fees that citizens paid to access healthcare. As the depression wore on this arrangement gained traction, and more people began to sign up as a way to manage their healthcare during this challenging period.
When their for-profit counterparts began to witness the traction this arrangement was garnering, they wanted in on the action. But to meet their primary goal, profiting off of healthcare, they determined that they couldn’t carry the same model that their non-profit colleagues adopted.
The for-profit consortiums decided to alter the rules of the game. Instead of extending healthcare to all, they chose to focus on signing up the healthy clients. While the non-profit consortium had to keep pace by raising the monthly fee, their for-profit compatriots managed to keep their costs low thus undercutting them.
The Situation Worsens
As World War II took place, it hurt the labor market. There were no rising wages, and many able-bodied workers were joining the fight overseas creating a tight labor market. Corporate America saw the healthcare plans with monthly subscriptions as a way to attract scarce workers.
Employers soon adopted these plans, but they added a twist to them. They made them contingent on employment in pursuit of getting workers to join their ranks. A notable effect of this was to significantly undermine the non-profit consortium’s bargaining power with providers and hospitals since they were losing the numbers as the employer-led scheme gained traction. They could not compete with the prospect of employment attached to the latter schemes.
One distinction between the non-profit and for-profit schemes was that the latter sought to offer coverage from the first moment of care. The latter designed a copay system (championed by Aetna in 1921) where costs were covered after patients paid an out-of-pocket amount.
The Copay Effect
The introduction of copay inevitably led to two things:
a) Workers began avoiding seeking medical care because of the deductible they had to foot.
b) If workers did seek medical care the employer’s liability in footing the bill was reduced.
Copay Discount Cards
Fast forward to today, and Big Pharma is still looking for ways to squeeze every drop of blood from the proverbial healthcare stone.
In the past when a new pharmaceutical drug was released, its success hinged almost entirely on its reception among physicians. As a result, physicians became primary targets of Big Pharma’s marketers with incentives like paid trips to conferences that doubled as paid vacations. Through these incentives that were not illegal, they were able to influence a drug’s success.
When Big Pharma realized that if they could influence the consumers, it would have a more significant impact on what kinds of prescriptions were written, they shifted their focus to them. Direct-to-consumer marketing by Big Pharma picked up the pace. Today the primary determinant of how well a drug does in the market is how much access the manufacturer has to the consumers.
When Pharmacy Benefit Managers (PBMs) decided to deploy formularies, Big Pharma sensed a threat. A formulary is the mix of drugs that a PBM will determine a consumer needs. One of its goals is to make healthcare more affordable. Through such initiatives, the uptake of cheaper drugs is encouraged over expensive ones.
To counter this onslaught, Bight Pharma crafted copay coupons. Copay discount cards are coupons issued by pharmaceutical manufacturers, and they reimburse the amount of copay a consumer was charged if they pick the more expensive drugs. As a result, consumers are encouraged to take up the higher cost drugs, and ultimately the manufacturers maintain high margins.
Employers Are Fighting Back
Major American employers are now pushing back on Big Pharma. Walmart through its manager Express Scripts and Home Depot via its manager CVS are now levying penalties on drug manufacturers that use discount cards via copay ‘maximizers’ and copay ‘accumulators.’
a) Copay ‘Accumulator’
It identifies the use of a copay discount card and ensures that amount doesn’t offset what the consumer ought to pay out-of-pocket. Once the discount card is depleted, the consumer can either pay their full copay amount, get another card or cease filing that prescription. This is applicable at near all pharmacies working with the PBM.
b) Copay ‘Maximizer’
Here the PBM ensures that the patient will take up a manufacturer’s discount card. However, they will increase the copay amount to maximize on the coupon’s set value.
America has a long and storied history with healthcare plans. From the noble non-profit schemes, the landscape is now dotted with for-profit ones that are tied to one’s job. While many workers are on a plan, its effectiveness is minimized by the profit-driven framework. Big Pharma is seeking to maximize its revenue by reducing copay charges for patients at the cost of the entire system’s affordability. Major employers, among them Walmart and Home Depot, are fighting back against this wave and are seeking to neutralize Big Pharma’s exploitativeness.