Viewpoints: November/December 2014

OIG
Concerns with Co-pay Discount Programs

by Tim Kosty, R.Ph, M.B.A. and Don Dietz, R.Ph., M.S.

The
U.S. Department of Health and Human Services Office of In
spector
General (OIG) released a report in September question
ing
pharmaceutical manufacturers’ safeguards to prevent co-pay
card use in federally funded programs, specifically Medicare
Part D (the report can be found by scanning the QR code at the
end of this column). The OIG voices its concern with the
strategies employed by the pharma
ceutical
manufacturers and their vendors that facilitate the execution
of co-pay card programs. The OIG defines co-pay card programs
as co-pay
ment
coupons offered to insured patients to reduce or eliminate
patients’ out-of-pocket costs for specific brand-name drugs.
Before reviewing the findings in the report, let’s review the
strategic reasons pharmaceutical manufacturers implement
co-pay card programs.

Co-pay
Card Programs

Pharmaceutical
manufacturers imple
ment
co-pay card programs for one or more of the following reasons:

  •   Attract
    new patients who may be using an alternative therapy.
  •   Retain
    patients when a generic alternative is introduced.
  •   Improve
    patient adherence on both new and refill prescriptions by lowering the patient cost for the product.

Employ
a defensive strategy when they are in an unfavorabl
e
position
on the payer formulary, to reduce the patients co-pay
.
Co-pay
card programs do lower the cost to the patient. As shown in the
example
at left, the co-pay discounts are typically set to lower the
patient’s cost to a second-tier brand co-pay for insured
patients. In this example, the patient will be indifferent,
from a financial perspec
tive,
as to which product is dispensed. However, the payer will pick
up the differ
ence
in cost between the second-tier and third-tier brand product.
Payers typically do not have a favorable view of these co-pay
card programs, because they miti
gate
a benefit design tool, patient co-pay differentials, that has
proven effective in driving utilization of preferred-brand
formulary products.

  Tier 2 Brand Tier 3 Brand
 Third-party Co-pay  $25 $50
 Co-pay Card Program  $0  $25
 Net Patient Pay  $25  $25

The
OIG’s concern is that co-pay cards will increase costs for
Medicare Part D plans and, subsequently, the government’s cost
for the program. Furthermore, the OIG cited two surveys where 6%
to 7% of seniors indicated they were using co-pay coupons on
their Part D prescrip
tions.
By applying the survey results to all 36 million Medicare Part D
patients, the OIG estimates that co-payment coupons would be
used by over 2 million Medicare beneficiaries.

Manufacturer
Perspective

Pharmaceutical
manufacturers are aware
that
their coupon programs should not be used on Medicare Part D
prescriptions, and they employ multiple methods to prevent
their use. These include:

  • A
    notice to beneficiaries indicating that the co-pay card
    program is not eligible for Part D prescriptions. 
  • A
    notice to pharmacists that Part D prescriptions are not
    eligible for the program. 
  • Use
    of claims-processing edits and alerts to preven
    t
    processing
    for drugs covered by Medicare Part D
    .

The
claims-processing edits used by manufacturers for pro
cessing
co-pay card programs often include:

  • Date
    of birth edit.

    For patients over 65, there may be an edit or informational
    message reminding the pharmacist that the co-pay program is
    not available to Medicare Part D or other government-funded
    programs. 
  • Patient’s
    primary insurance.

    The NCPDP processor ID number (BIN) is submitted on the
    secondary insurance transaction used for the co-pay card
    program. However, the BIN is insufficient to identify a
    Medicare Part D program, as many payers have multiple lines of
    business, including commer
    cial,
    Medicare Part D, managed Medicaid, and workers’ compensation. 
  • Part
    D benefit stage.

    Some co-pay card program processors use the Part D benefit
    stage self-reported by the patient to reject co-pay card
    claims indicating that the patient isn’t eligible for the
    program.

The
OIG concluded that the claims-processing edits have merit but
don’t prevent co-pay card programs from process
ing
claims for Medicare Part D beneficiaries because these use
proxies (e.g., date of birth) instead of actual Part D
information.

  • Seventeen
    percent of Medicare beneficiaries are under 62 years old and
    covered under the disability program. 
  • The
    BIN/PCN (processor control number) combina
    tion
    could be effective in identifying Medicare Part D plans. But
    the OIG noted that “NCPDP would need to revise its pharmacy
    claims transaction standards to enable the PCN to be
    transmitted as part of the coupon claim. Revising the NCPDP
    standards is an industrywide process that typically takes
    years.” 
  • The
    true out of pocket (TrOOP) facilitator has access to the Part
    D beneficiaries benefit stage, and the OIG concluded that it’s
    unclear how co-pay card program sponsors have access to this
    information.

The
bottom line is that there is no easy, systematic way to
prevent the processing of co-pay cards for Medicare Part D
patients.

Pharmacy
Perspective

Depending upon the type of co-pay card program used by the
patient, the pharmacy may not even know that a co-pay card
program is being used. Co-pay card formats that are
difficult to identify include electronic coupons, debit
cards, and direct patient reimbursements. In these
situations, the pharmacy may be unaware that these programs
are being used by their Part D patients.

Pharmacists
and technicians should be trained to not accept co-pay card
programs for Medicare Part D ben
eficiaries.
This is a manual process at this time. It may be beneficial
for pharmacy management systems to include an edit on
secondary insurance claims for Medicare Part D plans and
require an override to prevent the inadvertent submission of
co-pay cards.

The
OIG did specifically mention actions pharmacies could take
to prevent the submission of co-pay cards for Medicare Part
D beneficiaries, including submitting an E1 eligibility
transaction to determine Medicare Part D eligibility.

Next
Steps

Given
the shortcomings in preventing the processing of co-pay
cards for Part D beneficiaries, OIG nevertheless indicated
that pharmaceutical manufac
turers
have the responsibility to prevent their use. Further
more,
they may be implicated under the anti-kickback statute if
they offer coupons to induce the purchase of drugs paid for
by Medicare Part D or any other federal healthcare programs.
Pharmaceutical manufacturers should revisit the controls in
their co-pay card programs and conduct audits to ensure
compliance with the pro
gram
designs.

With
the introduction of co-pay card programs with virtu
ally
all new brand products, pharmacists should review their
procedures to prevent submission of co-pay card claims for
Medicare Part D and other federal programs. Finally, the OIG
recommends that all industry stakehold
ers
cooperate to identify solutions to prevent the use of co-pay
card programs for drugs paid for by Medicare Part

D.
It will be interesting to see how the industry prioritizes
this issue to create a solution that addresses, but may
never meet, the OIG’s goal of preventing the use of any
co-pay card to be used by a Medicare Part D beneficiary.
CT

Tim
Kosty, R.Ph., M.B.A.
,
is president, and
Don
Dietz, R.Ph., M.S.
,
is vice president, at Pharmacy Healthcare Solutions, Inc.,
which provides consulting solutions to pharmaceutical
manufactur
ers,
PBMs, retail pharmacy chains, and software companies on
strategic business and marketing issues. The authors can be
reached at tkosty@phsirx.com and ddietz@phsirx.com

Scan
the code to access the U.S. Department of Health and Human
Services Office of Inspector General (OIG) report. Or visit
goo.gl/55SU1k.

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