Turing Pharmaceuticals LLC did it. Mylan NV and Kaleo Inc. did it. And so did Marathon Pharmaceuticals LLC and many other drug companies.

They all pointed to their patient assistance programs (PAPs) and discount coupons to excuse high launch prices or aggressive price hikes for their prescription drugs.

PAPs have been used for years in the U.S. as a safety net for patients with the greatest financial need to ensure they could have access to life-saving medications. As they have become more plentiful and are increasingly cited as justification for lofty list prices, PAPs and discount coupons are now a suspect piece in the enormously complex pricing of drugs across the supply chain. (See BioWorld Today, Oct. 17, 2016.)

Following a 2014 report from the Health and Human Services' Office of Inspector General that suggested improper links between some drug companies and charitable PAPs, the Justice Department began investigating those links. Despite subpoenas to Celgene Corp., Gilead Sciences Inc. and other biopharma firms, along with a crackdown by some insurance companies on the use of discount coupons, both PAPs and coupon use continue to flourish.

Last year, biopharma companies offered discount coupons for more than 600 brands, with enrollees in commercial insurance plans using the coupons for 20 percent of brand prescriptions, according to a new report from the Congressional Research Service (CRS). Coupon use was as high as two-thirds of filled prescriptions for certain drugs.

Meanwhile, nonprofit PAPs supported by industry and independent charities have upped their contributions significantly. IRS data showed that giving by 10 large drug PAPs rose more than 1,520 percent from $376 million in 2001 to $6.1 billion in 2014, accounting for 85 percent of all biopharma giving and one-sixth of all U.S. corporate charity deductions in 2014, the CRS report said. In that same time span, giving by five of the main independent charity PAPs shot up from $2 million to $868 million.

PAPs offer industry valuable tax deductions and, together with co-pay coupons, they can build patient and doctor loyalty. They also help individual patients by reducing or eliminating their out-of-pocket costs – thus, improving their compliance to a drug regimen. But the tradeoff may be higher costs for everyone else, the CRS suggested.

Authored by health care finance analyst Suzanne Kirchhoff, the CRS report cited a few studies on the benefits of discount coupons. For instance, a 2014 study found that manufacturer coupons helped patients save $6 of every $10 in out-of-pocket costs for specialty drugs.

Another study revealed that coupons for statins used to control cholesterol levels increased prescription adherence for people in the program. But even with the discount, the patients paid more out-of-pocket than those taking generic drugs or brand drugs that didn't offer the coupons. Their insurance plans also faced higher costs.

Curbing competition

Therein lies the rub. While individual patients may see some benefit from coupons, the discounts often are used to curb competition, doing little to offset the overall impact of higher drug prices. The CRS report cited a 2013 study that showed 60 percent of the 374 drug discount coupons advertised on an Internet site were for drugs with generic alternatives.

In such cases, the coupons are used to encourage use of the more expensive drug. "The co-payment coupons increased retail sales for brand-name drugs solely by reducing sales of lower-cost generics," according to the CRS report. The coupons increased retail spending from 1.2 percent to 4.6 percent in the five years following the introduction of a generic, corresponding to increased spending of $30 million to $120 million for the average drug in the study.

As for PAPs, studies detailing their impact are scanty, Kirchhoff noted, but health care consultants have touted them as vehicles for improving consumer loyalty to brand drugs, and increasing use and sales of the drugs. Marketing materials from consultant Sonexus Health referred to manufacturer investment in PAPs as a "key strategy for improving patient uptake" of drugs. Another consultant observed that oncologists might be more likely to prescribe drugs from a company with a "high PAP image."

In appealing to drug companies for donations, independent PAP charities cite return-on-investment advantages that they claim are higher than for other strategies such as coupons, according to the CRS report.

On the patient side of the equation, a PAP can provide access to a drug they otherwise couldn't afford, but the usefulness of the programs is often restricted by a complex application process, which can be a big impediment for patients with chronic conditions who use more than one drug, the CRS report said. Other obstacles are unexpected program changes, difficult income-documentation requirements, the need for frequent reapplication and differences among the various PAPs.

The CRS report makes no recommendations, but it likely will inform future congressional debate on the role of PAPs in drug pricing, compliance and health care spending. As it is, many in Congress who have listened to companies use PAPs to defend cost hikes view the programs as "industry talking points" that allow manufacturers and the rest of the drug supply chain to play a shell game with pricing. (See BioWorld Today, Oct. 21, 2016.)