Cutting Prices to Save Sales

As patent protection expires for top-selling drugs, some firms are scrambling to stay one step ahead of generic-drug competitors. Pfizer and others are wooing insured consumers by offering copay coupons, which reduce the cost of a branded drug. These coupons are intended to discourage a patient from switching to a generic therapy. To redeem the coupons, consumers often must submit personal information that allows the firms to promote products to individual patients.

Erik Greb

The coupons may help consumers, but they oblige plan sponsors, such as employers or state governments, to pay high prices for branded drugs when generic alternatives are available. Drug companies can prevent plan sponsors from knowing when enrollees have redeemed the coupons by processing them through a "shadow claims system," according to a Nov. 3, 2011 statement from the Pharmaceutical Care Management Association. Copay coupons will increase costs for these sponsors by $32 billion over the next decade, according to research from Visante.

At a time when state governments and private companies are pinching pennies, it's hard to believe that they will allow drug companies to use these tactics for long. Arrangements such as Pfizer's agreement to manufacture generic Lipitor for Watson, in exchange for a share of net sales, seem comparatively more benign. They don't appear to constrain patients' choice or force payors to spend more than necessary. In fact, these arrangements might be the "least bad" option for drugmakers without new blockbusters on the horizon.

Erik Greb is an associate editor of Pharmaceutical Technology.

»Read Erik's blogs at blog.PharmTech.com.